The markets crashed on Monday, taking a sudden plunge about one hour ahead of the close of trading as investors confronted the news of the latest Covid outbreaks and a new lockdown in London and parts of the UK, resulting in a panic that led to the Sensex crashing by 1,406.73 points (3%) to close at 45,553.96. The Nifty dived 432.15 points (3.14%) to close at 13,328.4. The markets witnessed their biggest single-day fall in seven months.
All Sensex components ended in the red, with ONGC leading the pack by tumbling 9.15%. IndusInd Bank, M&M, SBI, NTPC, ITC, Axis Bank and PowerGrid shed up to 6.98%. All sectoral indices ended in the red, with BSE metal, oil and gas, utilities, realty, basic materials, industrials, power and bankex plunging as much as 6.05%. The broader BSE midcap and smallcap indices sank up to 4.57%.
The Indian markets reacted to the weakness in the European markets and started tanking when the markets in Europe opened for trade. Market experts, however, believe that it is premature to tell whether the correction will continue. Piyush Garg, chief investment officer, ICICI Securities, said, “Monday’s crash got triggered with the fall in the European markets. At this point, the markets remain in an overbought zone, so even a small trigger could lead to a steep correction.” He explained that entering the market at these levels means one may not make huge returns for some period, the markets could give CAGR returns of close to 10% for a two-three-year time frame.
Most experts believe that the markets are expected to remain volatile going forward as FPI flows are set to moderate ahead of the holiday season. FPIs till December 18 pumped in capital worth $5.9 billion. With the FPI flows remaining weak ahead of the Christmas, any selling in the market could cause a sharp correction. Jaideep Hansraj, MD and CEO, Kotak Securities, said, “As we head towards Christmas vacation and calendar year end, FII flows are expected to moderate which could also be one of the causes of a steep correction.”
The cash market segment on Monday saw a turnover worth Rs 76,367.07 crore while the futures and options segment saw a turnover of Rs 33.11 lakh crore. This is against the six-month average of Rs 21.7 lakh crore in the F&O segment and Rs 59,316 crore in the cash market segment.
Other asset classes such as crude oil and commodities also witnessed a correction whereas gold and silver rallied as investors flocked towards safety.