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    Sensex tanks 1,115 points, Nifty plunges to 10,806: Four factors behind market crash

    Synopsis

    India VIX, the measure of volatility in the market, advanced 5.45 per cent to 22.13.

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    Broader market indices were faring worse than their headline peers as Nifty Smallcap slipped 2.03 per cent while Nifty Midcap dropped 1.63 per cent. Broadest index on NSE, Nifty 500 was down 1.50 per cent.

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    NEW DELHI: Domestic equity indices slumped in the morning trade on Thursday, following a rout in US stock overnight after a number of Fed officials suggested the US economy was worse than the market was pricing in.

    Investors also battled the worries over resurging Covid-19 cases in European cities that led to more restrictions. Poor economic data from Western countries also hit sentiments back home.

    The 30-share pack Sensex nosedived 1,114.82 points or 2.96 per cent to 36,553.60. Its broader peer NSE Nifty slumped 326.30 points or 2.93 per cent to 10,805.55. Both indices extended their losing streak to the sixth day, matching a six month old record.

    India VIX, the measure of volatility in the market, advanced 12 per cent to 24-level, reflecting widespread fear on Dalal Street.

    “It is possible that we may see more corrections. Scotland and the UK have said they are contemplating a lockdown. Fears that more economies may close down is creating more nervousness in the market. The revelations on global bank’s transactions also weighed heavily. All this is collectively bothering the market, which is on the lookout for reasons to correct. Market had already raced ahead of its valuations,” said Abhimanyu Sofat, Head of Research, IIFL Securities.

    In the 30-share pack Sensex, HUL was the only gainer, rising marginally. On the other hand, IndusInd Bank was the biggest loser, down over 7 per cent. It was followed by Bajaj Finance, M&M, Tech Mahindra, TCS and Tata Steel that fell between 4-7 per cent.

    Broader markets also saw massive selling but were relatively better positioned than their headline peers. Nifty Smallcap dropped 2.57 per cent while Nifty Midcap extended its losing streak to sixth day, closing with a cut of 2.51 per cent.

    Here are major factors dragging markets:

    • Economy in a sinkhole
    Investors were left wondering if they have overpriced the global economic recovery as US Federal Reserve Vice Chair Richard Clarida said on Wednesday that the US economy remains in a "deep hole" of joblessness and weak demand, and called for more fiscal stimulus, noting that policymakers "are not even going to begin thinking" about raising interest rates until inflation hits 2 per cent.

    Cleveland Federal Reserve Bank President Loretta Mester echoed Clarida, saying that the US remains in a "deep hole, regardless of the comeback we've seen." These comments made investors jittery across the globe.

    • Global markets fall
    MSCI's broadest index of Asia-Pacific shares outside Japan tumbled 1.35 per cent in the morning session on broad losses across the region.

    Chinese blue-chips dropped 1.09 per cent, Hong Kong's Hang Seng fell 1.72 per cent, Seoul's KOSPI sank 1.73 per cent and Australian shares were 1.18 per cent lower. Japan's Nikkei fell 0.74 per cent.

    On Wednesday, the Dow Jones Industrial Average fell 1.92 per cent, the S&P 500 lost 2.37 per cent and the Nasdaq Composite dropped 3.02 per cent.

    • Macro numbers put more pressure
    US business activity cooled in September, with gains at factories offset by a retreat at services. Investors now await weekly data, which is expected to show US jobless claims fell slightly but remained elevated.

    Across the pond, Euro zone business growth ground to a halt this month as the service industry slammed into reverse, knocked by a resurgence in COVID-19 cases prompting governments to reintroduce restrictions, a survey showed.

    • Covid-19 re-emerges
    Countries including the UK, France, Spain and the Netherlands are seeing re-emergence of virus hotspots that may lead to fresh curbs on movement and businesses, fear investors. India is also reporting close to one lakh cases every day, with the current patient tally at 57.3 lakh.

    The number of coronavirus-related deaths worldwide has passed 9.75 lakh, according to the Johns Hopkins University tracker, which relies on official government data. Over 91,000 people in India have died from the virus.

    If deaths continue to occur at roughly the same rate, the world will have suffered a million dead before 1 October – or within the next week.
    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds.)

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    43 Comments on this Story

    Kishore Kumar Verma25 days ago
    People were confined to homes after March 23 lockdown. Many new investors were added, going by the increase in the number of new dmat accounts opened. They spent time buying and selling on the stock markets. That can be a possible reason for rally in share prices in India. The percentage of population trading in India is much less than that of USA even in this date
    Binu Pillai26 days ago
    Markets often ignores the fundamentals.. Right now the world is suffering from Covid problem, Vitamin D3 is widely used to raise the immunity against Covid. Look at FERMENTA BIOTECH the largest producer of Vitamin D3. It has posted very good results yet the share got hammered from its 52-week high. Company has good track record of Dividend and BONUS. Invest in such shares for long term benefits.
    Radhakrishnan Velmurugan26 days ago
    Any disruptive interruption will lead to a slippage in economy and its indicators for sure. Had it been gradual from April'2020 would have not created a shock like this. Anticipated since June after the unabated rise in indices world wide.
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