Sensex Plummets 1500 Points: New COVID Variant To Blame?

New Delhi: Indian stock markets fell on Friday over fears of a new COVID variant in South Africa that could be more infectious than Delta. The Sensex fell about 1500 points to 57,307 at day’s low while Nifty was struggling below 17200. “The news of the new covid variant has hammered confidence in equities, which were already under pressure as traders prepared for the Federal Reserve to start tightening its monetary policy to fend off surging inflation,” financial newspaper mint reported.

“Just as this particular tail risk was melting away into the background, scientists in South Africa have announced they have discovered a new Covid variant which could potentially be more transmissible. While the impact on human life is not yet established, the re-imposition of movement restrictions is likely to hurt economic activity. The South African Rand (ZAR) weakened past the 16 level for the first time this year,” Kristal.AI, a wealth management platform was quoted as saying in a note.

In Indian markets, autos, banks and energy stocks were the worst hit in early trading in Mumbai, with the sub-indexes down between 1.5% and 1.7%. The Nifty Pharma Index was the only sub-index bucking the trend to trade 2% higher.

Maruti was the top loser in the Sensex pack, shedding nearly 3 per cent, followed by Bajaj Finserv, Kotak Bank, HDFC, Bajaj Finance and Tata Steel. On the other hand, Dr Reddy’s and Sun Pharma were the gainers.

“Following to Asian trades Indian markets are reacting to the concern over a new Covid variant found in South Africa last night followed by few EU countries under full lockdown scenario. Traders in fear are selling riskier assets like equities, which could result in increased equity outflows from FII. We believe India is not in panic mode and investors should make use of this selloff as a buying opportunity. The new variant should not be a great matter of concern for us and we suggest investors with suitable risk appetite to consider and start allocating money into markets who have missed the rallies,” said Prashant Tapse, Vice President (Research) at Mehta Equities.

“There is fear of this new variant spreading to other countries which might again derail the global economy,” Hemang Jani, Head of Equity Strategy & Senior Group VP, Broking & Distribution, Motilal Oswal Financial Services was quoted as saying.