Markets in a bear trap, investors lose Rs 10 lakh crore of wealth in 2 days

Relentless selling pressure roiled the equity markets for the second consecutive session on February 14, leaving investors poorer by Rs 10 lakh crore.

Fears of a possible invasion of Ukraine by Russia, inflating crude oil prices, and a correction in global markets spooked investors for the second day in a row.

Equity benchmark indices fell 2 percent on Monday, in addition to the 1.3 percent drop in the previous session. The BSE Sensex plunged 1,255 points to 56,898, and the Nifty50 fell 382 points to 16,992 at 1:48pm.

With this drop, the benchmark indices plunged into the negative territory in 2022, losing more than 2 percent against a 22 percent rally in the previous year.

"The element of uncertainty is very high. If the Ukraine crisis aggravates into a conflict, it can inflict damage to the market in the short run. The consequences of severe sanctions on Russia in the event of a invasion can be debilitating for the Russian economy. This may restrain (Russian President Vladimir) Putin from a misadventure in Ukraine," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

The broader markets also corrected in line with the frontline indices as the Nifty Midcap 100 index lost 2.3 percent and Smallcap 100 index declined 2.6 percent.

Also read - Manic Monday for Indian markets, here are 4 factors for the steep decline

Heavy selling was seen across sectors, barring information technology (IT) and pharma that fell only 0.25 percent and 0.73 percent. The Nifty Bank, Auto, Financial Services and Metal indices tanked 3 percent each. Fast Moving Consumer Goods and Realty were down more than 2 percent each.

Investors have lost Rs 9.57 lakh crore of wealth in just two straight sessions. BSE market’s capitalisation dropped to Rs 258.24 lakh crore on Monday, against Rs 267.81 lakh crore at the close on February 10.

The advance-decline ratio was largely in favour of the bears as four shares gained for every share falling on the BSE. More than 570 shares hit the lower circuit on Monday, against 258 shares hitting the upper circuit.

Experts said sentiment may remain negative until the uncertainty over tensions between Russia and Ukraine eases.  "There is a short-term negative sentiment in the markets due to the Ukraine-Russia tensions, rising crude oil prices and expectations of aggressive rate hikes by the US Fed due to decades-high inflation," said Mohit Nigam, Head of  PMS at Hem Securities.

The current fall in the market is due to the Ukraine crisis and the market may stage a strong rebound after the crisis eases, he said.

Market volatility is expected to stay high, so investors should not jump in for short-term gains, rather they should adopt a long-term horizon and add quality stocks during significant dips, he said.

Markets across Asia were under pressure with Japan's Nikkei falling more than 2 percent. China's Shanghai Composite, Hong Kong's Hang Seng and South Korea's Kospi fell 1-1.6 percent each.

The US markets on Friday fell sharply with Dow Jones, S&P 500 and Nasdaq declining 1.4-2.8 percent, but on Monday, US futures were pointing to a flat opening for these indices.

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