Investors lose Rs 5 lakh crore in early trade; here's what spooked Dalal Street

Investor wealth eroded by Rs 4.65 lakh crore in Monday’s early trade as sentiment remained cautious amid rising Covid-19 cases in the country. The market capitalisation of BSE-listed firms declined to Rs 200.66 lakh crore from Rs 205.30 lakh crore on Friday. The BSE Sensex traded 891.22 points, or 1.83%, down at 47,940 at around 9.20 am (IST). On the other hand, the 50-share Nifty index was down 380 points, or 2.55%, at 14,244 at around the same time.

VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services said, “The health crisis in India is going through and localised lockdowns and restrictions on economic activity warrant a market correction. The targets of around 11% GDP growth and above 30% earnings growth for FY 22 that the market had assumed pre-second wave are likely to fall short. The steady rise in test positivity cases and the steady decline in recovery rates are areas of serious concern.”

Here are three key factors that triggered market selloff today:

Rising covid cases: Sentiment took a hit on rising concerns over economic growth amid Covid-19 cases in the country and stricter restrictions imposed in various states. Market participants will be concerned as India reported 2,75,306 coronavirus disease (Covid-19) cases on April 18, the highest single-day spike so far since the pandemic broke out, Worldometer showed.

GDP downgrades: With the resurgence of Covid-19 cases posing risks to economic recovery, leading brokerages have downgraded India’s GDP growth projections for the current fiscal year to as low as 10% on local lockdowns threatening fragile recovery. While Nomura has downgraded projections of economic growth for the fiscal year ending March 2022 to 12.6% from 13.5% earlier, JP Morgan now projects GDP growth at 11% from 13% earlier. UBS sees 10% GDP growth, down from 11.5% earlier and Citi has downgraded growth to 12%.

Outflow by foreign institutional investors: Market mood also got dampened after foreign portfolio investors (FPIs) pulled out a net Rs 4,615 crore from the domestic equity markets in April so far amid sharp escalation in Covid-19 cases and the consequent restrictions imposed by various states, unnerving overseas investors.