Why did the Sensex fall by 949 points on Monday and what is your outlook for the markets on 07-December?

It was a sort of Black Monday on 06-December as the Nifty fell 284 points and Sensex fell by 949 points. There were a number of triggers. Firstly, the number of Omnicron cases shot up sharply over the weekend. To worsen the situation, there are worries that the RBI may turn hawkish in its monetary policy. Above all, Evergrande crisis is getting worse.

It was a day of all round and across the board selling on 06-December. The correction was rampant across sectoral indices and across large cap, mid cap and small cap indices. In terms of sectoral indices, all were in the negative with IT index falling as much as 2.7% on Monday. The critical A/D ratio stood at a deeply unfavourable 1:49 with VIX well above the 20 levels.

Foreign investors sold equities worth Rs.3,361 crore while domestic funds bought stocks worth Rs.1,702 crore. In terms of FPI sentiment it is getting risk-off and that is not good news for emerging markets like India. However, there is hope for Tuesday as Dow was up 187 bps, NASDAQ up 93 bps and European markets were all up 150 bps.

Early trades on the SGX Nifty indicate a spike of 50 bps and that could sustain for the day but there is scope for more damage to this market. With Omnicron cases on the rise, the RBI talking hawkish and Evergrande on the verge of default, the market is hardly conducive. It is best to remain in the side-lines for now.