On the single-trading day session on Monday 19th July 2021, both BSE Sensex and Nifty 50 Index fell by nearly 1.10% and closed at 52533.40 and 15,752.40 respectively. Midcaps and Smallcaps fell by 0.58% and 0.31% respectively. Bank Nifty reported a heavy downfall of 1.88% and ended up at 35,079.20.
3 Major Reasons:
1. Poor Performance of the Top Contributors in the Indices:
- Banking and Financial Services, which constituents the majority portion in the indices- around 27% in Nifty 50 and 33% in BSE Sensex are not performing well and hence majorly impacting the stock market.
- The reason behind the fall in the Bank Nifty is due to the ongoing stress in Banking and NBFCs sectors due to the impact of the Second Wave of Covid-19.
- Recently, HDFC Bank has announced its quarterly results for Q1FY22 on 17th July 2021 which has also shown a sharp downfall sequentially and good growth numbers on yearly basis. The same kind of result or even worse can be expected from the banks in the upcoming days.
- The negative performance of the leading Private Sector Bank (HDFC Bank) is arising questions and concerns over the performance of the small banks and hence the Bank Nifty is under trouble.
2. Downgrading of Growth of the US Economy:
- The second reason behind the fall in the stock market is due to the global reason where Bank of America has downgraded the growth rate of the US Economy.
- Earlier, Bank of America expected that the US economy will grow at the rate of 7% -7.5% for the calendar year 2021.
- Now, they have downgraded their expectations to around 6.5% for the year 2021 for the US Economy.
- This news on the $15 Trillion economies will surely affect the global market as well, and hence the BSE Sensex and Nifty also reacted to this news up to a certain extent on Monday.
3. Rising Covid-19 Concerns in the Emerging Economies:
- The developing situation of the Third Wave of Covid-19 i.e., due to the ‘Delta’ Variant over the emerging economies had also caused some fear in the stock market.
- The concern over rising Covid-19 cases due to ‘Delta’ Variants is on account of a delay in economic normalcy in the country.
The above reasons are the major factors responsible for the downfall in the stock market on Monday 19th July 2021. A long-term investor should not worry over this situation and consider this as an opportunistic situation to accumulate the stocks which are on their radar. One should invest in a staggered manner at this point and should only invest 30%-40% in a lumpsum manner. Do consult a financial advisor before making any investment decisions.