India’s stock indexes posted their worst losses on record, as the world’s second-most populous nation went into a lockdown after the number of coronavirus cases in the country surpassed 400.
The S&P BSE Sensex Index tumbled 13% to 25,981.24 points at the close in Mumbai – its biggest one-day drop ever since data going back to 1979 – while the NSE Nifty 50 Index sank by a similar amount. The gauges triggered a trading halt earlier in the day, after a 10% fall within minutes of the opening bell tripped circuit breaker. The regional MSCI Asia Pacific Index lost 3.1%.
Prime Minister Narendra Modi and state leaders over the weekend imposed an almost-complete lockdown, which will probably worsen an economy already set to slow to an 11-year low. While the spread of the coronavirus pandemic has so far been slow in India, T Jacob John, the former head of the Indian Council for Medical Research’s Centre for Advanced Research in Virology, warned the virus could spread to as much as 10% of India’s 1.3bn population.
“The pandemic comes at a time when India was showing some signs of emerging out of a slowdown and this has been a setback,” Shibani Sircar Kurian, head of equity research at Kotak Mahindra Asset Management Co said by phone. “A prompt announcement of financial and monetary measures can help clam the market nerves.”
Policy makers’ immediate focus is ensuring Indians have cash in hand to buy essentials, the government’s principal economic adviser, Sanjeev Sanyal, said in an interview in New Delhi on Friday.
Economic management of the situation “now depends on the resilience of domestic demand,” ANZ Banking Group Ltd. analysts wrote in a note on Monday. “The ability to support domestic demand with fiscal and monetary accommodation is constrained and most of all, the dysfunctional financial system will restrict the availability of credit for a long time,” they added.
The S&P BSE Sensex Index last week marked its biggest weekly decline since October 2008. The ferocity of India’s sell-off has left equities way below the street’s forecasts. The average 12-month price target for companies in the S&P BSE Sensex Index has fallen less than 3% in March, versus a 32% plunge in the nation’s main stock gauge.
India’s stock exchanges will remain open despite a lockdown in the country’s financial capital of Mumbai, Economic Affairs Secretary Atanu Chakraborty said in an interview. 
The nation’s market regulator Friday evening raised margin requirements and capped derivatives exposure. The measures, which will stay in force for a month, are aimed at discouraging traders from aggressively building short positions at a time when volatility in the nation’s equities has spiked to levels last seen in the aftermath of the 2008 financial crisis.
Its central bank last week announced measures to boost liquidity but held back from following global peers with a rate cut. India’s government is considering offering easier loan repayment terms and tax breaks for smaller companies, a person with knowledge of the matter said.
Meanwhile the rupee on Monday fell sharply against the US dollar, weakening past the 76 per dollar mark for the first time. The rupee fell to a record low of 76.32 per US dollar, before closing at 76.29, against previous close of 75.19. The rupee yesterday opened at 75.69 amid a broad strengthening of the US dollar against other major currencies. Domestic equity markets fell sharply today with Sensex crashing about 4,000 points, its biggest one-day fall ever amidst concerns about the increasing number of coronavirus cases in the country.
Sugandha Sachdeva VP-Metals, Energy & Currency Research, Religare Broking, said that the sentiments in the market are shaky and domestic currency is likely to face more heat going ahead. The rupee may head to lower levels of around 77 in near term, she added.
Selling of Indian stocks by foreign institutional investors has weighed on the rupee despite a sharp fall in global oil prices, which are down at $26.10 per barrel. Vinod Nair, Head of Research at Geojit Financial Services, said FIIs have also contributed to the downtrend in Indian markets, turning net sellers to the tune of around Rs 48,000 crores in March till date.
Stimulus measures by central banks around the world to shield their countries from the economic fallout of coronavirus have not been enough to calm the markets, he added.
Anindya Banerjee, DVP for currency derivatives and interest rate derivatives at Kotak Securities, said: “Pandemic is causing widespread lockdowns, causing the economy to grind to halt. In such a situation, emerging market currencies are vulnerable due to their dependence on dollar debt. A scramble for dollars would continue as long as the panic lasts.”
“The RBI would continue to sell dollars aggressively but that may not stop the bleed in rupee. Over the next couple of weeks, there is growing risk of USD-INR inching towards 78.00 levels on spot. Technically, USD-INR needs to respect 74.50 levels, previous all-time high, to keep the bullish bias alive,” he added.
The dollar rose against major currencies yesterday as the worsening coronavirus crisis accelerated the flight to cash. Analysts say that uncertainty about the spread of the virus is likely to support the dollar in near term as investors have been liquidating positions in safe-havens, including gold, and other riskier investments to keep their money in dollars due to the uncertainty caused by the epidemic.
The coronavirus has now been reported in more than 100 countries and has claimed more than 13,000 lives.
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