Monday mayhem on D-Street: Sensex falls 1,190 points, Nifty ends at 16,614

The Indian benchmark indices plunged on Monday as rising Covid cases due to the Omicron variant triggered a global sell-off in equities. 

The Sensex fell 1189 points and ended the session at 55,822, a decline of 2.09 per cent – the sharpest since November 26, 2021. This is the lowest closing for the 30-share index since August 23 this year.

The Nifty50, on the other hand, tumbled 371 points to end the session at 16,614, a decline of 2.2 per cent. While the US markets opened weak, major European and Asian markets ended the session with big losses.

Investor wealth to the tune of Rs 6.8 trillion was wiped in Monday's mayhem on the D-Street. Over the past six sessions, the benchmark Sensex has declined 4 per cent or 2,461 points. 

The markets have been on the decline after hitting an all-time high (intraday) on October 19, 2021. On a closing basis, investor wealth to the tune of Rs 22.11 trillion has been cleaned off since October 18, when the BSE market capitalisation touched a high of Rs 274.66 trillion, according to the data from the exchange.

The continuous selling by foreign portfolio investors (FPI) is also weighing on Indian equities. A combination of concerns on valuations, interest rates, and the pandemic has turned FPIs into net sellers from October onwards. Since October, they have sold equities worth Rs 33,805 crore.

The rampant spread of Omicron across the globe, especially in Europe, has heightened concerns about economic recovery. Analysts said a fresh set of restrictions would derail the nascent economic recovery. Reports suggesting that existing vaccines may be less effective against the new variant are also fuelling investor worries.

Some countries in Europe have imposed lockdowns, while the others are considering the same to control the spread of the variant. During the weekend, the Netherlands announced a strict lockdown until January 14 and ordered the closure of all non-essential shops. France has banned public concerts and fireworks for the new year and asked its citizens to avoid large gatherings. The UK is also staring at strict curbs ahead of Christmas.

US health officials urged the public to get booster shots and take necessary precautions while travelling during winter holidays. The US’ top pandemic advisor, Anthony Fauci, warned of a bleak winter. 

India at present has at least 161 Omicron cases spread across 11 states and Union Territories.

“The markets have earlier done very well; valuations are expensive. We haven’t had a correction for a long time. And the markets doubling without a 10 per cent correction is a very rare event. That, coupled with the latest news flows, rattled investors," said Jyotivardhan Jaipuria, founder, Valentis Advisors.

The rise in Omicron cases comes as central banks across the globe have prioritised fighting inflation by withdrawing monetary support. Last week, the US Federal Reserve announced its plan to accelerate tapering its monthly bond purchases, and indicated hiking interest rates earlier than expected. The Bank of England became the first major central bank to raise interest rates and attributed persistent inflation to the surprise move. The change in stance by central banks that had termed inflation as transitory until recently has rattled investors. Meanwhile, China's central bank lowered its benchmark lending rate for the first time in 20 months but the move did not strike a chord with investors.

"Things are getting a bit more serious vis-à-vis Omicron concerns. Investors are factoring in potential lockdowns. Moreover, hiking of interest rates by the largest public sector bank in India shows that rates will go up anytime in India," U R Bhat, Co-founder, Alphaniti Fintech.

The market breadth was negative, with 2,699 stocks declining against 746 advancing on the BSE. Around 540 stocks were locked on the lower circuit on the BSE.

Barring two, all the Sensex stocks declined. Tata Steel was the worst-performing Sensex stock and declined 5.2 per cent. All the sectoral indices on the BSE declined. Realty stocks declined the most, and its sectoral index fell 4.7 per cent.

The BSE mid- and small-cap indices declined 3.4 and 3.3 per cent, respectively, on Monday. Over the last four weeks, the BSE midcap index has declined 6 per cent and the small-cap index 1.5 per cent.