Sensex plunges over 1,700 points: What triggered Monday’s stock market crash?

 Market Highlights: Sensex crashes 1,190 points, Nifty ends at 16,614 amid Omicron fears

 Sensex plunges over 1,700 points: What triggered Monday’s stock market crash?

Benchmark stock market indices plunged on Monday as investors remain worried about rapidly rising Omicron cases. However, there are several other factors that contributed to today's crash. Here is all you need to know.

The benchmark equity indices on the BSE and National Stock Exchange (NSE) ended over 2 per cent lower on Monday taking cues from their global peers which sank as raging global Omicron infections threatened to derail the economic recovery.

The S&P BSE Sensex tanked 1,189.73 points (2.09 per cent) to settle at 55,822.01, while the broader Nifty 50 ended at 16,614.20, down 371.00 points (2.18 per cent). Earlier in the day, both the indices had opened around 1.5 per cent lower and extended their losses to slip over 3 per cent.

Among the biggest losers on the Sensex were Tata Steel, IndusInd Bank, Bajaj Finance, State Bank of India (SBI), HDFC Bank, NTPC, Kotak Mahindra Bank, Larsen & Toubro (L&T), Reliance Industries (RIL) and Bajaj Finserv. there were only two gainers of the day, Hindustan Unilever and Dr Reddy’s Laboratories.

Among individual stocks, Shriram Properties made a weak debut and got listed at a discount of over 23 per cent from its issue price. It ended over 16 per cent lower on the NSE.

Among others, the shares of Future Group companies surged up to 20 per cent on Monday after the Competition Commission of India (CCI) suspended its over two-year-old approval for Amazon’s deal with Future Coupons and imposed a Rs 202-crore penalty on the e-commerce giant.

OMICRON THREAT INTENSIFIES

The threat arising from the rapid spread of the Omicron variant of coronavirus is the biggest factor behind today’s stock market crash. It is spreading like wildfire across many European countries after becoming the dominant strain in South Africa.

The rapid spread of the virus has again threatened global economic recovery, leading to weakness in stock markets around the globe. Several countries are planning to reintroduce restrictions to limit the spread of the new Omicron variant, while some nations like the Netherlands have already gone under a fresh lockdown.

HEAVY SELLING BY FIIs

Another reason that contributed to today’s crash is heavy selling by foreign institutional investors. FIIs have been persistently selling their holdings.

The nervousness among FIIs is not just a result of the new Omicron threat, but also hawkish central bank polices and rising global inflation. FIIs are also pulling out of the market due to rising volatility in the wake of a possible global economic slowdown.

WEAK GLOBAL CUES

Not just domestic markets, but the impact of the Omicron spread on global markets has been equally devastating.

Stock markets in China, US, Europe and other parts of the world have also fallen as the new coronavirus variant spreads rapidly across the globe.

The three main US stock indices ended in negative territory for the week after the US Federal Reserve said there will be at least three interest rate hikes in 2022 due to high inflation.

OTHER FACTORS

Equity markets in Asia and other parts of the globe could be witnessing a correction due to the hawkish stance taken by central banks in developed countries to combat rising inflation. Global inflation has witnessed a rapid rise over the past few months, prompting central banks to tighten policies.

The US Federal Reserve’s plan to hike interest rates starting in 2022 got an almost immediate response as many other central banks have raised rates to fight inflation. The Bank of England became the first major central bank to increase interest rates since the pandemic began. The central banks of some other countries have increased interest rates multiple times after the pandemic.