The benchmark indices slumped on Monday amid a global sell-off triggered by concerns about rising Covid-19 cases and news reports on suspicious transactions involving international banks.
The Nifty50 fell 254 points, or 2.2 per cent, to end at 11,250 — the biggest fall in three weeks, and the Sensex closed at 38,034, dropping 812 points, or 2.1 per cent. The Nifty was the worst performing index in Asia.
Wall Street’s main indexes hit their lowest in nearly seven weeks in early trade. The Dow Jones Industrial Average was down 2.8 per cent to 26,894 as of 08:30 pm IST, while the S&P 500 fell 2.3 per cent to 3,243.
European stocks fell the most since June 11, hit by mounting worries there could be new lockdowns as coronavirus cases surge. The Stoxx Europe600 Index dropped by over 3 per cent, while Germany’s DAX sank as much as 4.5 per cent, the most since late March. Several European countries, including Denmark, Greece, and Spain, have introduced new restrictions. The UK, on the other hand, is looking at a second national lockdown.
The International Consortium of Investigative Journalists (ICIJ) in its report said bankers across the globe profited from powerful and dangerous players in the past two decades even after the US imposed penalties. The ICIJ obtained top-secret suspicious activity reports, or SARs, worth more than $2 trillion globally, which were red-flagged by the US authorities as suspicious.
"The markets had rallied a lot and a correction was due. The possibility of lockdown coming into force again in many parts of Europe and the ICIJ report were just triggers,” said Jyotivardhan Jaipuria, founder, Valentis Advisors.
The halt in fiscal support from the US is worrying investors, and the tensions between Democrats and Republicans regarding the appointment of the next Supreme Court judge also concerned investors. Banking stocks across the globe fell, and the stock of HSBC fell to the lowest in 25 years. The yield on the benchmark 10-year US Treasuries dropped to 0.66 per cent. A drop in treasury yields suggests a shift to safe assets from equities.
"With high valuations and worries that earnings may not justify such valuations anytime soon, the markets may trade uncertain for the time being. Stay cautious," Vinod Nair, head of research, Geojit Financial Services, said.
Market experts said whether more restrictions would be announced in the days to come and the progress on finding a vaccine to treat Covid would influence the market movement. Investors will also be keeping a close watch on the Congressional hearing in which seven members of the Federal Reserve, including Chairman Jerome Powell, will appear.
”The markets will continue to rise, aided by monetary easing by central banks and hopes of a medical breakthrough in early winter. There could be occasional pullbacks due to news flows like today or fears of a second wave," said Saurabh Mukherjea, founder, Marcellus Investment Managers.
The market breadth was negative, with total declining stocks at 2,165 and advancing stocks at 595 on the BSE. Over 400 stocks were locked in the lower circuit. All the Sensex components, barring three, ended the session lower. IndusInd Bank fell 8.6 per cent, Bharti Airtel fell 5.8 per cent, and Tata Steel fell 5.6 per cent. Telecom and realty stocks fell the most with their sectoral indices falling 5.7 per cent each.
Both foreign portfolio investors (FPI) and domestic institutional investors (DII) were net sellers and sold shares worth Rs 540 crore and Rs 518 crore respectively.
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