June 10, 2023

The Second Wave Of Coronavirus Sends Stock Markets Crashing

By Ashwini Agarwal
First publised on 2020-09-21 19:50:56

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The expected second wave of coronavirus, the proof of which is the rise in fresh cases across Europe, caused a huge meltdown of stock indices all over the world. The Indian stock markets followed suit. The Sensex crashed by 2.09 percent or 812 points while the Nifty tanked by 2.21 percent or 254 points. The BSE midcaps and smallcaps suffered even bigger fall. Investors lost more than Rs 4.23 lakh crore in a single session today.

Stock markets across Asia in Shanghai, Seoul and Hong Kong suffered similar meltdowns. The European markets went down by as much as 3 percent across the board. While the US markets had not opened for trade till the time of writing this article, trade in futures showed that they were headed for a sharp decline. Dow Jones futures went down by 2%, while S&P 500 futures slipped  by 1.7% and Nasdaq futures dropped 1.5%.  

European nations are spooked by the second coming and are thinking of imposing further, economically debilitating, restrictions including lockdowns. Economies all over the world have yet to recover from the first lockdowns and it is clear that any further restrictions will crush whatever green shoots were appearing and perhaps create an atmosphere of extreme fear and uncertainty.

Three European nations have already imposed fresh restrictions on a host of activities while other nations, including Britain, are mulling the same. This has severe implications for companies operating in the travel, logistics, banking and financial services and education sector. Investors were already worried about the health of these companies due to the lack of business in the pandemic. Now they are dumping these stocks without a second thought.

In India, experts point out that many stocks are already overvalued and earnings for the first two quarters in this financial year cannot sustain such high valuations. A correction was in the offing and the global meltdown has hastened it. Experts say that this period of uncertainty will continue for a period longer than was originally expected and ask investors to make informed decisions. Economic revival is not going to happen in a hurry and the balance sheets of many companies will continue to be in the red. More job losses and salary cuts are also expected. Overall, the situation is not conducive for fresh investments.