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Bihar elections, rising Covid cases: Here's why Sensex tanked 600 pts today

Asian shares and US stock futures slipped in Wednesday's trade as coronavirus cases surged at an alarming pace in the US and Europe.
After logging decent gains in the previous session when the benchmark indices gained nearly 1 per cent, the S&P BSE Sensex tumbled 600 points, or around 1.5 per cent, to 39,922 levels while NSE's Nifty 50 index ended the session at 11,730 levels, down 160 points, or 1.34 per cent.

Selling was witnessed across-the-board with financial stocks taking the biggest knock. The gauge for volatility, India VIX, rose nearly 5 per cent to 23.2 levels.

"Going ahead, market is likely to remain in a tight range, taking cues from the ongoing result season, development around US elections and covid cases globally. Technically, till Nifty doesn’t surpass above immediate hurdle of 11850, more weakness could be seen towards next key support of 11650 while on the upside resistance has shifted lower at 11950," said Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services.

Here's a list of major factors that led to a sharp slide in the market on Wednesday.

Surging coronavirus cases: Growing Covid cases, both on the domestic and global front, weighed on the investor sentiment on Wednesday. According to a Reuters report, India’s tally of coronavirus cases stood less than 10,000 away from the grim milestone of 8 million, as 43,893 new cases were reported in the last 24 hours. Totalling 7.99 million, India has the second-most number of confirmed cases after the United States, which has a tally of 8.7 million.

Weak global cues: Asian shares and US stock futures slipped in Wednesday's trade as coronavirus cases surged at an alarming pace in the US and Europe raising fears that economies once again will resort to lockdowns and travel curbs. As per reports, German Chancellor Angela Merkel wants to close all restaurants and bars and some other venues from November 4 in a bid to curb new infections.

Worries over US elections: Another major factor that kept the investors on tenterhooks is the uncertainty around the US Presidential election due on November 3, 2020.  As per international media reports, Democratic challenger Joe Biden is currently leading Donald Trump in the national polls as the US approaches its 2020 presidential election. Market participants have been cautiously betting on Biden's victory and possibly a “blue wave” outcome, where Democrats take back the Senate as well, reports say.

Bihar elections: Investors were also cautious as the first phase of polling for the Bihar Assembly Election began today. The main contest is between the Bharatiya Janata Party (BJP)-led ruling coalition National Democratic Alliance (NDA) and the 'mahagathbandhan' in this phase of polls.

"Factors such as fresh curbs by many European countries and Bihar election that began today have impacted the sentiment. Although the market is in a tight range for the last few sessions so there is nothing much to read into today's decline. Whenever there's an important event, investors refrain from taking any positions," said AK Prabhakar, Head of Research at IDBI Capital.

Profit booking ahead of F&O expiry: Trading was expected to be volatile this week on account of the expiry of futures and options (F&O) contracts for the October series on Thursday. As per the rollover data till Tuesday, analysts say the markets are in for a wild swing on either side as foreign investors have hedged their position ahead of the key events lined up in November.

"A 22 per cent boost to index shorts, projects a bold positioning by FIIs with just a couple of days to expiry. With this, the index longs constitute just 54 per cent of the index futures, a far cry from the 71 per cent seen early this month. However, an 11per cent  increase in call longs as well as a 22 per cent rise in put shorts suggest that FIIs are hedged adequately for a positive surprise as well. In all, the chances of a one-sided move look limited," said an October 28 note from Geojit Financial Services.

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