NEW DELHI: Domestic equity indices slumped in the morning trade on Thursday, following a rout in US stock overnight after a number of Fed officials suggested the US economy was worse than the market was pricing in.
Investors also battled the worries over resurging Covid-19 cases in European cities that led to more restrictions. Poor economic data from Western countries also hit sentiments back home.
At 2.40 pm, BSE flagship Sensex was down 1007 points at 36,660 while NSE benchmark Nifty tanked 265 points to 10,867, sliding below the 11,000 level for the first time since August 4. All sectors saw a massive selloff.
India VIX, the measure of volatility in the market, advanced 8.06 per cent to 22.68, on the F&O expiry day.
“It is possible that we may see more corrections. Scotland and the UK have said they are contemplating a lockdown. Fears that more economies may close down is creating more nervousness in the market. The revelations on global bank’s transactions also weighed heavily. All this is collectively bothering the market, which is on the lookout for reasons to correct. Market had already raced ahead of its valuations,” said Abhimanyu Sofat, Head of Research, IIFL Securities.
In the 30-share pack Sensex, HUL and Nestle India were the two gainers, marginally. On the other hand, M&M was the biggest loser, down 6.01 per cent. It was followed by TCS, Bajaj Finance, IndusInd Bank, Tata Steel and Tech Mahindra that fell between 3-6 per cent.
Broader market indices were faring in-line with their headline peers as Nifty Smallcap slipped 1.96 per cent while Nifty Midcap dropped 2.05 per cent. Broadest index on NSE, Nifty 500 was down 2 per cent.
Here are major factors dragging markets:
- Economy in a sinkhole
Investors were left wondering if they have overpriced the global economic recovery as US Federal Reserve Vice Chair Richard Clarida said on Wednesday that the US economy remains in a “deep hole” of joblessness and weak demand, and called for more fiscal stimulus, noting that policymakers “are not even going to begin thinking” about raising interest rates until inflation hits 2 per cent.
Cleveland Federal Reserve Bank President Loretta Mester echoed Clarida, saying that the US remains in a “deep hole, regardless of the comeback we’ve seen.” These comments made investors jittery across the globe.
- Global markets fall
MSCI’s broadest index of Asia-Pacific shares outside Japan tumbled 1.35 per cent in the morning session on broad losses across the region.
Chinese blue-chips dropped 1.09 per cent, Hong Kong’s Hang Seng fell 1.72 per cent, Seoul’s KOSPI sank 1.73 per cent and Australian shares were 1.18 per cent lower. Japan’s Nikkei fell 0.74 per cent.
On Wednesday, the Dow Jones Industrial Average fell 1.92 per cent, the S&P 500 lost 2.37 per cent and the Nasdaq Composite dropped 3.02 per cent.
- Macro numbers put more pressure
US business activity cooled in September, with gains at factories offset by a retreat at services. Investors now await weekly data, which is expected to show US jobless claims fell slightly but remained elevated.
Across the pond, Euro zone business growth ground to a halt this month as the service industry slammed into reverse, knocked by a resurgence in COVID-19 cases prompting governments to reintroduce restrictions, a survey showed.
- Covid-19 re-emerges
Countries including the UK, France, Spain and the Netherlands are seeing re-emergence of virus hotspots that may lead to fresh curbs on movement and businesses, fear investors. India is also reporting close to one lakh cases every day, with the current patient tally at 57.3 lakh.
The number of coronavirus-related deaths worldwide has passed 9.75 lakh, according to the Johns Hopkins University tracker, which relies on official government data. Over 91,000 people in India have died from the virus.
If deaths continue to occur at roughly the same rate, the world will have suffered a million dead before 1 October – or within the next week.
