The futures and options (F&O) expiry and weak global cues turned out to be a nightmare for bulls on Thursday, as benchmark indices plunged nearly 3 per cent on heavy unloading. With the uncertainty regarding an economic recovery, the unabated rise in Covid infections and the derivatives expiry selling contributing to the negativity, the Sensex plummeted 1,114 points to 36,553.60 and the Nifty50 fell 363 points to 10,805.55.
With Thursday’s fall, the Sensex has lost over 2,200 points this week. The rupee declined 32 paise at 73.89 against the US dollar on capital outflows and weakness in other global currencies on Thursday.
Vinod Nair, head of research at Geojit Financial Services, said, “Benchmark indices had a gap down opening and kept losing ground as the day wore on, to finally end the day around 2.8 per cent down. Markets tracked weak global cues as the uncertainty witnessed in the last few days gave way to negativity, with broader markets also underperforming.” With volatility expected to be high, traders are advised to remain cautious, Nair said.
IT, metals, banks, auto, media, pharma and realty indices fell sharply in the selling avalanche. The mid-cap and small-cap indices, too, slipped sharply and lost 2.14 per cent and 2.28 per cent, respectively. The looming uncertainty over the stimulus package in the US, combined with the issue of rising Covid cases worldwide, raised concerns over the economic recovery. The economic situation may deteriorate further if the virus situation results in partial lockdown again, analysts said.
European and Asian stocks dropped following a rout in tech shares in the US on Wednesday and investors largely gave up hopes that the US Congress will provide a stimulus while worrying about a rise in Covid-19 cases.
“Economists at Goldman Sachs cut their US growth forecast for Q4 to 3 per cent from 6 per cent. Investors are bombarded by a perfect storm of problems including rising virus infections, new lockdowns, a slowing economic recovery, stalled US stimulus talks and election uncertainty,” said Deepak Jasani, head of retail research, HDFC Securities.
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