Sensex sinks 1,407 points: How market experts interpreted the development

Sentiment soured at the burses on Monday with the plummeting 1,800 points in intra-day trade on weak global cues. Fears of a new strain of that has threatened the UK. The ended the day at 1,407 points, or 3 per cent, lower at 45,553 levels. Nifty50, on the other hand, closed 432 points, or 3.1 per cent, lower at 13,328 levels.

UK According to reports, UK’s Health Secretary Matt Hancock has warned that the new strain of the 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.

Selling back home picked up pace as European stock market indexes opened weak. The DAX tumbled 1.70 per cent, while CAC 40 lost 2.45 per cent. Meanwhile, in London, the FTSE 100 dropped 1.68 per cent.

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,” the Ministry of Civil Aviation said in a statement on Twitter on December 21.

Here’s how leading market experts have interpreted the developments.

Rabobank International

The fact that this new strain has also been detected in other countries (the Netherlands reportedly having detected it in early Dec) highlights the threat that the UK’s necessarily draconian response may well be replicated elsewhere while, at the very least, border closures to insulate countries from this strain are likely to remain a feature for some to come.

We have argued previously that the market will not be able to maintain a focus upon a vaccine-related recovery and ignore the nearer term concern over the intensifying second wave of infections. As such, we laid out our expectations that safe haven curves would undergo a tactically bullish flattening as investors are forced to confront the intensifying fallout from the virus long before they can price in a vaccine-led return to normality.

Jyotivardhan Jaipuria, founder, Valentis Advisors

The had been on an upswing since quite some time now and the slightest of negative has triggered a sharp correction. The new Covid-19 strain is perhaps the trigger they were looking for to correct. That said, the new strain puts the efficacy of the vaccines developed thus far under question. This is what the are worried about. How much the will correct from here on is anyone’s guess, but a 10 per cent correction from the recent top will be healthy. While the corrections will be sharp, the recovery can also be equally swift if things get under control soon.

Ambareesh Baliga, an independent market expert

The new Covid-19 strain is a big concern for the markets now. It has already led to shutdowns across major cities in the UK / Europe and has aggravated the risk of re-lockdown at a time when most business hubs were opening up. If the market comes down another 3-4 per cent from here, there could be mayhem and more panic selling may happen.

S Ranganathan, head of research, LKP Securities

The new variant of the Novel in the UK spooked markets as we witnessed intense selling in pivotal throughout afternoon trade. While the street was bracing for a correction this week after a sharp up move, the sheer velocity of the fall across broader markets took the bulls by surprise, as practically none of the key indices constituents were in the green today.

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