Some factors behind today's market crash

HDFC twins were the biggest drags on blue-chip indices, followed by Reliance Industries and private bank trio of ICICI Bank, Axis Bank, and Kotak Mahindra Bank. Following are some factors that contributed to today's sharp fall.

1. The United States yesterday rejected China's disputed claims to offshore resources in most of the South China Sea, a move that Beijing criticised as inciting tensions in the region and highlighted an increasingly testy relationship. The harsh tone of the US Secretary of State Mike Pompeo's statement, especially in an election year in the US, spooked investors as they feared it could turn worse, which will be a bad sign for an already battered world economy. 

2. A steady rise in Covid-19 cases has forced many cities to clamp down on the movement of people and shut businesses. Pune and Bengaluru are among the big cities going under lockdown, while many areas in states like Bihar and UP are also under curfew.

If the acceleration of the virus outbreak continues, a large part of India may be under lockdown again, hurting businesses and derailing ongoing projects. This, in turn, will hurt the prospects of a faster economic recovery.

3. Large manufacturers and retailers of consumer goods, smartphones and automobiles said sales have declined by about a third in the past week as localised lockdowns have been rolled out across the country to arrest the spread of Covid-19.

4. Asian stock markets slipped, oil sagged and a safety bid supported the dollar. MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.2 per cent. Japan's Nikkei retreated from a one-month high touched on Monday, dropping 0.9 per cent, while Chinese stocks were down despite better-than-expected trade numbers. A firm dollar put pressure on the Aussie and kiwi market.