Bears take control: Sensex slips below 50,000, investors lose Rs 3.7 trn

The Indian markets fell for a fifth day on Monday as bond yields continued to rise and the possibility of fresh lockdown to tackle the new wave of coronavirus loomed in some states.

The Sensex tumbled 1,145 points, or 2.3 per cent — the most in two months — to end at 49,744, the lowest close since February 2. The index has lost 2,410 points, or 4.6 per cent, in the last five sessions. The Nifty50 index fell to 14,676, down 306 points, or 2.04 per cent. The India VIX (volatility index) surged 14.5 per cent to finish at 25.47.

At the close of trade on Monday, the market capitalisation of BSE-listed companies stood at Rs 200.26 trillion, with investor wealth declining by Rs 3.7 trillion compared to the previous closing.

Investor appetite towards risky assets waned as the benchmark US Treasury yields hit a near one-year peak at 1.37 per cent. The sell-off in the bond market and the rise in commodity prices have stoked fears of inflation and loose monetary stance.

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In the past as well, rising bond yields in the US have led to turbulence in developing markets. “With the rise in bond yields in the US, some investors would think of investing in the US bond market rather than taking a higher risk by investing in other markets. As such, equity markets have risen a lot, and investors would rather book profits than see their gains wither away,” said U R Bhat, Director, Dalton Capital India.

Moreover, Covid cases have risen in some parts of India, including the commercial capital Mumbai, leaving investors worried about whether there will be a fresh imposition of lockdown. On Monday, Maharashtra announced a new set of restrictions, including a statewide ban on gatherings after the rise in Covid cases last week. While most global markets corrected on Monday, India was a major outperformer.

Experts said the rise in crude oil prices was also weighing on investor sentiment. The Brent crude was up 1 per cent to $62.74 per barrel. With petrol prices in India inching towards the Rs 100 per litre mark, there are fears that this will have a cascading effect on the prices of essential commodities.

Analysts said the positive sentiment triggered by the Union Budget was fading as the government had to do a tough balancing act of maintaining fiscal deficit while reining in oil prices. “We always expected inflation and interest rates to remain low. If that changes, it can have a short-term negative impact. And if people take risk off the table, there could be a reversal of flows or slowdown of flows into the emerging markets,” Andrew Holland, CEO, Avendus Capital Alternate Strategies, said.

Both foreign as well as domestic investors were net sellers on Monday. The former pulled out Rs 893 crore, while their domestic counterparts yanked out Rs 920 crore, the provisional data provided by the stock exchanges showed.

Barring three, all the Sensex components ended the session with losses. Dr Reddy’s was the worst-performing Sensex stock and fell 4.7 per cent. Mahindra & Mahindra fell 4.5 per cent, and Tech Mahindra 4.4 per cent. All the BSE sectoral indices barring two ended the session with losses. Realty and IT stocks fell the most and their gauges fell 2.8 and 2.6 per cent, respectively. Copper producers rallied as the price of the underlying commodity surged in the international market.

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