Sensex recorded biggest single-day fall in its history (in absolute terms) amid rising cases of coronavirus and drastic drop in crude oil prices.
The 30-share Sensex ended 1,941 points lower at 35,634, after crashing 2,467 points in early trade, and the 50-share index Nifty fell 538 points to 10,451.
Domestic benchmarks followed the overseas trend and dropped over 6% on Monday. This was on the back of 30% drop in oil prices after the world's top oil exporter Saudi Arabia planned to raise its production significantly on the collapse of OPEC's supply cut agreement with Russia.
Within minutes of opening today, equity benchmarks plummeted over 3.5% each, led by major volatility in global markets. Continuing its downward spiral, Sensex hit a new 52-week low of 35,109.18. NSE Nifty too fell to a fresh one year low of 10,327.05.
The market breadth was negative with 357 stocks closing higher against 2,199 ending in the red. All sectors ended in the red with the sharpest fall registered in banking, consumer durables, metal and oil and gas stocks.
1. Weak global cues
Asian stocks slumped amid the collapse in oil prices after Saudi slashed its official selling price and launched an oil price war against Russia following the breakdown of the OPEC+ output agreement.
Japan's Nikkei fell 4.7%, while MSCI's broadest index of Asia-Pacific shares outside Japan lost 3.0% to a five-month low. Shanghai's blue chips also dropped by 2.1%. SGX Nifty traded down 242 points or 2.22% at 10,685.20.
Australia's commodity-heavy market also dropped 5% today.
Following this, US stock futures tumbled in Asian trading, with Dow Jones trading at 24,549, down 1,240 points or 4.81%. The S&P 500 is expected to drop 4% on Wall Street later today. Similarly, the UK's FTSE 100 index is expected to fall 3.6% in the afternoon session today.
Last week on Friday, the Dow Jones Industrial Average fell 3.58%, the S&P 500 lost 3.39% and the Nasdaq Composite dropped 3.1%.
2. Crude crash
Brent crude, the international benchmark, dropped from $45 a barrel to $31.52 a barrel, registering a fall of 31%. This was after Saudi Arabia started a price war with Russia cutting the crude price.
Today's drop in oil prices was the second-biggest fall on record for the international benchmark. Brent crude futures had fallen almost 34.8% on January 17, 1991.
3. Coronavirus fears
Global markets are on course for the worst week since the 2008 crisis amid coronavirus outbreak.
Panick-stricken global investors fled to bonds to hedge the economic shock of the coronavirus, backing away from equity market investment.
The virus outbreak has taken toll on policymakers worldwide, spreading across geographies and businesses, with supply dislocations, travel restrictions broadening out market volatility further.
4. FII outflows
Short-term concerns weighed with FII outflows in emerging markets also led to the fall in domestic equities.
"Although we witnessed select buying into key pivotal from domestic institutions today the sheer velocity of FII selling was enough to create panic across equities in India," said S Ranganathan, Head of Research at LKP Securities.
In last week, FIIs further sold stocks worth Rs 9,252 crore in cash segment, bought stocks futures worth Rs 216 crore and also sold index futures worth Rs 4,307 crore.
As per Kotak Institutional Equities, FIIs have sold shares worth $305 million since March 5, 2020. They have offloaded $774 million since the beginning of the month.
Backed by severe outflows, the local currency Indian Rupee, despite a weakened American currency, continued its downward journey on Monday to hit a fresh 52-week low of 74.16, declining 50 paise against the previous close of 73.78.
5. Near-term outlook
"While today was indeed a day of accumulation for those with lower equity allocation, the near term outlook indeed looks shaky as growth remains elusive globally," says S Ranganathan, Head of Research at LKP Securities.
On the technical outlook of Nifty, Manav Chopra, CMT, Head Research - Equity, Indiabulls Securities said, "Bears hammered the index hard and Nifty tested 10,300 zone on the downside. Important support levels have been breached with ease in such an environment. Bottom fishing should be avoided until the markets indicate fatigue on the downside. Nifty has tested the weekly 200 EMA which is placed at 10370 zone. It will be important to watch out for the weekly close on the Nifty. The index is likely to face stiff resistance as and when recovery happens and volatility is likely to remain higher. The immediate resistance zone is placed at the 10,800 zone."
"Nifty has plunged sharply in the last two weeks and breached the critical support zone of 11,000 as well," Ajit Mishra, VP-Research, Religare Broking said. He added later, "With no major event, the focus will remain on the developments related to coronavirus in the coming holiday-shortened week. Besides, participants will be eyeing IIP and CPI inflation data on March 12 and WPI inflation figures on March 13."