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Stocks tank as new covid variant spooks investors

On Friday, the benchmark Sensex fell 1.4% to 57,976, while the broader Nifty50 declined 1.4% to 17,294 as a new coronavirus variant hurt investor sentiment.Premium
On Friday, the benchmark Sensex fell 1.4% to 57,976, while the broader Nifty50 declined 1.4% to 17,294 as a new coronavirus variant hurt investor sentiment.

  • Nearly 7.4 trillion of investor wealth was wiped out in India after the new variant, called B.1.1.529, was identified in South Africa
  • The benchmark Sensex plunged 1,687.94 points, or 2.87%, to 57,107.15, while the broader Nifty index fell 2.91% to 17,026.45

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Indian stocks tumbled nearly 3% to hit a three-month low on Friday, tracking Asian markets, as investors pressed the panic button over reports of a new and possibly vaccine-resistant coronavirus variant.

Nearly 7.4 trillion of investor wealth was wiped out in India after the new variant, called B.1.1.529, was identified in South Africa.

The discovery led to fears that the new strain could fuel outbreaks in many more countries, straining health systems, potentially evading vaccines and complicating efforts to reopen economies and borders. Scientists say B.1.1.529 carries many mutations in its spike protein, which plays a key role in the virus’ entry into cells in the body. It’s also what is targeted by vaccines.

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The benchmark Sensex plunged 1,687.94 points, or 2.87%, to 57,107.15, while the broader Nifty index fell 2.91% to 17,026.45. Both indices closed at the lowest level since 30 August. The Sensex fell as much as 3.06% in intraday trading, while the Nifty lost 3.14%.

Indusind Bank, Maruti Suzuki and Tata Steel were among the biggest blue-chip losers on Friday, dropping more than 5%.

The day capped a tough week for the Indian markets, with the Sensex and Nifty losing 4.24% and 4.16%, respectively, the steepest weekly decline this year. Except for BSE Healthcare, the selloff was seen across sectors, with most of them down 1.8%-6.4%. The volatility index India VIX surged 24.84% to 20.80 levels.

The rupee weakened to near a one-month low of 74.87 against the dollar, down 0.48% from its previous close. The 10-year bond yield fell 4 basis points to 6.33%, while the five-year bond yield slipped 4 bps to 5.655%.

“Nervousness on the new variant of coronavirus and expectations of the US increasing the pace of tapering have led to recent market weakness. This trend may take some time to recover as the World Health Organization meeting on the new mutant variant impact and hospitalization rates in the US and Europe will be watched by the market very closely," said Amit Gupta, fund manager–portfolio management services at ICICI Securities.

“India is on a higher earnings growth trajectory, and this is the only major risk which can spoil the sentiments. The current dollar strength also suggests the risk-off sentiments and is leading to FII flows currently," Gupta added.

Between 22 and 25 November, FIIs sold around $2 billion in equities, according to Sebi.

Elsewhere in Asia, Japan’s Nikkei lost 2.5%, Hang Seng fell 2.7%, and Taiwan and Kospi slumped 1.6% each. In Europe, FTSE100, CAC 40 and Dax lost between 2.8-3%. US markets were closed on Thursday due to Thanksgiving.

Several governments moved to tighten restrictions on travel from countries in southern Africa. The UK, Israel, Italy, Germany blocked flights from South Africa and five neighbouring countries, and Singapore restricted travel from seven African countries. “There is fear of this new variant spreading to other countries, which might again derail the global economy. Already there is uncertainty as to when the US Fed will start raising interest rates. So markets might continue to reel under pressure and would actively track covid situation globally," said Hemang Jani, head of equity strategy, Motilal Oswal Financial Services.

Bloomberg contributed to this story.

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