Market Crash: Sensex Falls 1,260 Pts, Nifty Down 400 Pts; Is HMPV Virus The Reason & What Should Investors Do?

Stock Market Crash: The Indian stock market witnessed a bloodbath on Monday, January 6, 2025, just when India reported its first (HMPV)Human Metapneumovirus case in Bengaluru. The majority of experts believe that risks towards HMPV weighed on investors' sentiment, while global trends and upcoming Q3 results also played a role. Currently, states like Maharashtra and Karnataka have issued advisories for precautions in the wake of HMPV concerns while maintaining regular communication with the World Health Organization (WHO). So far on Monday, the Sensex and Nifty nosedived by over 1,260 and 400 points. Here is the key chain of events that is impacting the stock market.

Sensex Crash:

The 30-scrip benchmark is struggling to hold onto the 78,000 mark. So far, Sensex erased its 78,000 mark, to dip by 1,263.16 points to hit an intraday low of 77,959.95, compared to the previous session's closing price of 79,223.11. In the early trade, the Sensex did rise to hit an intraday high of 79,532.67 but erased gains soon after.

Currently, the benchmark traded around 78,400.

Nifty Crash:

This 50-scrip benchmark gave up its key indicator 24,000 mark, and plunged by a 403.25 points to hit an intraday low of 23,601.50. Just like Sensex, there was slight upside in the early trade where Nifty also touched an intraday high of 24,089.95, but took a reverse due to broad-based selling pressure.

Currently, Nifty traded at around 23,700. In the previous session, the index stood at 24,004.75.

HMPV Outbreak:

Amidst concerns related to Human Metapneumovirus (HMPV) infections, India's volatility index has skyrocketed by more than 13%. Currently, HMPV outbreak has reportedly surged in major countries like China and Malaysia.

China, which recorded the first case of human metapneumovirus (HMPV), is experiencing a massive surge in the infection. Following this, the country's health ministry is incorporating new measures to examine and contain the spread of HMPV. While Malaysia has reported about 45% surge in HMPV cases to 327 in 2024, compared 225 cases in 2023.

While in India, panic emerged among investors when two cases were confirmed in Karnataka by the state health ministry with one of them being a 8-months old baby. Following this, Karnataka health authority followed by Maharashtra have issued precautionary guidelines for citizens.

Is HMPV the Reason For the Indian Stock Market Crash?

When asked about the impact of HMPV on stock market, Mandar Bhojane, Equity Research Analyst at Choice Broking told GoodReturns.In, "On January 6, the Indian equity market witnessed significant selling pressure, with the Sensex falling 851 points and the Nifty declining by 373 points. Weak domestic cues, global uncertainties, and fears surrounding the Human Metapneumovirus (HMPV) weighed on investor sentiment. Despite these factors, the technical analysis of Nifty indicates critical levels and trends to watch for market direction."

Trivesh, COO of Tradejin said, the market faced sharp declines due to a rising drop in PSU stocks, crude prices, weak global cues, FPI selling, and investor concerns ahead of the earnings season. These uncertainties, along with concerns about the HMPV outbreak in China, combined with global cues, may influence market sentiment further. While it is too early to gauge the full economic impact of the HMPV virus, the parallels to past pandemics are hard to ignore. The spread of HMPV highlights the ongoing vulnerabilities in public health systems, and its potential to disrupt markets cannot be ruled out. I feel investors should remain cautious but avoid overreacting until there is more clarity on how this situation unfolds.

Also, Vinod Jhaveri, Independent Analyst, Pure Technicals said, India reports the first case of HMPV Virus, 8-month-old baby tests positive in Bangalore. State governments have issued guidelines to enhance preparedness and ensure proper surveillance and travel warnings. This news spooked the stock markets and reacted on the downside. It's too early to say anything, but stock markets, being sensitive to such news, immediately respond! How can we help you? Global markets are pretty stable, while Indian markets have reacted negatively.

