Why Sensex tanked 1,400 points today

Sensex tumbled 1,400 points in afternoon session today, tracking across-the-board losses amid a selloff in global markets. Sensex slumped 1,401 points to 55,610 and Nifty tanked 425 points to 16,559.

Bajaj Finance was the top Sensex loser, shedding 5.39 per cent, followed by IndusInd Bank, Bajaj Finserv, Tata Steel, SBI, Axis Bank and HDFC Bank. On the other hand, Dr Reddy's and HUL were the sole gainers rising up to 0.38%.

India VIX zoomed 14.11% to 18.65 against the previous close of 16.34, indicating heightened volatility in the Indian market.

Here's a look at five factors that led to the market crash today.

Global markets sink

Asian stock markets followed Wall Street lower amid concerns over coronavirus' latest variant and tighter Federal Reserve policy. Australia's S&P/ASX 200 was trading 11 points lower at 7,292. Nikkei plunged 607 points to 27,937 and Shanghai Composite was trading 38 points lower at 3,594. Hang Seng index fell 466 points to 22,723. On Wall Street, the S&P 500 ended 48 points lower at 4,620, the Nasdaq lost 10 points to 15,169 and the Dow Jones fell 532 points to 35,365.

Omicron cases cross 150 mark

The rising number of cases of Omicron variant at home also kept sentiment nervous in Indian market. India reported its 150th case of the new COVID-19 variant on Sunday (December 19, 2021). The country's Omicron count rose to 153 after Maharashtra and Gujarat added ten more infections.

Central banks turn hawkish

Central banks such as Federal Reserve and Bank of England have become hawkish reducing their bonds repurchase programme to tame rising inflation. The Bank of England has decided to raise interest rates by 15 bps to 0.25 per cent during its December meeting. Bank of England is the first central bank to hike interest rates. The US Fed has also indicated that it would hike rates next year. The reduction of fund infusion by key central banks into their economies amid the rising Omicron cases has unnerved traders across the globe.

Heavy selling by FIIs

Overseas investors have sold Rs 26,687 crore of Indian equities in December so far against Rs 39,901 crore in November 2021, according to NSE data. Foreign institutional investors (FIIs) remained net sellers in the capital market, as they sold shares worth Rs 2,069.90 crore on Friday. The heavy outflow by foreign investors has led to a correction of over 6% in Sensex and Nifty in a month. While Sensex is down 6.81% or 4,060 points, Nifty has lost 6.87% or 1219 points in a month. Sensex lost 1,774.93 points, or 3.02 per cent last week and Nifty tumbled 526 points, or 3 per cent during the same period amid heavy FII selling.  

Rise in Omicron cases across the globe

The US government has warned of a possible surge of "breakthrough infections" due to Americans traveling for the Christmas and New Year holidays. In the UK, Omicron cases have grown 52% in a week.

Till date, Omicron cases have been reported in 89 countries and the number of cases is doubling in 1.5 to 3 days in areas with community transmission, the World Health Organization (WHO) said.

Omicron cases are rising rapidly in countries with high levels of population immunity, but it is unclear if this is due to the virus' ability to evade immunity, its inherent increased transmissibility or a combination of both, the WHO said in an update.