Global sell-off hits Indian stocks; Sensex tanks 2.6%

MUMBAI: A sharp sell-off in global equities spooked by fears of a resurgence of the coronavirus pandemic impacting economic recovery and receding hopes of a US stimulus before the November presidential election dragged Indian markets lower on Thursday.

The benchmark BSE Sensex ended at 39,728.41, down 1,066.33 points or 2.61%, while the Nifty closed at 11,680.35, down 290.70 points or 2.43%.

Weakness in the European markets led to a fresh bout of selling in the domestic markets in the afternoon.

European stocks slumped, with investors concerned about the impact of a second wave of Covid-19 on the economy without any imminent stimulus to cushion the blow.

Governments across Europe have tightened restrictions to curb an accelerating second wave of infections.

London will enter a tighter Covid-19 lockdown from midnight on Friday to curb the rapid spread of the disease.

The British capital will move to a so-called “high” alert level from midnight on Friday, up from the current “medium” alert level.

Analysts said traders seemed to take note of Covid-19 cases and booked profits in anticipation of fresh rounds of lockdown in many parts, which could further prolong the already weak economic recovery.

Markets in other parts of Asia Pacific were also under pressure with Hong Kong’s Hang Seng index dropping 2.06%. Meanwhile South Korea’s Kospi slipped 0.81% and Japan’s Nikkei 225 declined 0.51%.

“Stalled vaccine trials and Brexit clouds also played a part in the weakened sentiment. In India, additionally there were reports of a microfinance institution (MFI) defaulting on debt servicing due to internal fraud and a financial service firm facing forensic audit directed by the regulator,” said Deepak Jasani, head of retail research at HDFC Securities.

Weakness in Indian equities may linger further, according to analysts.

“We see scope for further decline of 3-4% from the current level before things stabilize and markets find a durable shortterm bottom. The weak global cues seem to have triggered profit booking in India too with banks and IT stocks facing intense selling pressure,” said Gaurav Dua, SVP, head capital market strategy & investments, Sharekhan by BNP Paribas.

Further, Moody’s statement that India’s second round of stimulus will provide very limited support to growth during these times dampened sentiments.