Stock Market Crash: Market Reaction to Virus Outbreak
Stock Market Crash – Following the confirmation of two cases of Human Metapneumovirus (HMPV) in Karnataka by the Indian government, amidst reports of a virus outbreak causing chaos in China, stock market investors opted for caution. This led to the Sensex dropping over 1,100 points and Nifty losing approximately 1.4%.
The fear gauge index, India VIX, surged by 13% as a widespread sell-off was observed across mid and small-cap stocks, as well as in various sectors. The Sensex plummeted by over 1,200 points to a low of 77,960, while the Nifty fell close to the 23,600-level.
Sectors Affected
Sectors hit hardest included metals, PSU banks, real estate, oil and gas, and financials. Shares of Union Bank of India saw a 7% decline, while Bank of Baroda, HPCL, BPCL, Tata Steel, Adani Energy Solutions, and PNB were down by around 4-5% each. Heavyweights like HDFC Bank, Reliance Industries (RIL), and Kotak Mahindra Bank were major contributors to the Sensex’s decline.
Reasons Behind the Crash
The stock market crash today was triggered by unexpected news of HMPV cases in Karnataka. Investors were primarily focused on tracking earnings updates, expectations for the Q3 results season, developments related to the Trump presidency, and geopolitical issues. The sudden revelation of HMPV cases caught them off guard.
The Union Health Ministry confirmed the detection of two HMPV cases in Karnataka, both involving infants. A 3-month-old female infant, diagnosed with HMPV after being admitted to Baptist Hospital, Bengaluru with bronchopneumonia, has been discharged. An 8-month-old male infant, testing positive for HMPV on January 3, 2025, is currently recovering.
The Union Health Ministry reassured citizens that there is no need for alarm and that India is actively monitoring the global HMP situation through various modes. Ministry is in active touch with WHO and has requested regular update over the issue throughout the globe.
Precautionary Measures
As a precautionary measure, the ministry plans to increase the number of laboratories testing for HMPV cases and has assigned the Indian Council of Medical Research (ICMR) with year-round monitoring of HMPV trends.
The situation in China is not uncommon during the ongoing flu season. Reports also indicate that the current surge is due to the Influenza virus, RSV, and HMPV – the typical pathogens expected during this season, as stated by the Union Health Ministry following a recent meeting.
Physicians from hospitals have confirmed that there has been no increase in respiratory illness cases in the past few weeks, aside from the usual seasonal variation.
The stock market has already been affected by FII outflows, totaling about half a billion dollars in January according to NSDL data.
Market Outlook
The market is expected to be influenced by negative factors affecting FII flows, as well as some positive domestic factors that could support the market. The external macroeconomic environment remains unfavorable, with the dollar index at 109 and the 10-year US bond yield at 4.62%. Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, predicts that FIIs will likely continue selling until yields decrease and the dollar stabilizes.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.