Markets plunge on news of mutant virus

Worst single-day fall in seven months

Fears of a rapidly spreading new strain of the COVID-19 virus in the U.K. caused a bloodbath in Indian equity markets, with key benchmark indices slumping 3%. The rupee declined to a two-week low at 73.79 against the U.S. dollar.

Global equities too tumbled, the dollar strengthened and volatility surged across asset classes as news of the new strain threatened to torpedo markets’ optimism over a vaccine-fuelled rebound in economic growth.

U.K. equities were down just over 2%, while European equities fell around 2.5%. Futures for the S&P 500 fell 1.8%, recouping some earlier falls, while Nasdaq futures were down 1.2%. Gold, which usually rises during times of turmoil, fell as much as 1.3% in the global markets before clawing back some of that loss.

Back in Indian equities, all sectoral indices closed with losses. The markets witnessed the worst single-day loss in more than seven months, analysts said. Declines were seen across sectors such as banking, auto, metal, oil & gas, real estate and public sector stocks.

Amid widespread sale of the BSE Sensex pack, intraday trade saw the index plunging 2,038 points or 4.34%. It recovered to a 3%, or 1,407-point decline to 45,554 points. ONGC led the bloodbath, plummeting 9.15%, while SBI slumped 6.2% .

The NSE Nifty-50 index also fell 3.14% to 13,328.40 points. The top Nifty losers included ONGC down 9.44%, Tata Motors down 9.44% and GAIL down 8.44%. .

“Travel restrictions imposed by several countries to and from the U.K. have added concerns of yet another lockdown,” said Vinod Nair, head, Research, Geojit Financial Services.

 “The European market witnessed further selling pressure. The vulnerability of the market was high, due to quick gains made in the ongoing rally leading to low margin of safety,” Mr. Nair added.

“Despite this, we do not expect a big correction [but] rather a consolidation, in the short term, of not more than 7% to 10% in the main indices,” he said.

Ajit Mishra, VP, Research, Religare Broking, said the next round of strict travel restrictions would dent economic recovery.

S. Ranganathan, head, Research, LKP Securities, said, “While the street was bracing for a correction this week after a sharp up move, the sheer velocity of the fall took the bulls by surprise as practically none of the key index constituents was in the green.”

(With Reuters inputs)

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