COVID effect: Equity markets crash, oil prices tumble amid fears of new variant

London's benchmark fell by an unusually wide margin of 3.3 per cent at the opening and Tokyo lost 2.5 per cent as Shanghai, Frankfurt and Hong Kong also declined.

A currency trader walks by the screens showing the Korea Composite Stock Price Index (KOSPI) at a foreign exchange dealing room in Seoul (Photo | AP)

NEW DELHI: Reports of a heavily mutated COVID-19 variant on Friday sent global and domestic equity markets into a tizzy. Indian equity markets saw Rs 4.5 lakh crore worth of investors' wealth getting eroded as both the benchmark indices - BSE Sensex and NSE Nifty - fell by around 3 per cent.

US stocks opened lower while London's benchmark fell by 3.3 per cent at the opening. Tokyo, Shanghai, Frankfurt and Hong Kong also fell. The tremors were also felt in the global oil market as well, as Brent Crude shed over 10 per cent to trade around USD 73.34 a barrel on Friday.

India's equity market saw its biggest single day fall in recent times on Friday. The Sensex shed 1,688 points or 2.87 per cent to close at 57,107, and the Nifty was down 510 points or 2.91 per cent to 17,027.

Friday's bloodbath was caused by discovery of a new mutation of coronavirus in Africa (B.1.1.529), which poses another set of challenges to global economic recovery.

Amit Gupta, fund manager, portfolio management services at ICICI Securities said, "Nervousness on the new variant and expectations of US increasing the pace of tapering have led to recent market weakness. This trend may take some time to recover as the WHO meeting on the new mutant variant impact and hospitalisation rates in US and Europe will be watched by the market very closely."

Other than the discovery of the new COVID variant, the release of crude oil reserves by the US and other countries leading to an increase in global supply also caused the 10 per cent drop in oil prices.

Recently, the US had made a request to some of the world’s largest oil-consuming nations, including China, India and Japan, to release oil from their strategic reserves to check the skyrocketing prices.

India and the US decided to release 5 million and 50 million barrels of oil, respectively, from their stockpile. According to the findings of a panel of experts that advises ministers of the Organisation of the Petroleum Exporting Countries (OPEC), such release is likely to perk up supplies further in the coming months.

OPEC and its allies, a group known as OPEC+, are set to meet on December 2 to weigh their options.