Why did Indian Market suffer the worst one-day fall in seven months?

The SENSEX crashed 1,406.73 points and NIFTY crashed 432.15 points recently. In terms of percentage, SENSEX crashed by 3% and NIFTY crashed by 3.14%. This was the biggest fall in seven months. This is being referred to as “Blood Bath in Dalal Street”. Dalal Street is the address of Bombay Stock Exchange. The main reason behind the big fall is the new much potent strain of COVID-19 discovered in the UK.

What led to the crash?

The following reasons led to the market fall:

New Strain of COVID-19

The health officials in the United Kingdom recently discovered a new virus strain of COVID-19. This new strain of corona virus is likely to spread faster as compared to the other strains. Also, this strain is believed to bring in more challenges as the mutation has occurred in the spike protein of the virus. This will change the way by which the virus transmits. As the COVID-19 vaccines such as Pfizer, Oxford and Moderna vaccine target spike protein, the mutation is questioning the efficacy of the vaccine. This affected the shares of bio-pharmaceutical companies that were constantly increasing lately.

Aviation Sector

Following the discovery of the virus, India and several other countries banned flights from London. Also, UK imposed strict border closure. Aviation stocks were put under pressure due to border closure.

Oil Prices

The Energy majors were also lagging as the global oil prices dropped by 3%.

Brexit Trade Deal

The deadline of post-Brexit trade deal is on December 31, 2020. This is adding to the current scenario coincidentally. Britain and European Union has still not clinched a Brexit deal.

Profit Bookings

Profit Bookings are currently at its peak. Profit Bookings in stock markets occur when companies or individuals liquidate their holdings to cash out their profits they have created. Profit bookings are occurring as economic outlook is uncertain, despite signs of improvement due to COVID-19 and its new threats.

Stopgap Funding Bill of the US

Issues and uncertainties over Stopgap Funding bill. The bill includes 900 billion USD COVID-19 relief packages of United States. This is another reason for the crash of the market. The US House has passed the bill. However, President Trump has rejected the bill.

Month: Current Affairs - December, 2020