Markets lost enough ground again on Monday after a weak start and are ready to extend their lost run until the fifth day.
Weak global cues, rising bond yields, cover bulls in the streets for fear of a Covid-19-led lockdown. Meanwhile, due to improved oil prices and extended valuations, investors decided to take profits off the table and stay on the sidelines after a secular rally on the benchmark in about a year.
The BSE barometer Sensex crossed the 1,000-point mark and fell below 50,000 to an intra-day low of 49,611, but NSE’s Nifty jumped 248 points to 14,7333.755.
With that, both indices are 3.5 in five days. Exceeded 3.5 percent.
The index includes heavyweights, Reliance Industries, HDFC, TCS, ITC and ICICI Bank among the top Sensex drag. At the same time, ONGC was the best performer, up more than 2 percent.
India VIX, however, rose 24 per cent from 11 per cent before the end of the month on Thursday.
Investors on the BSE became poorer by Rs 2.6 trillion as the market cap of companies listed on the BSE crossed Rs 203 trillion to Rs 260 trillion.
Here are the top reasons behind the market crash:
- Weak global sources
Back home indicators follow mixed signals from peers around the world. Asian stocks have been mixed in anticipation of rapid economic growth and global inflation, and real yields appear to be relatively broader than equity valuations.
Outside of Japan, broader MSCI indices for Asia-Pacific stocks flattened, with Japan’s Nikkei recovering 0.8 percent and South Korea’s 0.0 percent, while Chinese blue chips fell 1.4 percent. Meanwhile, the S&P 500 futures are down 0.1 percent and the Eurostox 50 futures are down 0.3 percent, and the FTSE futures are down 0.7 percent, indicating a weak start for European and US markets later today.
- Riding bond yield
The jump in bonds is the yield of unscrupulous investors on Dalal Street in India and the United States. The yield on government bonds has reached its highest level since Aug. 27, although the yield on 10-year Treasury notes has already reached 1.38 percent, breaking the 1.30 percent level and reaching 43 basis points so far this year, Reuters reports.
“It is important for investors to know that rising bond yields are a major determinant of equity valuation. The fine tunnel of 2013 is one of two examples where the sudden rise in bond yields caused markets to slide into massive bonds.” Yields are inversely proportional to equity returns, and equity markets tend to be relatively risk averse as bond yields decline.
- Spike in covid case
According to the Union Ministry of Health, India has seen an increase in active cases for the fifth day in a row. As of February 22, the total number of Covid-19 infections had exceeded 1.10 crore with 14,199 new infections in a single day.
Meanwhile, the state most affected by epidemics, pandemics, epidemics has once again witnessed a dramatic increase in the infection rate in Pune district on Sunday alone. Following this, the government of Chief Minister Uddhav Thackeray banned political, religious and social gatherings and in some cases imposed new locks. Going forward, market participants will keep an eye on developments in the case of Covid, and new lockdowns could further disappoint market sentiment.
- Oil on a fork
The recent surge in oil prices is another factor that is about investors back in the country because crude is a big part of India’s imports and it could have an impact on the rupee and increase the cost of raw materials for companies. Brent crude rose 76.7 cents, or 1.2 percent, to $ 1.67, after gaining about 1 percent last week, as demand for crude oil epidemic recovered and demand recovered from the depths of the coronavirus epidemic. US oil fell 0.4% last week to 744 cents, or 1.3 percent, to 9.98 a barrel.
- Value concerns
Analysts on Dalal Street have also blamed prices for the correction in the market.
“Markets have rallied a lot, so there is some profit booking in the market. The fall has accelerated over the past few days before the F&O expires on Thursday. Meanwhile, the valuation has been costly, driven largely by the flow, and is on the upside,” said Jyoti Roy said.
Meanwhile G Chucklingam of Equinomics Research thinks that 90 per cent of the crash in the market is due to price concerns. “It’s nice to see this correction because if you don’t make such corrections periodically, your market will crash massively,” he added.
- FOO’s expired
Given the near-term headwinds, investors also rushed to bookings gains before the expiration of the February series Futures and Options (F&O) contract due to this Thursday.
“The Nifty’s call options for both Friday, weekly and monthly contracts have a maximum open interest (OI) of 16,000 with a maximum OI added to 15,000. The highest number in the 1400 strike was 14,800, the note said.