Equity indices Sensex and Nifty fell over 3% each on Monday ending sharply lower, in line with weak global equities as new COVID-19 strain in the UK triggered a global selloff.
Reversing the trend from six days of consecutive gains amid concerns over fresh rounds of lockdown, Sensex fell 1,406 points to 45,553 and Nifty ended 432 points lower at 13,328.
More than Rs 7 lakh crore of investor wealth was eroded in a single session as Sensex fell 2,037 points to 44,923, its day's low and Nifty lost 628 points to the intraday low of 13,131.
Last Friday, Sensex ended 70 points higher at 46,960 and Nifty gained 19 points to 13,760. During Friday's session, Sensex hit an all-time high of 47,026 and Nifty logged a lifetime high of 13,772.
M&M, ICICI Bank, PowerGrid, Axis Bank, SBI, ONGC and IndusInd Bank were among the top laggards on Sensex. On the other hand, L&T, Reliance Industries, Sun Pharma, Infosys and HCL Tech were among the gainers. On the sectoral front, all the indices closed deep in the red, with over 6% decline in media, over 5% fall in metal, realty and over 4% drop in banking indices.
European markets were down over 2% each, witnessing heavy selling pressure after European countries including France, Germany, the Netherlands, Belgium, Austria and Italy banned flights from the UK. The British government started stringent new stay-at-home lockdown on Sunday, over fears of new virus strain. The British government stated the new mutated form of the virus is 70 per cent more transmissible and "out of control". Further, talks on post Brexit trade deal continued with no clear agreement which affected market sentiment.
The Modi government has also decided that all flights originating from UK to India are to be suspended till 31st December 2020.
Most Asian equities were bearish on Monday as coronavirus infections increased in parts of North Asia, such as Japan and South Korea, and weighed on investor sentiment. China on Monday kept its Loan Prime Rates unchanged, in line with expectations from analysts.
US, stocks ended lower on Friday, pulled down by uncertainty around a coronavirus stimulus deal. Meanwhile, Moderna Inc's coronavirus vaccine on Friday became the second to receive emergency use authorization (EUA) from the US Food and Drug Administration.
Manish Hathiramani, Proprietary Index Trader and Technical Analyst, Deen Dayal Investments said,"The Index has broken its support of 13500 which indicates a stop out on all long positions. We would now need to wait and watch the markets over the next couple of sessions. One should not take hasty and risky trades by going long or short on the markets. For the upside to resume, we would need to start trading above 13750-13800. In order to break on the downside, we should wait for a day or two and re-evaluate the markets. The strategy for the current market would be to sit on the sideline without a trade."
S Ranganathan, Head of Research at LKP Securities said,"The new variant of the Novel Coronavirus in the UK spooked markets as we witnessed intense selling in pivotal throughout afternoon trade. While the street was bracing for a correction this week after a sharp up move, the sheer velocity of the fall across broader markets took the bulls by surprise as practically none of the key indices constituents were in the Green today."
Vinod Nair, Head of Research at Geojit Financial Services said, "In fear of a new wave of coronavirus and reports of the rapid spreading of new virus strain in the UK, a deep correction was triggered in the equity market. Travel restrictions imposed by several countries to and from UK have added concerns of yet another lockdown. European market witnessed further selling pressure, as the UK and EU failed to reach a trade deal before the decided deadline. As we all know, the vulnerability of the market was high due to quick gains made in the ongoing rally leading to low margin of safety. Despite which, we do not expect a big correction rather a consolidation, in the short-term, of not more than 7 % to 10% in the main indices. Buying at dips can be considered as a strategy in the falling market."
Kanika Agarrwal, Co-founder and Chief Investment Officer, Upside A said," On the global front, we got good news and bad news overnight - Good being that the democrats and republicans managed to finalize the latest stimulus package which will add $900bn to the US economy. The bad news is a new strain of the virus in the UK which appears to be more contagious than the existing one. Even so, the strain appears similar to the current one for which vaccine rollout is on at full speed. Therefore, the bad news seems to come with its own glimmer of hope. Nothing else has majorly changed. We continued to buy today, and will do so for the rest of the week. Today's markets are therefore a could serve as an entry point for those waiting for a correction. As Warren Buffett says, "be greedy when others are fearful."
Ajit Mishra, VP - Research, Religare Broking said,"Technically, Nifty has tested the lower band of the prevailing rising broadening formation around 13,150 and its breakdown could trigger a further decline towards the 12,700-12,800 zone. In case of a rebound, the 13,400-13,600 zone would act as a hurdle. We suggest avoiding naked leveraged trade in the futures segment and preferring option strategies until the markets stabilise. Investors, on the other hand, should utilise this fall and accumulate quality stocks on dips."
The Indian rupee declined 23 paise to end at 73.79 per dollar on Monday amid massive selloff in domestic equities and strengthening American currency in the overseas market. However, continued foreign fund inflows and lower crude prices supported the rupee and restricted the fall.