Why did Sensex crash over 1400 points intraday and what should investors do on Tuesday

Indian stock markets witnessed a major selloff on the first trading day of the week despite positive cues coming in from the global markets on April 5. The Sensex closed at 49,159.32, down 870.51 points, or 1.74%, while the Nifty was at 14,637.80, down 229.55 points or 1.54%.

Among broader indices, the BSE midcap and smallcap indices closed 1.13% and 1.08% lower, respectively.

On the sectoral front, Nifty PSU Bank index slipped 4%, Nifty Bank index shed over 3% and auto index declined more than 2%. However, IT index gained 2% in trade today.

Bajaj Finance, IndusInd Bank, SBI, Eicher Motors and M&M were among major losers on the Nifty, while gainers were HCL Technologies, TCS, Britannia Industries, Wipro and Infosys.

Here are the key factors which led to the market crash 

Record Covid cases

A record jump in the Covid-19 cases in the country spooked market investors. With 1,03,558 fresh Covid-19 cases, India recorded the biggest-ever daily surge. This took the case tally in the country to 1,25,89,067.

Maharashtra remained the worst-hit state in the country. It saw the highest-ever daily surge with 57,074 fresh infections on Sunday. Mumbai, also saw the highest-ever single-day spike with 11,163 new infections, taking the city’s tally to 4,52,445 cases.

Lockdown in Mahrashtra 

To contain the spread of Covid, the Uddhav Thackeray government announced the shutting of malls and multiplexes along with private offices, except those engaged in finance, insurance, banks, telecommunications, and essential services in Maharashtra for a month.

These restrictions are a big blow to the smaller businesses at a time when they were just about recovering and getting back on track.

Weak macro data

A weak PMI manufacturing print for March elevated concerns on the growth front. Growth in manufacturing activities slowed down to the lowest rate in seven months. PMI fell from 57.5 in February to a seven-month low of 55.4 in March. However, economists are pointing out the fact that the data should instead be interpreted in a way that PMI over 50 indicates expansion.

Spike in bond yields

A spike in US Bond yields also dented market mood as it may lead to FII outflows.

Here’s how experts see the markets trading tomorrow

Shrikant Chouhan, EVP Equity Technical Research, Kotak Securities

Breaking all the important support, the market went back to 14,450 levels and came back. From now on, 14450 would act as a trend decider. The levels of 14670 and 14730 will be major obstacles and it is advisable to reduce weak long positions around the same. Trends above 14,900 can be subverted.

Manish Shah, Founder, Niftytriggers.com

Nifty closed the day sharply lower as rising cases of Covid in India seem to be spooking the traders. Nifty opened the day at 14,850 and there was a sell-off in the first hour of the day. This was a big fall and finally, there was a recovery from the low of 14,465 and the price movements of the day would put readers of a seismograph to shame. Extreme intra-day volatility was the norm.

A break above 14900 is needed for the market to move higher. Till the time the range gets resolved Nifty will remain listless.

We still think that the breakout will be on the upside. If Nifty does resolve to move beyond 14,900 expect an explosive move on the upside.