UPDATED: April 12, 2021 11:32 IST
Domestic benchmark indices crashed on Monday as stock markets continued to witness increased volatility, triggered by nervousness among investors.
At 10:40 am, S&P BSE Sensex was down 1,419 points (2.86 per cent) at 48,171.77, while NSE Nifty 50 fell over 400 points (2.75 per cent). This is one of the biggest drops in benchmark indices in the last few weeks.
The market weakness observed today is directly related to negative market sentiments arising from the second wave of Covid-19 cases in the country.
India has reported 1,68,912 fresh Covid-19 cases in the last 24 hours — the biggest spike in daily cases witnessed since the pandemic began last year.
It may be noted that all Nifty sectoral indices have nosedived into negative territory except pharma, with bank stocks bleeding the most. Banks are now worried about the prospect of India’s economic recovery, which has been hit hard by the second wave of the virus in India.
Not just banks but several sectors like automobile, FMCG, financial services and realty have plummeted sharply due to increased uncertainty amid rising cases. It has not only made investors nervous but also triggered a sharp rise in volatility across sectors.
MAHARASHTRA LOCKDOWN FEARS
One of the key reasons behind today’s market weakness is the possibility of a lockdown in Maharashtra, which contributes 14.5 per cent of the country’s overall GDP. Investors are worried that a stringent lockdown in the state could severely detail India’s economic recovery.
The fear among investors is clearly visible as the two main indexes, Sensex and Nifty, have retreated 6 per cent to 8 per cent from their mid-February record highs. Experts expect domestic stock markets to plummet further if the Covid-19 situation worsens in the country.
It may be noted that Maharashtra is not the only state that is now facing a crisis. India’s national capital Delhi is also witnessing a similar surge and authorities may have no choice but to opt for another lockdown if the trend continues.
Other states in India are also witnessing a sharp rise in cases, and today’s record surge has made India the world’s second worst-hit country in terms of total Covid-19 cases since the pandemic began.
WORSE THAN EXPECTED
VK Vijayakumar, the chief investment strategist at Geojit Financial Services, told news agency Reuters that the second wave of the pandemic is turning out to be “worse than expected”.
“There is profound uncertainty about its impact on the economy and markets,” Vijayakumar said. He added that the market’s assumption of 11 per cent economic growth and above-30 per cent earnings could take a hit.
A saving grace for the market could be the corporate earnings season that starts today, with Tata Consultancy Services expected to report March-quarter results.
However, markets are likely to remain volatile for most parts of the weeks as inflation data, expected later in the day, could worsen investor sentiment. Inflations in India is expected to touch a four-month high in March.