Jobaaj Stories
The Nifty50 hit a low of 16,653 points, down 1.8 percent, while the Sensex fell nearly 1,100 points, to 55922.58, amid massive selloffs.
The equity markets were in a freefall right from the start of trading today.
The Nifty Midcap 100 declined 3.1 points and the Nifty Smallcap 250 was down 3 percent.
Furthermore, the volatility index India jumped 10 percent to 18.02 levels today.
IT sector bled red while even Nifty IT couldn't maintain its long-standing gain.
Even the Nifty Bank fell 2.7 percent, Nifty Realty was down 2.8 percent and the metals index was down 3 percent.
The following factors most probably led to this downfall:
The Omicron Anxiety
The rapidly spreading Omicron variant has continued to scare away investors as European countries strive to tackle the situation.
Market experts believe that further lockdowns could massively hurt the economic recovery prospects just a year after the global economy started moving towards a normally functioning economy.
The Netherlands has also imposed a “painful” lockdown right in the middle of the festival season. The UK had already imposed travel restrictions, and countries like Germany and Austria are still recovering from the aftermaths of the previous waves.
Global Spill-off
Wall Street plunged a bit on Friday, brought down by major tech giants as investors worry about Omicron and continue to digest the Federal Reserve's decision to end its pandemic-era stimulus faster.
All three main US stock indices ended with a decline for the week after the Fed on Wednesday signaled three interest rate hikes by the end of 2022 to fight inflation.
On December 20, Asian indices fell and oil prices slid due to the same Omicron variant concerns and tighter restrictions in Europe.
Policy Tightening
One of the major reasons for the downfall can be attributed to the stricter stances undertaken by the central banks worldwide.
The Fed has expressed its views on aggressively retreating from its pandemic-led stimulus.
And therefore, several central banks are raising rates to fight inflation in their respective countries.
The Bank of England on Thursday became the first major central bank to raise interest rates since the COVID-19 pandemic began.
This paved way for all the other central banks to start raising rates to combat inflation.
Norway raised rates for the second time this year on December 16 despite an expansion of COVID curbs, while Russia raised its policy rates for the seventh time this year on December 17. New Zealand had also raised its interest rate last month, and Canada has suggested that it will start doing the same soon.
FII Selling Spree
The tightening of the policies by the central banks in developed markets has resulted in unabated selling by Foreign Institutional Investors in India, and other emerging markets.
In December alone, the FIIs have sold over Rs 26,000 crore in the cash market, the highest monthly selling this year.
On December 17, they net sold Rs 2,069 crore in the cash market.
With such massive selloffs by FII, it's no wonder that the market has plunged.
Omicron still seems to be one of the major factors of this downfall.
