The benchmark indices in India tanked on Monday over concerns about the rising number of coronavirus cases outside China. This is the second-worst fall in February after the markets’ reaction to the Union Budget.

Compared to Thursday’s close of 41,170.12, the S&P BSE Sensex fell over 863 points (-2.1%) to touch Monday’s low of 40,306.36. The Nifty 50 fell over 267 points (2.21%) from Thursday’s close of 12,080.85 to touch the day’s low of 11,813.4 points. At the end of the day’s trade, the Sensex and the Nifty 50 lost over 806 points (-1.96%) and 242 points (-2.01%), respectively, closing at 40,363.23 and 11,838.6 points. The S&P BSE MidCap and S&P BSE SmallCap also closed lower by over 250 points (-1.6%) and 233 points (-1.58%), respectively.

According to the World Health Organisation (WHO), the count of confirmed cases as on February 23 stood at 78,811—an addition of 1,017 new cases over February 22’s 77,794 cases.

The new cases on February 23 were nearly 70% higher than February 22’s addition of 599 cases. The Republic of Korea reported a total of 602 cases on February 23—a rise of 256 cases over the previous day while the death count stood at five, three more than the toll on February 22. In Europe, Italy reported two deaths and 76 cases on February 23—67 cases more than February 22.

According to Deepak Jasani, head of retail research at HDFC Securities, fears of secondary infections increasing outside of China sent risk assets in a tailspin and a wave of refuge-seeking into safe-haven. Spot gold prices rose by 2.1% on Monday to hit above $1,679 per troy ounce—a seven-year high. “With the outbreak showing little sign of easing, investors are increasingly concerned it could have a much longer-term impact on the world economy, which was already stuttering, with a number of companies warning about their bottom lines,” says Jasani.

Mumbai-based Siddhartha Khemka, head, retail research, Motilal Oswal Financial Services, also opines that with the outbreak spreading to other countries, investors are increasingly concerned that it could have a much longer-term impact on the world economy. Khemka says the IMF has warned that the epidemic could put the recovery of the global economy at risk.

In a weekend meeting in Saudi Arabia, of finance ministers and central bank chiefs of the G20 major industrial economies, officials warned that the outbreak is threatening to derail world growth. “All this led to a major global selloff,” says Khemka. “Even U.S. President Donald Trump’s maiden India visit failed to cheer the market,” Khemka adds. “Investors also turned cautious ahead of the expiry this Thursday.”

“Market breadth was sharply negative,” says Manav Chopra, head research, equity at Indiabulls Ventures. Market data backs Chopra’s view. At the day’s high of 41,037.01 points, the Sensex saw lower by over 133 points (-0.32%) compared to its Thursday close. The Nifty 50 also at day’s high of 12,012.55 points was 68.3 points (-0.57%) below its Thursday close. “Near term, markets have strong momentum on the downside and recoveries are unlikely to sustain as and when they come,” Chopra warns.

Mumbai-based Ajit Mishra, VP, research, Religare Broking expects the markets to be choppy in the near term as global sentiments continue to remain muted. In addition, futures and options’ expiry could also induce some volatility during the week. “On an optimistic note, any positive outcome from the U.S. President’s India visit in terms of strategic partnership/trade deal could possibly cheer the Indian markets,” says Mishra.

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