Monday blues: Second Covid-19 wave stings indices as markets drop 1.8%

Benchmark indices drop 3% before settling 1.8% lower, amid Covid-19 surge, new restrictions

The worsening coronavirus crisis triggered yet another sell-off in the domestic stock market on Monday, with the benchmark indices dropping more than 3 per cent before recouping some of the losses.

A sharp jump in Covid-19 cases and fresh curbs to contain the spread of the virus have stoked concerns about the revival of the economy and corporate earnings, prompting some investors to pull back.

After dropping as much as 1,469 points, or 3 per cent, the Sensex settled 883 points, or 1.8 per cent, lower at 47,949, while the Nifty 50 index fell 258 points, or 1.8 per cent, to finish at 14,359. Both the indices had dropped more than 3 per cent on the previous Monday.

Investor wealth on Monday tumbled over Rs 3.53 trillion, and the market capitalisation of all BSE-listed companies stood at Rs 201 trillion at the close of trade.

The latest sell-off came as the daily Covid-19 tally in the country crossed a record 273,810. The spike in new cases was accompanied by a severe shortage of medicines and other essentials, putting a spotlight on the country’s weak healthcare infrastructure. Health experts have raised concerns that a possible new variant could spread more rapidly.

The rise in Covid-19 cases has forced many states to impose lockdowns of varying intensity. Delhi on Monday announced a week-long curfew.

Last week, Maharashtra, one of the biggest contributors to the country's gross domestic product (GDP), imposed strict curbs on movement.

“It remains to be seen if this second wave of Covid-19 cases subsides without a serious national-level lockdown. A month of nationwide lockdown costs 100-200 basis points of GDP. Given the high economic cost, we expect the central and state governments to try to contain the spread with the tightening of Covid-19 regulations, night curfew, and localised lockdowns,” BofA Securities said in a note.

India's earnings and economic indicators showed signs of recovery in the last quarter amid a decline in the number of cases and easing restrictions. But the current wave has raised fears of possible recession and curbs in business activities. Analysts said the second wave could complicate corporate India's financial woes and hurt the economic recovery.

"We were expecting 20-25 per cent earnings growth this year, and those estimates will have to be trimmed. We have to see how long the lockdown is. If it's over in another few weeks, the economic impact will be minimal,” said Andrew Holland, CEO, Avendus Capital Alternate Strategies.

All Sensex components, barring two, declined. Powergrid Corporation was the worst-performing Sensex stock and fell 4.1 per cent. ONGC and IndusInd Bank fell 3.9 per cent. More than a dozen stocks fell more than 3 per cent. All the sectoral indices on the BSE, barring one, ended the session with losses. Realty and capital goods stocks fell the most, and their sectoral indices fell 3.9 and 3.09 per cent, respectively. The market breadth was negative, with 2,199 stocks declining against 773 advancing stocks.