Investors lose Rs 14 lakh crore today. Sensex, Nifty fall 8% from record highs

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The wealth creation process in the stock market has taken a pause off late and the tide seems to have turned towards market correction over the past month.

© Kshitij Anand Investors lose Rs 14 lakh crore today. Sensex, Nifty fall 8% from record highs

The BSE Sensex had created a new peak of 62,245 on October 19, 2021 when Nifty also created a new record of 18,604. Since then, the market has contracted by ~8%, eroding almost Rs 14 Lakh crore of investor’s wealth.

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“Equity markets have plunged almost 2% amid the emergence of a new, highly mutated Covid-19 variant”, said Hemang Jani, Head of Equity Strategy & Senior Group VP, Broking & Distribution, Motilal Oswal Financial Services.

BSE Sensex had a market cap of Rs 2,74,69,606.93 crore when the markets closed on October 19, while today the market cap stands at about Rs 2,60,81,433.97 crore when both the benchmark indices are down more than 2%. Sensex was down more than 1,300 points and Nifty was trailing by over 400 points.

The fall from the all time highs is witnessed across sectors of indices with biggest drop witnessed in BSE Metals index which have fallen by ~13.6 percent from October 19 levels. BSE Energy index has also witnessed a double digit fall during this period and has fallen by about 10 percent. This was followed by BSE Bankex which tripped 8.2 percent, BSE Finance -7.37 percent, BSE FMCG -7.04 percent, BSE IT -6.68 percent, BSE Oil & Gas -6.1 percent, BSE Auto -6.01 percent and BSE Realty 5.74 percent.

BSE Midcap and Smallcap are down 5.65 percent and 4.6 percent respectively during the same period.

Investors have been vary of global factors that are bringing uncertainty to the markets. The impending stimulus taper and interest rate hikes by Fed and other central banks is acting as a major deterrent for the markets, bringing to the fore the concerns related to the reduction in liquidity from the markets.

The rising inflation across economies is adding fuel to the fire as central banks grapple with the issue of whether it will be prudent to tame the inflation at the cost of economic growth by going for an aggressive increase in interest rates which had been prevailing at all time lows.

Increase in crude and metal prices are adding to the inflationary trends which might slow down the revival in demand that is much needed for the economy to come out of the COVID induced rut.

The rising new cases of COVID virus in major economies of Europe like Germany and Austria and the imposition of total lockdowns therein have dampened the investor sentiment further. More doubts are now creeping up as to when the world will be finally free from the clutches of this virus.

More nails were hammered down the coffin yesterday when a new vaccine resistant variant of the virus was detected in countries like South Africa and Botswana. Currently identified as B.1.1.529, the variant is a big concern because of its high number of mutations and rapid spread among young people in Gauteng, South Africa’s most populous province.

“Equity markets have plunged almost 2% amid the emergence of a new, highly mutated Covid-19 variant”, said Hemang Jani, Head of Equity Strategy & Senior Group VP, Broking & Distribution, Motilal Oswal Financial Services.

The World Health Organization (WHO) has also scheduled a special meeting on November 26 to discuss the plans to tackle this new variant.

EU announced temporary ban of flights from South Africa. “Thus there is fear of this new variant spreading to other countries which might again derail the global economy. Already there is uncertainty as to when the US Fed will start raising interest rates. So markets might continue to reel under pressure and would actively track COVID situation globally,” Motilal Oswal’s Jani added.

Today, the overall Asian markets are also trading below ~1.5 percent – 2.5 percent below their yesterday’s levels. SGX Nifty was down close to 400 points (more than 2 percent), Nikkei 225 has fallen more than 700 points (about 2.5 percent) while Hang Seng is down more than 550 points (more than 2 percent).

Indian markets today were battered down mainly by fall in realty, metals, banks and auto while gains in pharma provided some reprieve.