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Sensex, Nifty in red: What’s making D-Street nervous?

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At around 2.03 pm, BSE Sensex was trading 353.77 or 0.86 per cent at 40,701.90 while NSE Nifty was down over 120.60 points or 1 per cent at 11,927.90. 

At one point of time Sensex was down over 400 points. (Photo: Reuters)

Indian market indices on Tuesday extended losses as both BSE Sensex and NSE Nifty traded in red due to a bunch of factors that made investors nervous.

At around 2.03 pm, BSE Sensex was trading 353.77 or 0.86 per cent at 40,701.90 while NSE Nifty was down over 120.60 points or 1 per cent at 11,927.90.

At one point in time Sensex was down over 400 points. Broader markets were also impacted as investors lost a fair amount of wealth in market capitalisation.

Here are key factors that spooked domestic markets on Tuesday:

Weak global markets & coronavirus impact

Indian investors remain worried about the impact of the coronavirus on businesses. With top companies like Apple already declaring lower sales due to the virus outbreak in China, global investors are worried about the future. Indian shares also suffered as Asian peers also traded lower.

There has been an uptick in the Volatility Index as well, signaling that market investors are worried about near term instability due to the virus outbreak. The virus has already killed nearly 1,900 people with over 72,000 positive cases.

Muted earnings season

Apart from the impact of global market movement and coronavirus, the Indian stock market is also witnessing higher losses due to weak earnings in key sectors. An Economic Times report quoting experts said the recently concluded earnings season has made equities less attractive.

While some companies reported modest numbers, the fact that consumer and auto firms reported muted numbers has affected stock markets significantly.

AGR Shock

Another factor that has increased anxiety among market investors is the fate of telecom companies who have been asked by the Supreme Court to clear Adjusted Gross Revenue (AGR) dues to the tune of Rs 1.47 lakh crore. The biggest impact of the order will be on Vodafone Idea Limited, the second-largest telecom operator in India.

The company has even indicated that it may be forced to wrap up its business in India if the final deadline for paying dues is not extended. In a case where Vodafone Idea faces bankruptcy, a contagion effect will be felt by India’s banking sector which owes a significant amount to the telecom joint venture between Vodafone and Idea Cellular.

The news of a probable bankruptcy has spooked market investors on D-Street as several allied sectors will take a hit if Vodafone Idea disconnects its India’s business.

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