Dalal Street experienced a downturn on Thursday, halting its recent rally amidst an increase in COVID-19 cases across India and other parts of Asia. Both the Sensex and Nifty recorded significant drops.
As of 12:45 pm, the S&P BSE Sensex had fallen over 900 points to 80,681.76, while the NSE Nifty50 was down 266 points, trading at 24,547.45. This market decline follows a period of strong performance.
The recent dip in the stock market coincides with a gradual rise in COVID-19 infections. Kerala has reported 182 cases in May alone, and cities such as Mumbai, Chennai, and Ahmedabad are observing small but discernible spikes in infections.
Beyond India, several Asian nations are also seeing an uptick in cases. Hong Kong, Singapore, and Thailand are currently reporting more infections, prompting concerns about a slow resurgence of the virus.
IS COVID BEHIND THE MARKET DROP?
The market’s decline has led to questions about whether investors should be concerned about the increasing COVID cases. Kranthi Bathini, Equity Strategist at WealthMills Securities Pvt Ltd, suggested that the initial signs of rising cases could be a factor in the downturn observed in certain sectors. “There is a sense of worrying factor there. That is the reason we can see some kind of an uptick in healthcare, diagnostic stocks and also in pharma stocks,” he noted.
He further added, “Whether it is just the beginning or a sign of something bigger, we will have to wait and see. Right now, it is premature to say anything definite about Covid cases because numbers are still low and mostly in single digits in many states. The next few weeks will be important to watch.” Bathini also emphasized that the broader market conditions remain stable.
“The market has outperformed in the last month after touching a high of 25,500 range. What we are witnessing is some kind of profit booking because of global cues, US debt worries and also US downgrades, which is creating pressure on the market in the short to medium term.” He explained that the Nifty appears to be establishing a base between 24,500 and 25,000.
“We had a decent earnings season. There were no major negative surprises. There is stock-specific action happening now as we are at the far end of the earnings season,” he stated.
While there is some apprehension, experts indicate that panic is unwarranted at this stage. Trivesh, COO of Tradejini, commented, “Investors are a bit more seasoned now when it comes to COVID news. Pharma might see some defensive interest, but overall, market fundamentals remain strong. Volatility? Maybe. Panic? Unlikely.”