Markets crash like house of card amid concerns over new virus strain in UK

Indian equity benchmarks witnessed sharp selling towards the end of the trade and crashed like house of card on Monday with frontline gauges ending with a massive cut of 3 percentage points as fears of a new strain of coronavirus that has threatened the UK. Markets made a cautious start amid rising coronavirus cases and fresh lockdowns in some countries. Key gauges somehow managed to trade near neutral lines as traders took some respite came in with Union Minister Anurag Singh Thakur’s statement that India has the potential to achieve double-digit growth through a healthy dose of digital services and manufacturing base expansion which will be driven by demand from the rural sector, youth and the aspirational middle class. Some support also came with Finance Minister Nirmala Sitharaman’s statement that India would be the engine of global growth, along with a few other countries, contributing to the revival of the global economy in a significant way.

However, markets witnessed sharp selloff in last leg of trade as traders booked their recent profits on reports that UK’s Health Secretary Matt Hancock has warned that the new strain of the coronavirus is ‘out of control’ and suggested parts of England will be stuck in the new, highest tier of restrictions until a vaccine is rolled out. Meanwhile, India has suspended all flights originating from the UK to India until December 31. This suspension to start with effect from 23.59 hours, 22nd December 2020. Consequently, flights from India to the UK shall stand temporarily suspended during above said period.

Weak opening in European counters too dented domestic sentiments with all the European counters opened in red after the UK government announced a lockdown in various parts of the country, including London, saying that more than half of all new Covid-19 cases had been caused by a mutated, more infectious coronavirus strain. Asian markets ended mixed on Monday, after China's benchmark lending rates were left unchanged as the economy continued to recover strongly from the coronavirus driven downturn. The one-year loan prime rate was retained at 3.85 percent and the five-year loan prime rate was maintained at 4.65 percent.

Back home, Industry body FICCI has called for abolition of anti-profiteering provisions in the GST law to allow market forces to determine prices of goods and service. The plea has been made in a set of pre-Budget recommendations submitted by the federation to the Finance Ministry for implementation in FY22 Budget. Meanwhile, The Ministry of Finance has released eighth weekly installment of Rs 6,000 crore to states to meet the Goods and Services Tax (GST) compensation shortfall. Of this, Rs 5,516.6 crore has been released to 23 states and an amount of Rs 483.4 crore has been released to the three union territories with legislative assembly (Delhi, Jammu & Kashmir and Puducherry) which are members of the GST Council.

Finally, the BSE Sensex tumbles 1406.73 points or 3.00% to 45,553.96, while the CNX Nifty was down by 432.15 points or 3.14% to 13,328.40.

The BSE Sensex touched high and low of 44,923.08 and 47,055.69, respectively and all the 30 stocks declining on the index and there was no gainer on the Sensex.

The broader indices ended in red; the BSE Mid cap crumbled 4.14%, while Small cap index was down by 4.57%.

The top losing sectoral indices on the BSE were PSU down by 6.47%, Metal down by 6.05%, Oil & Gas down by 5.99%, Utilities down by 5.68% and Realty was down by 5.03%, while there were no gainers on the BSE sectoral front.

The top losers on the Sensex were ONGC down by 9.15%, Indusind Bank down by 6.98%, Mahindra & Mahindra down by 6.26%, SBI down by 6.19% and NTPC was down by 5.98%, while there were no gainers on the index.

Meanwhile, with an aim to improve the health of the country's banking sector, Economic Affairs Secretary Tarun Bajaj has said that the government is exploring all options, including setting up of a bad bank. He added that the government has recapitalised public sector banks and continue to pump in capital as per requirements.

Bajaj said ‘we are looking at various options, including the option you mentioned (of bad bank), and it is still in the works. The RBI has been asking us, and we ourselves also feel that we need to recapitalise. We have recapitalised to a large extent and this year too, we have kept some money for recapitalisation so that commitment is there...’. Currently, banks sell their bad loans to ARCs as per the prudent norms of the Reserve Bank of India.

To help the MSME sector, Bajaj said the government has announced 100 per cent guarantee for the smaller industries so that the banks could lend to them. Recently, the finance ministry, said that banks have sanctioned loans worth Rs 2,05,563 crore to about 81 lakh accounts under the Rs 3-lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) for the MSME sector that was impacted by disruptions caused due to the coronavirus pandemic. Of this 40 lakh MSME accounts have received Rs 1,58,626 crore till December 4.

The CNX Nifty traded in a range of 13,131.45 and 13,777.50 and all the 50 stocks were declining on the index.

The top losers on Nifty were Tata Motors down by 9.53%, ONGC down by 9.44%, GAIL India down by 8.44%, Indusind Bank down by 7.94% and Hindalco down by 7.44%, while there were no gainers on the Nifty.

All the European markets were trading lower; UK’s FTSE 100 shed 192.60 points or 2.95% to 6,336.58, France’s CAC tumbled 199.71 points or 3.61% to 5,328.13 and Germany’s DAX was down by 487.82 points or 3.58% to 13,142.69.

Asian markets ended mixed on Monday, despite news that US lawmakers finally set a deal for a nearly $900 billion Covid-19 financial package for American families and businesses. Faltering trade negotiations between Britain and the European Union put more pressure on market. The United Kingdom has gone back into strict lockdown due to the discovery of the new strain of the Sars-CoV-2 virus, which causes Covid-19, weeks after it started vaccinating against the virus. Chinese shares ended higher as the country's central bank kept its key benchmark lending rate unchanged, but rising Sino-US tensions could continue to weigh on the market.