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Home / Markets / Stock Markets /  Sensex slumps 1700 points. Why stock markets are worried over new covid variant?
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Indian stock markets fell sharply today in tandem with a similar selloff in other Asian markets over fears of a new South Africa Covid variant that could be could be more infectious than Delta. The Sensex fell about 1700 points to settle at 57,107 while Nifty slumped about 3% to 17,026. Just two stocks - Nestle and Dr Reddy's - among the Sensex 30 pack ended in green.

The news of the new covid variant has hammered confidence in equities, which were already under pressure as traders prepared for the Federal Reserve to start tightening its monetary policy to fend off surging inflation.

“Just as this particular tail risk was melting away into the background, scientists in South Africa have announced they have discovered a new Covid variant which could potentially be more transmissible. While the impact on human life is not yet established, the re-imposition of movement restrictions is likely to hurt economic activity. The South African Rand (ZAR) weakened past the 16 level for the first time this year," said Kristal.AI, a wealth management platform, in a note.

In Indian markets, autos, banks and energy stocks were among the worst hit. The Nifty Pharma Index was the only sub-index bucking the trend to end 1.7% higher.

“Following to Asian trades Indian markets are reacting to the concern over a new Covid variant found in South Africa last night followed by few EU countries under full lockdown scenario. Traders in fear are selling riskier assets like equities, which could result in increased equity outflows from FII. We believe India is not in panic mode and investors should make use of this selloff as a buying opportunity. The new variant should not be a great matter of concern for us and we suggest investors with suitable risk appetite to consider and start allocating money into markets who have missed the rallies," said Prashant Tapse, Vice President (Research) at Mehta Equities.

The flare-up of uncertainty also sent safe-haven currencies up with the yen -- a go-to unit in times of turmoil -- piling ahead against the dollar.

The B.1.1.529 strain has been blamed for a surge in fresh cases in South Africa and has already been cropped up in Hong Kong, with the World Health Organization due to hold a meeting later in the day to decide if it should be designated a variant of "interest" or of "concern".

The number of daily infections in South Africa has increased tenfold since the start of the month. In response, Britain banned all travel from the country and five other southern African nations as concerns grow about the new variant, which scientists say could be more infectious than Delta and more resistant to current vaccines.

"Unfortunately we have detected a new variant, which is a reason for concern in South Africa," virologist Tulio de Oliveira told a hastily called news conference.

The variant, which goes by the scientific label B.1.1.529, "has a very high number of mutations," he said.

The WHO said it is "closely monitoring" the reported variant and is expected to meet on Friday to determine if it should be designated a variant of "interest" or of "concern". "Early analysis shows that this variant has a large number of mutations that require and will undergo further study," the WHO added.

The fact that US markets were closed for Thanksgiving on Thursday and trade would be thinner Friday "means there's a wall of buyers missing", meaning moves would be accentuated, say analysts. 

(With Agency Inputs)

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