Why is the stock market falling so sharply today?

• After two weeks of straight decline, Indian stock markets began Monday with a fresh bout of sell-off triggered by the rising spread of Omicron infections around the world.
  
• The market decline has worsened since the opening today, with Sensex and Nifty down by nearly 1,500 and 400 points respectively.
  
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The 30-scrip Sensex is down by nearly 3,000 points in the last two weeks, while Nifty50 is down by nearly 1,000 points.

Nearly half of that decline is from today (Dec 20) alone, with the Sensex down by nearly 1,500 points, while Nifty is down by over 400 points.

The fall in Indian markets mirrors the decline in other Asian markets like Japan, Hong Kong, China and Taiwan, which were down by as much as 2%. So, why are markets across Asia declining?

Here’s why stock markets around the world are falling today

European countries, as well as the USA, which have a healthy rate of vaccination against Covid-19 – either full, or at least one dose – have started reporting a surge in Covid-19 cases once again, with the Omicron variant being the primary contributor.

The impact of rising Covid-19 cases has already become visible – The Netherlands imposed a complete nationwide lockdown on Sunday, and media reports suggest that there is a possibility that this could spill over through Christmas and New Year.

White House medical advisor Dr. Anthony Fauci urged people to get booster shots. While Germany’s health minister ruled out the possibility of a Christmas lockdown, he warned that a fifth Covid-19 wave could no longer be stopped.

How do rising Covid-19 cases lead to a fall in markets?

Market sentiments have been marred by tighter restrictions across Europe, fearing the possibility of the Covid-19 pandemic staging another recovery and spilling over into 2022.

If the Omicron variant leads to shutdowns and tighter restrictions in countries around the world, it could have a snowball effect on the global economy. Supply chains could be strained once again, the rising commodity prices could see a further increase, businesses would see a decline in their revenues as lockdowns and restrictions would lead to reduced footfalls across stores and business markets.

It remains to be seen just how bad the Omicron wave of Covid-19 will be, but the markets are responding early and we could see this fear being priced in if and when Covid-19 lockdowns and restrictions return to Asia.

In India, the steep market fall in today’s morning trade was felt across sectors, with banking, metals, auto and FMCG registering amongst the top losers.


Source: NSE, as of 12:00 p.m.

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