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Mumbai: A man reacts while watching stock prices on the facade of BSE building after the Sensex crossed 40000 mark, in Mumbai, Thursday, Oct. 8, 2020. (PTI)
Mumbai: A man reacts while watching stock prices on the facade of BSE building after the Sensex crossed 40000 mark, in Mumbai, Thursday, Oct. 8, 2020. (PTI)

Global sell-off on virus fears jitters India, Sensex tanks nearly 3%

  • Weakness in the European markets led to a fresh bout of selling in Indian markets in the afternoon
  • European stocks slumped, with investors concerned about the impact of a second wave of coronavirus on the economy

Sharp sell-off in global equities amid fears of resurgence of covid-19 impacting economic revival and the receding hopes of a US Stimulus before the presidential elections dragged Indian markets on Thursday. The BSE Sensex ended at 39,728.41, down 1066.33 points or 2.61%. The Nifty ended at 11,680.35, down 290.70 points or 2.43%.

Weakness in the European markets led to a fresh bout of selling in Indian markets in the afternoon. European stocks slumped, with investors concerned about the impact of a second wave of coronavirus on the economy without any imminent stimulus to cushion the blow. Governments across Europe have tightened restrictions to curb an accelerating second wave of covid-19 infections.

London will enter a tighter covid-19 lockdown from midnight on Friday to curb the rapid spread of the disease. The UK’s capital city will move to a so-called “high" alert level from midnight on Friday, up from the current “medium" alert level.

Analysts said that traders seemed to take note of covid-19 cases and booked profits in anticipation of fresh rounds of lockdown in many parts which could further delay the already weak economic recovery.

Markets in other parts of Asia Pacific were also under pressure with Hong Kong’s Hang Seng index dropping 2.06% while South Korea’s Kospi slipped 0.81% and Japan’s Nikkei 225 declined 0.51%

“Stalled vaccine trials and Brexit clouds also played a part in the sentiments weakening. In India additionally there were reports of a microfinance institution(MFI) defaulting on debt servicing due to internal fraud and a financial service firm facing forensic audit directed by the regulator," Deepak Jasani, Head of Retail Research, HDFC Securities said.

Analysts feel that weakness in Indian equities may linger further. “We see scope for further decline of 3-4% from the current level before things stabilise and markets find a durable short term bottom. The weak global cues seem to have triggered profit booking in India too with banks & IT stocks facing intense selling pressure," said Gaurav Dua, SVP, Head Capital Market Strategy & Investments, Sharekhan by BNP Paribas.

Further Moody's statement that India's second round of stimulus will provide very limited support to growth during these times dampened sentiments. “While the latest stimulus will spur consumer spending over the near term as coronavirus-related restrictions continue to be eased and India’s festive season begins, the support to growth will be minimal,"Moody’s Investors Service said on Thursday.

So far this month, foreign institutional investors (FIIs) have purchased Indian shares worth $821.38 million. Domestic institutional investors continued to dump equities, selling 4833.20 crore shares in October so far.

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