Earlier this morning, trading on Sensex was suspended for 45 minutes as Indian stocks plunged by 10%. The stock index, which tracks 30 of the largest companies in India, plunged by 3,000 points.
An automatic mechanism, referred to as a circuit breaker, is triggered when a stock market falls by 10% before 1 pm. Trading is then suspended for 45 minutes. Prior to the circuit breaker being activated, the Sensex fell to a low of 26,924.11. As of this writing and after the 45-minute suspension, the index has pared some of its losses as it trades at 27,417.24.
Meanwhile, the NIFTY 50 which tracks a broader market of 50 Indian companies, is also down by over 10% at 7,859.10. A suspension will not be imposed because the circuit breaker had already been triggered by the Sensex.
What caused the massive sell-off? The government imposed stricter lockdown protocols following a rise in coronavirus cases in India. On Saturday, confirmed coronavirus cases in the country were at 330. It is now up at 415. Consequently, 75 districts have been put on lockdown with the government threatening criminal charges against violators.
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Sensex Outlook
On the monthly time frame, we can see that the Sensex is testing support at the 100 SMA. A close above the 100 SMA around 27,710.00 for March could mean that there may still be buyers in the market. It could hint at a potential rally to 29,372.00 where the index topped on January 2015.
Conversely, if sellers are able to sustain their momentum, a close below the 100 SMA could mean a bigger sell-off for Indian stocks. The Sensex could then fall to 21,080.00 where it made highs on February 2008 and November 2010.
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