Benchmark stock market indices plunged sharply on Friday, marking the end to a volatile week. Benchmark indices S&P BSE Sensex and NSE Nify 50 had barely managed to break a four-session losing streak on Thursday, but failed to keep the momentum today.
At Friday’s closing, the Sensex ended barely above 57,000 as it fell 889.40 points or 1.54 per cent, while the Nifty 50 ended below 17,000 after shedding 200 points. The India VIX, which is the gauge that measures market volatility, rose nearly 3 per cent as several factors continue to weaken investor sentiment.
Read | Sensex, Nifty fall on inflation worries; Omicron concerns persist
Having said that, here are some factors that have made investors on Dalal Street nervous:
OMICRON, GLOBAL INFLATION & HAWKISH CENBANKS
One of the biggest reasons behind increased market volatility is the rapid spread of the Omicron variant of coronavirus in several countries, including South Africa, UK and the US. Even India has reported over 100 cases of the new variant, barely a month after the first case was reported.
The fact that Omicron cases are steadily rising in India is one of the biggest factors that has spooked investors on Dalal Street as investors fear a third wave.
Read | Inflation is rising again. Will it dent India’s economic recovery?
Global stock markets are also facing turbulence due to the spread of the Omicron variant of coronavirus. Experts suggest that stock markets around the globe may see further corrections in the wake of the surge of Covid-19 cases and investors should remain cautious.
“The emergence of a new COVID-19 variant, Omicron, inflation concerns and a hawkish turn of global central bankers have led to an increase in volatility in equity markets worldwide, including India,” said Shibani Kurian, head of equity research at Kotak Mahindra Asset Management Co, told news agency Reuters.
Rising global inflation, heavy selling by foreign institutional investors and hawkish stance by central banks around the world are a few other reasons that have weakened domestic markets. “With inflation increasing in countries across the world, all eyes are on central bankers and the pace of liquidity normalisation adopted by them,” Kurian said.
For instance, the Bank of England became the world’s first major central bank to raise interest rates since the pandemic battered the world economy. The US Federal Reserve has also made it clear that it will hike interest rates from next year, citing the risk of rising inflation.
Bank, realty and media stocks were the worst hit at the end of Friday’s trading session, while IT stocks gained.
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