Sensex, Nifty end 1% lower for fifth session: Five factors behind the market crash

Indian stock market suffered sharp losses in the second half of day's trade and ended lower for the fifth straight session on Thursday, cumulatively falling around 2,063 points. Amidst volatile trade, the S&P BSE Sensex ended 585.10 points or 1.17 per cent lower at 49,216 and NSE Nifty 50 index dropped 163 points or 1.11 per cent to settle at 14,557. The BSE Sensex, which opened 490 points higher, declined as much as 1,334 points intraday, from day's high of high of 50,296.35 to low of 48,962.36. Losses in heavyweights like HCL Technologies, Infosys, Dr. Reddy's Laboratories, Reliance Industries, Tata Consultancy Services further dampened market sentiment.

The broader markets also witnessed bloodbath, with midcap and smallcap indices declining 1.1 per cent and 1.45 per cent, respectively. The market breadth, indicating the overall strength of the market, was weak. Out of 3,464 shares traded today, 988 advanced, while 2,306 declined and 170 remained unchanged. On the sectoral front, all the indices ended in red, barring FMCG stock, while IT and Teck emerging as top losers, falling 3.02 per cent and 2.54 per cent.

Here are five factors behind sell-off in Sensex and Nifty:

Rising COVID-19 cases

Indian market remained in negative territory as investors sentiments were dampened by resurgence in COVID-19 cases. The increase in the number of infected COVID-19 cases contributed to the fears that the economic impact will be much larger than earlier estimates. With a huge surge of 35,871 fresh COVID-19 cases in the last 24 hours, India reported highest daily rise since early December. India recorded more than 20,000 cases for the eighth day in a row, with the cumulative tally crossing 11,474,605 in the last 24 hours, according to the Union Health Ministry data updated at 8am. In wake of rising cases, Prime Minister Narendra Modi held a meeting with Chief Ministers on Wednesday and asked states to take steps such as management of micro-containment zones and strict enforcement of restrictions. More than 1.59 lakh people have died due to COVID-19 infection.

Spiking bond yields continue to spook market

Rising bond yields continued to spook market sentiments. US 10-year treasury yields breached 1.7 per cent on Thursday, their highest levels since December of 2019. The rising yield means investors will get higher returns on their investments in government bonds, which in turn would make stocks, gold, and other financial instruments less attractive.

"Indian equities pared its early optimism and fell into a sharp correction as US bond yield rose to its highest level since January. Dovish comments from the Fed chief on the strong economic bounce back and continuation of its accommodative stance, could not weigh down the rally in the US bond market.  Indian markets had witnessed higher volatility compared to its global peers as domestic investors turned extra cautious on increasing Covid cases in India & a fall in FII inflows," says Vinod Nair, Head of Research at Geojit Financial Services.

Profit booking

Benchmark indices ended lower for the fifth straight session due to profit booking. Markets witnessed strong rally post Budget amid sustained FII inflows and continuation of accommodative monetary policy.

Sell-off in index heavyweights

The strong sell-off in BSE Sensex pack also dragged market. HCL Technologies, Infosys, Dr. Reddy's Laboratories, Reliance Industries, Tata Consultancy Services were among top losers.

IT and Teck stocks crash

IT and Teck sectors plunged over 3 per cent as investors resorted to profit booking. The BSE IT index fell as much as 3.68 per cent or by 977.62 points to 25,612. In a similar trend, BSE TECk index dropped by 390.62 points or by 3.26 per cent to 11,610, led by decline in Infosys, TCS, HCL Tech and Affle (India).

Also read: Stock Market Highlights: Sensex ends 562 pts lower at 49,801, Nifty at 14,721; Reliance, SBI, ONGC top losers