Bloodbath on Dalal Street! Why did Sensex crash 1,500 points, and what should investors do?

Indian markets were under serious selling pressure on Friday due to rising cases of a new coronavirus variant in South Africa. The 30-stock index tanked over 1500 points to hit an intraday low of 57,251.52 against the previous close of 58,795. Nifty lost over 400 points to 17,068.85.
 
Equity benchmark Sensex plummeted over 800 points in early trade today on heavy across-the-board selling amid a negative trend in global markets and unabated foreign fund outflows.
 
The Union Health Ministry, on November 25, issued an alert for the B.1.1.529 variant of coronavirus, which was detected in South Africa. The ministry directed states and Union Territories (UTs) to ensure “rigorous screening and testing” of all international travellers landing in India from countries that are ‘at risk’. Confirmed cases of the new variant have been reported from South Africa, Hong Kong and Botswana.
 
Recently, Austria became the first country in western Europe to reimpose a full coronavirus lockdown this autumn to tackle a new wave of infections. Italy imposed curbs on unvaccinated people. The US also advised its citizens to avoid Germany and Denmark.
 
Foreign institutional investors (FIIs) have been selling continuously in the Indian equity cash market. They sold shares worth Rs 2,300.65 crore on November 25, taking the total so far in November to over Rs 25,300 crore.
 
Amid the ongoing correction, here's what experts have to say.
 
Dr. Ravi Singh, Vice President & Head of Research, ShareIndia
 
The benchmark indices fell on account of heavy selling in Asian markets due to the fear of a possible outbreak of Covid and new restrictions after a new and possibly vaccine-resistant covid variant is detected in South Africa.

Global economies are already facing high inflation and economic bottlenecks and are still in revival mode post-Covid outbreak. In this scenario, if new lockdown and restrictions are imposed then it would be very difficult to maintain the pace of recovery.

Also, Nifty has given adequate return to date, if compared with last year's return so FIIs and retail investors may be closing their positions due to approaching year-end and booking profit at current levels. Nifty may remain weak and touch the level of 16800 and Sensex may touch the 55000 levels in the next trading sessions.
 
Jay Thakkar, VP and Head of Equity Research, Marwadi Shares and Finance Ltd.
 
Nifty has reversed with a break down from the bearish head and shoulders pattern. The neckline resistance of the same is pegged at the 17600/17700 range whereas the target comes to 16900/16700 levels. The momentum indicator MACD has gone into sell mode on the weekly charts as well which is quite negative.
 
November is a negative month and if December also closes in the negative territory, then there will be a quarterly negative close which will happen post six consecutive positive quarterly closes.
 
Hence, going ahead in the December series the outlook is negative and we recommended lightening the long positions and aggressive traders can also short sell on rise.
 
V.K. Vijayakumar, Chief investment Strategist at Geojit Financial Services
 
The new headwind is the latest variant of the virus detected in South Africa, Botswana and Hong Kong. This along with sustained selling by FIIs for the seventh consecutive day are major sentiment negatives for the market.
 
Kranthi Bathini, equity strategist at WealthMills Securities
 
It's a kneejerk reaction in the market due to new covid variant news in some parts of the world including Asian financial hub Hongkong. FII selling is putting pressure on the markets ahead of the holiday season, Investors can use this dip to buy chips in a staggered manner.