STOCK markets in India crashed on Monday with the Bombay Stock Exchange’s Sensex and NSE’s Nifty indices logging their biggest ever fall in absolute terms as global markets witnessed a meltdown in the face of a oil price war and the economic fallout of the coronavirus outbreak.
The Sensex plummeted 1,942 points or 5.17 per cent to 35,635 and the Nifty plunged 538 points to 10,451, wiping out as much as Rs 6.8 lakh crore of investor wealth, or market capitalisation of listed shares. All sectoral indices ended in a sea of red with oil and banking stocks among the worst hit. At one stage, the Sensex had plummeted more than 2,400 points during the session and the broader NSE Nifty benchmark had slumped to as low as 10,294, down more than 700 points, before making a mild recovery towards the end of trade.
The rupee also dropped below the 74-level against the US dollar to settle at 74.17, down 30 paise, amid rising concerns over the sell-off in stock markets, capital outflows and economic slowdown.
In the US, the S&P 500 sharply plummeted 7 per cent in the first few minutes of trading Monday morning, and losses were so steep that it led to a halt in trading.
Analysts said fears about the worsening global slowdown in the wake of the spread of coronavirus were exacerbated by the shock decision by Saudi Arabia over the weekend to increase oil production in an attempt to drive competitors such as Russia and the US out of the market. The price of Brent crude oil fell almost 30 per cent to $31.14 a barrel on Monday, its biggest single fall since the start of the first Gulf war in 1991.
Falling Chinese exports, faster than expected pace of shrinking of the Japanese economy, increasing cases of Coronavirus outside China, and disruption of global supply chains, have contributed to the panic in the financial markets worldwide. While the fall in oil prices is good for India in the long-term, FII outflows from all emerging markets and the Yes Bank crisis at home, added to jittery market sentiments.
“The risk of recession increased fuelled by crash in crude oil prices and increasing virus cases outside China. The coronavirus fear is intensifying too and fresh travel bans seem to hurt the global economic sentiments more than feared,” said Vinod Nair, Head of Research, Geojit Financial Services.
The Sensex had plunged 1,624 points to close at 25,741 on August 2015 in its previous biggest fall in absolute terms. The index plunged 1,448 points on February 28 this year amid fears over the economic slowdown.
Earlier on Monday, Asian markets fell sharply, with Japan’s Nikkei 225 index down 5 per cent while Australia’s ASX 200 slumped 7.3 per cent, its biggest daily drop since 2008. In China, the benchmark Shanghai Composite fell 3 per cent while in Hong Kong, the Hang Seng index sank 4.2 per cent as investors also reacted to the slump in the oil price, fall in Chinese exports, and figures showing the Japanese economy shrinking at a faster pace than expected.
Indian markets are facing a deluge of negative triggers, mostly from abroad, with the Yes Bank crisis adding to the worries. “Global markets are plunging after the break of an alliance between OPEC and Russia resulted in the worst one-day crash in crude prices in nearly 30 years, fueling panic triggered by the escalation of the coronavirus epidemic. The panic began after Saudi Arabia shocked oil markets by launching a price war,” said Deepak Jasani, Head of Retail Research, HDFC Securities.
The broader markets also faced a rout, with the BSE Midcap index shedding 4.7 per cent at 13,554 and the Smallcap index losing 4.2 per cent at 12,770. Reliance Industries, India’s most valued firm, plunged by 12.35 per cent in the selling avalanche.
Italy placed nearly 16 million people under semi-lockdown and the number of confirmed cases in Europe continues to rise. China’s exports fell 17 per cent in the January-to-February period compared to a year before, according to data released over the weekend. Imports too fell 4 per cent, pointing to a slower recovery in China.
The sharp decline in the global oil prices not only reflects the deep underlying concerns on a global economic disruption brought about by the coronavirus scare but also a lack of consensus among the OPEC nations regarding production cuts. This will benefit India since it is one of the largest importers of crude oil. “We estimate the savings on oil imports to be around US $30 billion in FY21 if there is no significant uptick in global demand. This will also arrest the rising inflation and facilitate the next round of rate cuts by RBI,” Suman Chowdhury, President, Acuité Ratings & Research, said.
Analysts expect Indian markets to remain under pressure in the near-term as the sentiments are weak on worries over slowdown across the globe. “Investors would continue to monitor crude oil prices, currency movement and the updates on spread of coronavirus cases as these factors are keeping the markets on edge. On domestic front, inflation data such as IIP and CPI scheduled this week would be on investor’s radar,” said Ajit Mishra, VP – Research, Religare Broking.
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