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Friday, May 29, 2020

Shutdowns weigh heavy on sentiment, Sensex tanks 13% in biggest daily crash

The rupee also came under pressure and plunged below the 76 level to close at 76.22 against the dollar on capital outflows and strengthening of the dollar abroad.

By: ENS Economic Bureau | Mumbai | Updated: March 24, 2020 7:17:51 am
Shutdowns weigh heavy on sentiment, Sensex tanks 13% in biggest daily crash The stock market selloff intensified Monday with the BSE Sensex plummeting 3,935 points, or 13.15 per cent, to 25,981.24 — the biggest daily crash in the history of the capital market, (Express photo by Nirmal Harindran)

The stock market selloff intensified Monday with the BSE Sensex plummeting 3,935 points, or 13.15 per cent, to 25,981.24 — the biggest daily crash in the history of the capital market — in the wake of the lockdown announced by several states following a spurt in the number of coronavirus cases. The NSE Nifty nosedived 1,135.20 points or 12.98 per cent to settle at a four-year low of 7,610.25 and close to Rs 13.9 lakh crore of investors’ wealth was wiped out in the selloff during the day.

The rupee also came under pressure and plunged below the 76 level to close at 76.22 against the dollar on capital outflows and strengthening of the dollar abroad.

When the market opened for trading, the Sensex plummeted over 10 per cent, triggering the circuit breaker system. Trading was halted for 45 minutes as lockdowns across the world stoked fears of a massive global recession. Though trading resumed around 11 am, indices fell further on across the board selling. This was the second time that the circuit breaker was applied and trading halted for 45 minutes in the last ten days.

Read| Stock markets post worst losses in history; Sensex crashes 3,935 points amid coronavirus lockdown

The Sensex has now fallen 12,316 points, or 32 per cent, in the month of March. In another words, nearly one-third of investors wealth has been wiped out during the month.

Bank stocks led by Axis Bank led the selloff and all sectoral indices closed with sharp losses. “With the spread of Covid-19 continuing unabated and the fears of global recession increasing, the Indian markets crashed. The markets closed much lower in percentage terms compared to the Asian and European markets, which indicated increased uncertainty regarding the spread of the virus in India after the government indicated that the country was in a crucial phase in its fight against the virus,” said Vinod Nair, Head of Research, Geojit Financial Services.

Mutual fund net asset values (NAVs) have fallen steeply over the last one month, triggering fears that there could be redemption pressure from investors. However, on Monday, domestic institutions were buyers in the market and accumulated stocks worth Rs 1,082 crore, according to BSE data.

Read| Explained: As Indian markets fall, should you sell, hold or invest?

“Further measures and lockdowns are expected after manufacturing companies indicated that they would shut down their facilities, which would have an overall impact on business activity and market confidence,” Nair said. The markets are expecting a stimulus package from the government to bail out the economy. There’s widespread expectation that the Reserve Bank will cut the policy Repo rate and announce measures like relaxation in bad loan classification.

“Market participants pin their hopes on stimulus package from the government to reduce the economic impact of coronavirus cases,” said Ajit Mishra, VP-Research, Religare Broking.

Siddhartha Khemka, Head-Retail Research, Motilal Oswal Financial Services, said, “investors continued to worry over the impact of the rapidly spreading coronavirus outbreak on global economic growth”. The broader market also mirrored benchmarks with Nifty Midcap 100 and Nifty Smallcap 100 falling n 13.0 per cent and 12.9 per cent respectively. Bank index was down 16.2 per cent, followed by auto which was down 14.2 per cent and all other sectors were down 10-12 per cent. Pharma index closed 7 per cent lower.

Analysts said the increase in domestic shutdowns to contain the virus weighed on the sentiment. India has shut over 75 districts along with bus and railway services to restrain the pandemic. Global markets sank as rising national lockdowns are likely to have bigger repercussions on the global economy leading it to a global recession. Further, market regulator Sebi reduced the position limit in specific stock futures to half. It had also curbed short selling in index derivatives and raised margin rates for some stocks to curb abnormal volatility in the midst of the pandemic.
“The steep correction has made many good stocks cheaper and attractive. While it is very difficult to predict the bottom of the market, it always rewards investors in the long term who take the benefit of such sharp fall,” said an analyst.

“Going forward, we expect the markets would continue to remain volatile as increase in number of cases in India would lead to selling pressure,” Mishra said.

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