Hotel, airline and cinema stocks suffered sharp losses on Friday amid a broad-based selloff on Dalal Street. Global markets followed news of a new COVID variant, which triggered fears of stricter lockdown restrictions once again to curb the spread of the pandemic. Headline indices Sensex and Nifty50 hit nearly three-month lows, as the news of the new coronavirus variant spooked investors.
Most tourism-related shares succumbed to negative territory, including hotel stocks such as Chalet, Indian Hotels, Lemon Tree, Kemat Hotels, Oriental Hotels, Royal Orchid, Mahindra Holiday, EIH, Taj GVK and Country Club, down around 2-8.6 percent.
Restaurant stocks also faced selling pressure, including Barbeque Nation, Coffee Day, Burger King and Jubilant Food, trading between 2.1 percent and five percent lower.
Cinema stocks such as PVR and Inox Leisure fell 8.8 percent and 8.1 percent respectively.
Shares in Indian Railway Catering and Tourism Corporation (IRCTC) – a unit of the Indian Railways – fell three percent.
Airline stocks InterGlobe Aviation (IndiGo) and SpiceJet were down 7.9 percent and 4.6 percent respectively.
Scientists said the COVID variant, detected in South Africa, may be able to evade immune responses, according to a report by Reuters. Little is known about the new variant, but scientists told reporters it has a “very unusual constellation” of mutations, it said.
Most analysts say the news triggered fuelled concerns about the impact of COVID-related restrictions on global businesses.
“A new COVID variant, supposed to be more lethal, have alerted the global markets and institutions… The WHO is calling for an emergency meeting and other countries are calling for flight bans,” Vinod Nair, Head of Research at Geojit Financial Services, told CNBCTV18.com.
The World Health Organization will hold a special meeting on Friday to discuss if the heavily mutated strain will become a variant of interest or a variant of concern.
“This is bound to impact domestic and international tourism, which was expected to bounce in this quarter and 2022. This will have a sentimental setback to tourism and entertainment sectors in anticipation of cautious public behaviour and government restrictions,” he said.
The latest COVID-triggered sell-off damages investor sentiment after a near one-sided rally in equities in the past few months that took benchmarks to unprecedented heights.
“There is fear of this new variant spreading to other countries which might again derail the global economy. Already there is uncertainty as to when the US Fed will start raising interest rates. So the markets might continue to reel under pressure and would actively track COVID situation globally,” said Hemang Jani, Head of Equity Strategy and Senior Group VP-Broking and Distribution at Motilal Oswal Financial Services.
Many foreign brokerages have in the recent past warned against expensive valuations on Dalal Street and advised their international clients to book profits.