D-Street feels the tension; indices plummet by 3%
While the likely impact of the new variant is unclear, investors are concerned about its spread and the prospect of further lockdowns across the globe. Many countries are tightening travel after the discovery of the new variant of Covid-19 in South Africa earlier this week. Reports suggest the new variant may be more heritable.
The Sensex lost 1,688 points or 2.9% to close at 57,107.15, after briefly slipping below 57,000 during the day. The Nifty also briefly broke below the 17,000 mark before closing at 17,014.80, down 521.45 points or 3% from the previous close. Elsewhere in Asia, the indices fell 0.6% to 2.7%. The carnage spread to Europe and the United States. Markets in France, UK and Germany collapsed 3.6-4.8% as the Dow fell more than 1,000 points at the start of trading.
The Nifty’s fall below critical technical support of 17,200 opened up the likelihood that the index would fall another 2-4%, analysts said.
âThe new variant of Covid is a source of great concern but we will have to wait for its exact impact. The market was a little ahead of its fundamentals,â said Nilesh Shah, Managing Director of Kotak Mahindra Asset Management Co. âIt is likely the market will remain in a correction-to-consolidation mode for some time. ”
India’s VIX volatility indicator, which measures the market’s perception of short-term risk, jumped 25% to 20.80. Foreign portfolio investors (REITs) offloaded shares worth Rs 5,785.83 crore while domestic institutional investors (DII) bought shares worth Rs 2,294.11 crore on Friday .
The loss of more than 4% this week pushed the benchmarks to their worst weekly performance since January. Indices have fallen 8% from their October records, Covid fears are accelerating the decline.
Europe’s largest economy, Germany, has seen the biggest daily increase in new Covid cases since the outbreak began in the past 24 hours. The death toll in the country has exceeded 100,000. Other countries like the Czech Republic, Portugal, Slovakia and Belgium, among others, have imposed strict restrictions or are in the process of putting more rules in place. strict to prevent the spread of the virus.
âThis is just the start, little is known about it and, on the positive side, it is still very limited at the moment in terms of spread,â said Andrew Holland, CEO of Avendus Capital Alternate Strategies. “We have to see if the current vaccines work against this. The indices could drop a few more percentage points.”
Earlier this month, the World Health Organization said the current rate of transmission in the 53 countries of the WHO European Region was “of serious concern”.
The new concerns over Covid have erupted at a time when investors are already worried about the impact of the imminent withdrawal of the US Federal Reserve’s bond purchase program. Wall Street is increasingly betting that the US central bank will step up the pace of cutting stimulus and raise interest rates sooner to contain rising inflation, leading to a stronger dollar and foreign investors pulling money from riskier emerging markets, including India.
âThe correction started on the US taper tantrum and REIT profit reservation due to India’s massive outperformance against other peers and accelerated due to variant concern. of Covid, âShah said.