Stock market volatility: Nifty, Sensex end 2% lower; 6 factors that spooked Indian markets on Monday

Domestic equity benchmarks corrected nearly 3,5 per cent each after witnessing a big fall of 1.5 per cent on Friday last week. Barring the IT sector, all major sectoral and broader market indices were trading in the red amid high volatility. At around 12.55 pm, headline indices Sensex and Nifty were trading with over 1830 points loss at 55,181 and Nifty gave up 16,500 after it shed 548.05 points to trade at 16,437.15 respectively.  

Among the sectoral indices, Nifty Bank and Nifty Realty and Nifty PSU declined between 4 to 6 per cen, while Nifty Midcap and Nifty small cap both slipped nearly 5 per cent in the broader market.  CIpla was the only gainer on Nifty50, while all stocks traded in teh red on the 30-share Sensex.

From Omicron scare to Foreign Institutional Investors (FIIs) relentless selling, there were several factors that led to this market crash on the first day of the fresh week on Monday.  

1. Omicron scare: The emergence of this Covid variant has been spooking the market across the world. India reported 6,563 new covid cases and 132 deaths and 8,077 recoveries in the last 24 hours, as per the Ministry of Health and Family Welfare. On Friday, the government reported that more than 101 Omicron cases have been detected across the country, as per an ANI report.

Meanwhile, Britan continues to be one of the biggest victims of this virus as another 12,133 Omicron cases were recorded in the UK, taking the total Omicron cases found in the country to 37,101, the UK Health Security Agency (UKHSA) has said.The Indian Benchmarks made gap-down opening today amid rising Omicron coronavirus cases worldwide, said Gaurav Garg, Head of Research, Capitalvia Global Research Ltd.

2 FIIs relentless selling

Foreign portfolio investors (FPIs) have pulled out Rs 17,696 crore from the Indian markets in December so far amid uncertainty due to a new coronavirus strain, Omicron, and expectations of faster tapering by the US Federal Reserve.  According to the depositories data, FPIs took out Rs 13,470 crore from equities, Rs 4,066 crore from the debt segment and Rs 160 crore from hybrid instruments between December 1-17.  

"Traders will be cautious with continuous net outflow of foreign funds as Foreign Portfolio Investors (FPIs) have pulled out Rs. 17,696 from the Indian markets in December month so far. RBI data showed decline in India’s forex reserves for the third consecutive week," said Garg.  

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3. Global Cues
Global markets have been witnessing volatile trading sessions in view of rising cases of omicron virus across the world. The Asian markets traded negative this morning. Japanese Nikkei 225 was trading negative by 2 per cent, Hang Seng Index dipped 1.4% and Shanghai Composite 0.75% around 10. 35 am on Monday. Besides, SGX Nifty Futures, which hints at the trends of Indian market opening, was down over 360 points and was trading at 16, 651 around the same time.  

4. Technical data
The Indian markets opened with a gap-down, giving up on a hope of revival. "The lows of Friday was a ray of hope but the index has opened with a gap down this morning, which cements the validity of a downtrend. The upside for the index is capped for the time being and every rally up can be used to short this market for a target of 16400," said Manish Hathiramani, proprietary index trader and technical analyst, Deen Dayal Investments.  

Gaurav Garg said the research suggests that the levels of 16,350 may act as support levels in the market. If the market unable to sustain above the level of 16,350, we can expect the market to trade till the lower range of 16000-16100.

5. Primary Market: Shriram Properties weak listing
As the market opened with a gap-down, shares Shriram Properties Limited made a weaker debut on exchanges than expected on Monday.   Shares of one of the largest real estate players in the country was listed at 20.34% discount to Rs 94 per share on the BSE against its issue price of Rs 118 per share. Shares declined by Rs 24 per share on its debut.

6. US-China tension
The US and China tension has renewed after the US sanctioned more Chinese tech companies and added others to a blacklist for alleged human rights abuses in the far-west Xinjiang region. Earlier on Friday, the US Treasury Department sanctioned eight companies, including drone maker DJI Technology and artificial intelligence giant Megvii. The Commerce Department separately added 34 firms to its so-called entity list.