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5% Loss For Sensex This Week; What’s Causing Panic?

Sunil Fernandes
·2-min read

The Sensex has shed almost 1900 points or near 5 per cent this week. Relentless selling pressure has been witnessed since the start of the week and the indices are likely to end lower for the sixth straight day. Take a look at what's causing the mayhem:

Resurgence in Covid 19 cases

Earlier this week, we saw a rising number of Covid-19 cases from Europe. Countries like the UK, France, Spain and the Netherlands are seeing re-emergence of virus hotspots. Investors remain worried that this could lead to fresh curbs on business activity and movement and a sharp slowdown in the global economy.

"It is possible that we may see more correction. Scotland and 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 collective bothering the market, which is at is on the lookout for reasons to correct. Market had already raced ahead of its valuations," says Abhimanyu Sofat, Head of Research, IIFL Securities.

India's own Covid-19 infection statistics is not too encouraging. India's tally has now crossed 57 lakhs, with no signs of a slowdown in infected cases.

US Economic growth weak

US Federal Reserve Vice Chair Richard Clarida said on Wednesday that the US economy remains in a "deep hole" of joblessness and weak demand. This led to some selling pressure across the US markets, which pushed India lower as well as Asian markets lower on Thursday.

Banking stocks saw big losses in India, with State Bank and ICICI Bank among the big losers.

Big tech sell-off in the US

On Wednesday technology stocks saw a big sell-off across the US markets. Shares in Amazon and Netflix dropped 4.1% and 4.2%, respectively, dragging the tech heavy NASDAQ lower.

Facebook fell 2.3%, while Alphabet closed 3.5% lower. Apple ended the day down 4.2% and Microsoft dipped 3.3%.

Markets are overpriced

Most analysts are of the opinion that the Indian markets are still overpriced at these levels. With the Sensex jumping near 40 per cent from lows seen in March, there is not much room let for upside, given the slowdown for India inc.

India's economic slowdown is also likely to last longer than usual, with many restrictions still in place following the Covid-19 outbreak.

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