India’s stocks slumped again on Friday amid fears about a new, potentially more dangerous Covid variant, weak global markets and strong selling by foreign investors.
The BSE Sensex and Nifty50 benchmark indexes both fell almost 3%. The slump came days after the market rebounded from a steep decline on Monday.
“The market panicked on fresh fears of the dreaded Covid coming back in the garb of a new variant,’’ said Avinash Gorakshakar, head of research at Mumbai-based Profitmart Securities. “The main worry was that major global economies could again slip back into a slowdown if the new variant spreads.’’
Asian and European countries rushed to tighten restrictions on Friday after a new and possibly vaccine-resistant coronavirus variant was detected in South Africa, with the EU and India among nations announcing stricter border controls. The Indian government has asked states to conduct rigorous screening and suspended all international passenger flights till 30 November, 2021.
Safe Havens
“Foreign investors have been net sellers this week and the worry is that fresh Covid fears may result in a flight to safe havens,” said Gorakshakar. That may only increase equity outflows from emerging markets like India, he said.
The domestic market was already seeing sharp foreign outflows amid rising inflation globally and a hawkish US Federal Reserve stance, he added. Foreign investors sold $309 million worth of domestic stocks on Friday, according to the National Stock Exchange.
Local investors also resorted to broad-based selling, dumping Covid-sensitive stocks while their focus shifted towards the pharmaceutical sectors.
“This is evident from the fact that except pharma, that was up nearly 2%, all other sectoral indices lost between 1 and 6%,” Chandan Taparia, vice-president of research at Mumbai-based brokerage firm Motilal Oswal, said.
Selling Pressure to Continue
Given uncertainty over moves by the US Federal Reserve, which could ramp up tapering of its bond buying soon, or even raise interest rates, markets could continue to reel under selling pressure, analysts said. They are also likely to actively track the Covid situation globally.
“Equity markets in the near-term will closely follow the impact of new Covid variant, foreign investors’ actions, and the US Fed policies,” Taparia said. “Today’s closing has left the markets nervous and if we break today’s low, the index can easily slide to 16,400, or even 15,500.”
Meanwhile, the US dollar’s recent surge against the rupee has been attributed to foreign investors’ rush to safety. The rupee was turbulent in forex trading last week and declining overall against the dollar. And on Friday, it fell an “alarming” 40 paise to Rs 74.92 versus the dollar.
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