Sensex crashes 1,066 points, snaps 10-day gaining streak on negative global cues

Indian market indices fell heavily on profit-booking after 10 days of consecutive gains and erased over 2% each on Thursday, led by losses in IT and banking stocks. Amid heavy volatility in global markets, Sensex ended 1,066 points lower at 39,728 and Nifty fell 290 points to 11,680.

Tech Mahindra, followed by HCL Tech, TCS, ICICI Bank, Bajaj Finance and ITC were among the top losers on Sensex. On the other hand, Tata Steel, ONGC, NTPC, Asian Paints, M&M, Nestle India and Bharti Airtel were among the gainers

All sectors fell heavily today, with IT and banking indices dropping nearly 3% each, followed by 2% fall in realty and pharma shares and over 1% decline in auto and FMCG stocks.

Investors lost Rs 3.25 lakh crore in Thursday's session as the total market capitalisation of BSE-listed companies fell to Rs 157.31 lakh crore.

In the currency market, Indian rupee pared its initial gains and settled 5 paise lower at 73.36 per US dollar.  

Ajit Mishra, VP - Research, Religare Broking said,"Markets witnessed a sharp sell-off in today's session following global peers. Investors' sentiments were largely impacted as US fiscal stimulus would get delayed until elections. Also, the second wave of Covid-19 infection led to strict restriction and lockdown globally majorly in Europe added to their worries. On the domestic front, the benchmark indices opened flat and gradually inched lower in the first half however decline in IT, banking and energy majors intensified the fall as the session progressed."Here's a look at five factors leading to the crash in Sensex and Nifty today.1. IT & Banking stocks

IT pack registered heavy selling pressure today. Infosys, TCS, Mindtree, TechM shares were the top losers that led the fall in broader market indices today.

IT stocks were outperformers of the rally seen in the last 10 trading sessions. The bluechip stocks failed to maintain the momentum from recent sessions on back of anticipation of the Q2 results and fell amid profit booking in the index.

2. Profit Booking

The market rallied for the 10 consecutive days and indices were trading near overbought positions. Some technical correction was on the cards, suggest experts. However, a dip can be used as buying opportunity as long as it does not violate 11,800 levels

Investors are also awaiting Sept quarter earnings reports that will provide a clear picture of the disruption caused by the coronavirus pandemic-induced lockdown. September quarterly earnings announcements by Cyient and Mindtree will also set the tone for the stock market.

Besides this, September quarterly earnings announcements by Cyient, Hathway Cable, Mindtree, South Indian Bank and Trident also kept tone for the stock market bearish today.

"This fall has engulfed the gains of the last six sessions and derailed the momentum as well.  We believe 11,600 would be the next critical support in Nifty. Considering the scenario, we suggest maintaining short positions also and limiting trades largely to the index majors. Besides, participants should keep a close watch on global developments for cues," Ajit Mishra added.

3. Fresh lockdowns imposed in the Covid-19 pandemic

The unprecedented increase in fresh COVID-19 cases and rising worries about the sluggish pace of economic recovery due to the pandemic turned equity markets pessimistic globally. International Monetary Fund also expressed worries over the outlook for many emerging markets as the virus continued to spread.

Sentiments turned bearish with Europe and United States reporting more than 51,000 COVID-19 average infections every day. Reinforcement of coronavirus-induced lockdowns across Europe and Britain reflected the alarming increase in Covid-19 cases and a slowdown in the business sector in US & Europe dampened hopes of a paced economic recovery.

Worldwide, there were 387 lakh confirmed cases and 10.96 lakh deaths from COVID-19 outbreak. India's COVID-19 caseload breached the 71-lakh mark and the death toll from COVID-19 infections rose to 10.9 lakh, as of today.

4. Global markets

Asian markets were trading mostly lower tracking overnight US markets.

Wall Street closed lower for the second consecutive day on faded expectations of reaching a stimulus deal before elections. Trump administration added China's Ant Group to a trade blacklist, also raised fresh concerns of US-China trade tensions and kept markets muted.

European markets traded lower today as investors weighed corporate earnings and concerns over rising coronavirus cases. Investors were also worried over Brexit talks, as the deadline for a pact on the European Union's relations with Britain nears.  

5.  Stimulus hopes weaken

Both equity and commodity markets turned negative since yesterday as investors lost hopes after Treasury Secretary dampened expectations of reaching a US fiscal stimulus before the presidential election in November.

Treasury Secretary Steven Mnuchin said around midday that getting a deal done before the election would be difficult, adding that both sides were still far apart on certain issues. He also noted, however, that Democrats and Republicans are making progress in some areas.

Political uncertainty in the US ahead of the elections and delay in fiscal relief package have kept sentiments tepid, experts suggested.

Vinod Nair, Head of Research at Geojit Financial Services said,"The market had moved-up in expectation of a big stimulus, but the desired fiscal package was not announced in India and a delay of it in US & Euro has changed the trend. At the same time, the pace of economic recovery is under stress because of a resurgence of high rates of Covid infection, mounting to high economic restrictions. The margin of safety is low given premium prices and a slowdown in economic recovery. The trend going forward will depend on the supportive measures announced in context to stimulus and commentary of Q2 results."

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