Virus slams brakes on runaway stocks

Fear index highest in two months; fall worse in broader markets

- Ram Sahgal

After a seven-week sprint that lifted stock bellwethers by 12%, investors and traders finally grabbed their chance to book profits on Wednesday, as pandemic fears resurfaced.

The Nifty and Sensex tanked by 1.4% and 1.3% respectively, their worst fall since 26 October, as Singapore revived mask mandates and issued a travel advisory amid the spread of JN.1, a new sub-variant of the novel coronavirus causing covid-19. India has recorded 21 cases of the new sub-variant so far, and the Centre has asked states and Union territories to maintain vigil.

The broader markets saw a bigger fall, with the Nifty Midcap 150 and the Nifty Smallcap 250 tanking over 3% each.

Nilesh Shah, managing director, Kotak AMC, said that anecdotally, after a rally as long as the latest leg, markets have tended to correct.

"Wednesday has shown us that markets can’t move in a linear fashion. The past 30 years have shown us that markets tend to correct after a seven-week-long rally," Shah said. "The triggers could vary from valuations to geopolitical events or, as we are seeing right now, covid."

Fear gauge India Vix rose by 4.2% to 14.45, its highest level in a little over two months.

"Resurgence of covid was an excuse to book profit in the market, which was looking a bit stretched," said A. Balasubramanian, managing director, Aditya Birla Sun Life Asset Management.