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Sensex, Nifty crash 3%: Five factors behind the market mayhem

While Sensex was trading 1,133.63 points lower at 38,612.03, Nifty was down 339.90 points at 11,293.40. India VIX, the measure of markets expectation of volatility over the near term, surged 24.43% to 22.105 points in opening trade on NSE.

Rupa Burman Roy | February 28, 2020 | Updated 14:30 IST
Sensex, Nifty crash 3%: Five factors behind the market mayhem
Following a broad-based fall, 29 out of 30 constituents on BSE Sensex and 48 out of 50 scrips from NSE Nifty traded in the red

It was a Balck Friday on Dalal Street today, with investors losing Rs 4 lakh crore wealth within minutes of opening as Sensex and Nifty slipped 2.85% each marking sixth consecutive session of losses for the indices.

While Sensex was trading 1,133.63 points lower at 38,612.03, Nifty was down 339.90 points at 11,293.40. India VIX, the measure of markets expectation of volatility over the near term, surged 24.43% to 22.105 points in opening trade on NSE.

Following a broad-based fall, 29 out of 30 constituents on BSE Sensex and 48 out of 50 scrips from NSE Nifty traded in the red. Sensex made a low of 38,551.54, while Nifty fell to 11,291.90. Sensex and Nifty's 52-week lows stand at 35,926.94 and 10,637.15, respectively. Sensex has erased 3.50% in one week, 3.40% in one month and 6.43% year-to-date. Nifty has fallen 3.70% in one week, 4% in one month and 7.15% year-to-date.

In terms of sector-based decline on NSE, Nifty metal fell the most, dropping 5.25%, followed by a 4.6% fall in media. IT, PSU bank and realty fell 3.5% each, while pharma, financial services, FMCG declined around 2-3%.

Commenting on the markets trend today, Umesh Mehta, Head of Research, Samco Securities said, "D-Street is also a victim of the virus outbreak in other countries as this pandemic has led to indices across the globe witness a sharp fall this week."

"However, when the entire world is blaming coronavirus for the fall, we feel that valuations have a big part to play in this bearishness," he added and continued that the domestic bourses have been trading around higher valuations and hence a correction was needed to align the markets as per the mean reversion theory.

Santosh Meena, Senior Analyst from TradingBells said, "Equity markets are falling sharply as fear of recession is rising where investors are looking for safe-haven instruments like Yen, US bonds and Gold. The momentum of new coronavirus cases in China is coming down but the number of cases outside China are rising sharply."

1. Virus Pandemic

With new coronavirus cases emerging in China, that has now infected more than 81,000 people and killed over 2,700, policymakers and governments all around the world are taking aggressive steps in order to contain the outbreak and contain the economic downfall.

World Health Organization officials said the COVID-19 virus could become a pandemic as the outbreak spreads to major developed economies and warned that failure to prepare for coronavirus now 'could be a fatal mistake'.

2. Foreign Fund Outflows

Foreign institutional investors (FIIs) continued to be sellers for the fourth straight day. FIIs remained net sellers in the capital market, as they sold shares worth Rs 3,127.36 crore on Thursday, according to provisional exchange data.

FIIs sold shares worth Rs 3,336.60 crore on Wednesday, Rs 2,315.07 crore on Tuesday and Rs 1,160.90 crore on Monday in the capital market.  

3. Oil at 4 year low

Fall in oil price deepened for the sixth straight session on Friday and was on track for about a 12% weekly decline, the biggest in more than four years. Brent crude futures, the global oil benchmark, fell 2.24 per cent to trade at USD 51.01 per barrel.

4. GDP data

Dalal Street is expected to trade highly volatile today as market participants will track third-quarter GDP data and eight-core industries January data, scheduled to be released later in the day.

The general estimates by market experts suggest the Indian economy growing at a pace of 4.7% in the December quarter in the last year.

5. Global Markets

Friday's fall in domestic markets was primarily driven by Asian, European and US indices that dropped around 3-4% and suffered sell-off to the sixth day, after the number of coronavirus cases outside China exceeded those inside the country for the first time.

On Wall Street, while S&P 500 confirmed its fastest correction in history at 4.42% decline, DOW registered a record one-day points drop on Thursday. In the meanwhile, European stocks ended sharply lower at a drop of 3.6% amid virus fears weighing heavily on market investors.

MSCI all-country world index fell 0.3% after 3.3% drop on Thursday. In Asia, MSCI's regional index excluding Japan shed 1.4%.

China, Japan and South Korea all posted heavy losses. Japan's Nikkei gave up 3.3% on rising fears  of Olympics cancellation due to the coronavirus, while South Korean shares shed 2.1%. Australian shares also dropped 2.8% to a six-month low.

Oil prices may see biggest fall in four years

Share Market LIVE: Sensex crashes 1,100 points, Nifty sinks below 11,300 as coronavirus fears roil global markets

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