On Monday, BSE's Sensex ended lower by a whopping 810 points, while the NSE's Nifty 50 dropped nearly 254 points, largely on weak global cues. The major correction was seen in the afternoon, after the European markets declined in opening trade, with banks falling as much as 6 percent on allegations of suspicious transactions as well as latest coronavirus developments.
1. Leaked FinCEN Files
On Sunday, BuzzFeed and other media reported the involvement of large global banks in moving large sums of alleged illicit funds between 1999 and 2017. These reports were based on leaked suspicious activity reports (SARs) filed by banks and other financial firms with the US government's Department of Treasury's Financial Crimes Enforcement Network (FinCen).
These SARs reportedly include spreadsheets of transactions that have been red-flagged for suspected money laundering, terrorism, drug dealing or financial fraud. However, these SARs are not necessarily evidence of any criminal conduct.
The media reports citing these SARs suggest that Deutsche Bank AG facilitated more than half of the $2 trillion leaked suspicious transactions, that is transactions worth $1.3 trillion.
Media reports suggest that names of five banks- HSBC, JPMorgan Chase, Deutsche Bank, Standard Chartered and Bank of New York Mellon- appear most often in the documents as facilitators to their red-flagged transactions.
Hong Kong-listed shares of Standard Chartered plunged 4.8 percent and HSBC tumbled 4.5 percent on Monday following the allegations.
Indian banks were also named as facilitators among scams and cases already under investigation.
2. COVID-19 fights efforts not enough says WHO
On Friday, the World Health Organization said that the coronavirus is "not going away," noting that it's still killing about 50,000 people a week. "That is not where we want to be," Dr. Mike Ryan, executive director of the WHO's health emergencies program, said. He also said that countries entering the winter season had 'a lot of work to do' to prevent COVID-19 cases from rising and developing countries would also struggle after nine months of pressure on their healthcare systems.
There are also expectations among analysts that European countries are likely to impose more restrictions on public life in the coming days after France reported 10,569 new cases on Sunday, while the UK reported almost 4,000 cases in a day. Media reports suggest that the UK government is mulling a second, "mini" national lockdown to act as what has been described as a "circuit breaker" to the virus spread.
In India, the tally crossed 54 lakh cases on Sunday.
3. Major stock market draggers in the US, Europe
The S&P 500, Dow Jones Industrial Average and Nasdaq Composite all fell for a third straight week last week. Tech stocks including Facebook, Amazon, Apple, Netflix, Alphabet and Microsoft were under pressure in part on valuation concerns within the sector as well as options of individual stocks, ETFs and indexes expired.
In Europe, Germany's United Internet plunged more than 24 percent, Network International dropped 13.7 percent, Rolls-Royce tumbled 8 percent and British Airways parent IAG dropped another 14.9 percent.
Most major Asian indexes were in the red and MSCI's broadest index of Asia-Pacific shares outside Japan was 0.6 percent weaker. Japanese markets were closed for a public holiday.
After a major recovery, almost to pre-COVID levels, analysts were expecting a healthy correction. Valuations of global and Indian markets had seen a tremendous surge, which in the current economic uncertainty was bound to fall.
"The Nifty Midcap 100 index is trading even higher than the Nifty50 which suggests some kind of overvaluation in mid-caps vis-à-vis the large-caps. The 10-year average forward PE of Nifty50 works to nearly 16 times and a current forward PE of 22 times indicates it is trading nearly 3 standard deviations above the 10-year average," Rusmik Oza, Executive Vice President, Head of Fundamental Research at Kotak Securities said, as quoted by Moneycontrol.
BSE erased market cap of over Rs 4.5 lakh crore on Monday.
Investors also exited outperforming stocks like Reliance Industries, that have surged to new highs amid the pandemic.