On the other hand, A R Ramachandran, Independent Research Analyst explained that broader markets have corrected more out of estimated weaker earnings expected in Q3FY25 results than the HMPV case that has been detected in India. He added BSE Sensex looks bearish on the Daily charts with strong resistance at 80182. A daily close below support of 77898 could lead to a target of 76802 in the near term.

Key Draggers of the Market:

PSU Bank Stocks Bloodbath:

Nifty PSU Bank emerged as top loser in the extreme bearish market tone, with Nifty PSU Bank falling by 226.45 points or 3.42% to trade at 6,392.55. All PSU stocks have nosedived with most selloff seen in Union Bank of India which tumbled by 7% followed by 5% drop in Bank of Baroda. Also, PNB, Bank of India, UCO Bank, Bank of Maharashtra, Indian Overseas Bank, Central Bank of India, Indian Bank, Canara Bank and Punjab & Sind Bank shares that dipped by 3% to 4%.

Oil & Gas Stocks:

Heavyweight oil and gas stocks plunged as well, further dragging the market. Reliance Industries, the largest stock in terms of market value and weightage, dropped by nearly 2%, while stocks like HPCL, Oil India, Indraprastha Gas, Indian Oil, Adani Total Gas, BPCL, Gail, and ONGC were down by 1.5% to 5%. Nifty Oil & Gas Index dipped by 6,392.55% to trade at 10,806.70.

Metal Stocks:

All metal giants listed on Nifty Metal Index were in deep red, with the index down by 2.50% to trade at 8,511.55. Tata Steel was the biggest loser down by 4%, followed by Hindustan Copper, Hindustan Zinc, Welspun Corp, Vedanta, SAIL, and NMDC that plunged by 2% to 4% as well.

Other Indices:

Bank Nifty dropped by 1.7%, while Nifty Auto was down by 1.6%. Financial indices also plunged over 1.3% on NSE. Meanwhile, Nifty Media and Nifty Realty index slipped by over 2% each. Interestingly, IT stocks witnessed much slower decline than compared to these indices ahead of Q3 results season. Nifty IT was marginally down. Also, amidst HMPV outbreak in neighbouring countries, Nifty Healthcare index also witnessed marginal drop.

Mid-cap, Small-caps In Deep Red:

Nifty Midcap 100 and Nifty Smallcap 100 index are down by 2% to 2.5%. Stocks like Cochin Shipyard, Suzlon Energy, HPCL, IRB, Oil India, and SJVN in the midcap basket were top bears with decline of 3-5%.

Under smallcap basket, Tata Teleservices, Adity Birla Real Estate, Five-Star Business Finance, NCC, Swan Energy, Chennai Petroleum Corporation, RailTel, and Inox Wind were top underperformers, dropping 5-6%.

Where is the market headed?

Bhojane added the Nifty is struggling to sustain above the immediate resistance level of 24,000, facing strong selling pressure. On the downside, the index is trading near a crucial support level of 23,700, where the 200-day EMA is positioned. If the price closes below this support, further corrections are likely, with the next support levels at 23,250 and 23,000. A decisive break above 24,000 is essential for bullish momentum to resume.

Furthermore, Choice Broking analysts said, technical indicators reveal a mixed outlook. The Relative Strength Index (RSI) is currently at 42.28, trending downward, signalling bearish momentum. However, the Stochastic RSI shows a bullish crossover, hinting at the possibility of a short-term recovery. This divergence between indicators suggests cautious optimism but highlights the need for confirmation through price action near the key levels.

To investors, Bhojane said, Nifty's performance in the coming sessions will largely depend on its ability to hold the 23,700 support or break above the 24,000 resistance. A close below the support could accelerate selling pressure while sustaining above it might provide a base for recovery. Traders are advised to monitor these levels closely and align their strategies with the prevailing trends, keeping a close watch on indicator signals for potential reversals.