India’s stock market benchmark Sensex on Friday reeled under a huge global sell-off, and posted its second-biggest one-day fall in absolute terms, as the coronavirus continued to spread, increasing fears that the epidemic could push some of the world’s biggest economies into recession.
Even as markets in Asia, Europe and America plunged for the seventh day in a row on worries over a recession, the 30-share BSE Sensex ended 1,448.37 points, or 3.64 per cent, lower at 38,297.29. This was the second largest fall in the Sensex after August 24, 2015, when it had plunged 1,625 points. The broader NSE Nifty Index fell 431.55 points or 3.71 per cent to end at 11,201.75.
The bloodbath in the market wiped out investor wealth worth Rs 5.45 lakh crore as the market capitalisation fell to Rs 146 lakh crore on Friday. In the worst week since the 2008 global financial crisis, the Sensex plunged 2,873 points or 6.97 per cent, and the Nifty tumbled 879 points, or 7.27 per cent. The market is set for further losses as Wall Street’s Dow Jones Industrial Average opend with a loss of over 500 points on Friday. On Thursday, Dow Jones dropped 1,190.95 points intra-day, or 4.42 per cent.
Virus presents significant threat to global economy
Investors hit the sell button in early trade Friday, with Indian market indices, tracking the slide in global markets, dropping to near 5-month lows. The S&P BSE Sensex saw a slide of over 1,000 points while Nifty50 breached the 11,300 levels in intraday trade. Selling pressure was visible across sectors such as metals, infrastructure, IT, capital goods, auto, banks and oil & gas stocks. The bigger question roiling markets is how badly the global economy will be hit, particularly if the spread of infections is not contained.
“Increase in new virus cases is diluting investor wealth across the globe. On the domestic front, broad-based selling was witnessed with sectors having global exposure like metals and IT being impacted the most,” said Vinod Nair, head of research, Geojit Financial Services.
China’s Shanghai Composite closed down 3.7 per cent, Japan’s Nikkei ended down 3.7 per cent and benchmark indexes in Australia and South Korea both shed 3.3 per cent. European stocks suffered even greater losses, with Germany’s DAX dropping as much as 5 per cent in early trading and London’s FTSE 100 shedding 4.4 per cent intra-day. In Italy, where 17 people have died so far due to the virus, the benchmark index was down nearly 4 per cent.
Europe is emerging as the new hotspot for the virus, while the US has reported a rise in the number of cases, and the situation in Iran is looking bad. Equity research firm Jefferies warned that the “large outbreaks of COVID-19 in South Korea, Italy and Iran point to risk of a global pandemic that, if not handled correctly, could swamp hospitals with acute cases.”
Significantly, foreign fund outflow has turned significantly negative during the week. Foreign institutions have sold close to Rs 10,000 crore worth of stocks in the first four sessions this week.
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