Bears maul markets: Indices plunge 3.5%, m-cap worth Rs 8.8 trn wiped out

Indian shares tumbled on Monday as an alarming rise in Covid-19 infections and fresh stringent curbs to contain the spread of the coronavirus cast a shadow over the economic recovery.

The Sensex fell 1,708 points, or 3.4 per cent, to end the session at 47,883 -- the lowest close since January 29 -- while the Nifty 50 index closed at 14,311, declining 524 points, or 3.5 per cent. The fall was the biggest since February 26 and the second biggest in the past one year. It wiped out Rs 8.8 trillion of India’s market capitalisation.

Broad selling was seen across the market as more than five stocks declined for every one advancing stock on the BSE. Overseas investors sold shares worth Rs 1,746 crore on Monday; buying from domestic institutions was also muted at Rs 233 crore.

The Sensex has almost wiped out its 2021 gains. After rising as much as 9.2 per cent, the index is now up just 0.3 per cent on a year-to-date basis.

India has added 168,912 new Covid cases in the last 24 hours, the biggest spike in daily cases since the outbreak of the pandemic last year. The total number of Covid infections in the country also touched 13.5 million, overtaking Brazil as the worst-hit country after the US.

Analysts said the possibility of a full lockdown in Maharashtra -- one of the biggest contributors to India's gross domestic product (GDP) and home to the financial capital Mumbai -- had spooked investors. The state has already announced night curbs and weekend lockdowns. Analysts said stringent restrictions could derail the nascent economic recovery. Many other parts of the country are also witnessing a rise in Covid cases, raising the possibility of the re-imposition of lockdowns.

"The rise Covid-19 infections has spooked the markets. In the last three-four days, the rise in Covid cases has been more intense. Even a mini version of the last year's lockdown will impact businesses,” said Raamdeo Agrawal, co-founder, Motilal Oswal Financial Services.

Analysts said investors were expecting double-digit GDP growth and a record rise in profit in the current financial year. Impending lockdowns have seriously dented the optimism surrounding these projections.

"Since the second wave of the pandemic is turning out worse than expected, there is profound uncertainty about its impact on the economy and markets. The situation is the worst in economically significant Maharashtra and this can impact the market's assumption of around 11 per cent GDP growth and above 30 per cent earnings growth,” said V K Vijayakumar, chief investment strategist at Geojit Financial Services.

India has only been able to vaccinate a small portion of its total populace so far and is facing a shortage of vaccines. There are fears of a spike in cases as large gatherings were witnessed at Kumbh Mela in Uttarakhand and political rallies in states where assembly elections are being held.

A nationwide lockdown in March 2020 had crippled the economy and hit corporate profits. Analysts said the situation might improve if cases peak soon and start coming down.

Barring one, all Sensex constituents ended the session in the red. IndusInd Bank fell the most at 8.6 per cent, followed by Bajaj Finance, which fell 7.4 per cent. Dr Reddy’s rose nearly 5 per cent. All the sectoral indices ended the session lower. Realty and industrials stocks fell the most, and their gauges fell 7.7 per cent and 6 per cent, respectively. Index heavyweights Reliance and HDFC Bank fell over 3.5 per cent each and dragged the Sensex lower by over 400 points.

"The bad health situation and rupee depreciation have improved prospects for the pharma and IT sectors, which are likely to remain resilient even during a market downturn. Economy- facing stocks are likely to be under pressure," said Vijayakumar.