Indian stocks plunged, with the benchmark indexes posting their worst drop in more than four years, as the fast-spreading coronavirus roiled global markets.
The BSE benchmark Sensex logged its second-worst point-wise fall yesterday, as investors flocked to safe haven assets.
The market crash eroded Rs5.20 lakh crore of investor wealth in a single day. The biggest fall happen on August 24, 2015, when the 30-pack had crashed 1,624 because of meltdown in Chinese market and a major spike in oil price.
The 30-share Sensex closed 3.64% or 1,448.37 points lower at 38,297, while the 50-share Nifty slumped 3.56% or 414 points to close at 11,219. For the week, the indices have shed 6.98% and 7.28%, respectively.
Not unexpectedly, the India NSE Volatility Index, a gauge of expected price swings, jumped the most in more than three years as investors braced for more pain.
The coronavirus looms as a new threat to the fragile recovery in India’s economy, with data showed a pick-up in growth for the first time in seven quarters. The recovery remains uneven, with a slew of high-frequency indicators showing consumption, which accounts for 60% of GDP, still weak.
The global risk aversion has also turned the tide for flows into Indian assets. Foreigners sold a net $934mn of shares from Monday through Thursday, set for the biggest outflow since August. They also unloaded $761mn of bonds, the most since April.
“As the coronavirus is spreading across countries, the fear factor is going up,” said Rusmik Oza, head of fundamental research at Kotak Securities Ltd. “The fall in Nifty was accentuated after it broke the 200-day moving average. It has since followed the developed markets.”
“While there’s no telling what will happen in the next trading session, my sense is that we will be much better-off, a couple of months’ down the road.
The market fall so far, is factoring in a reasonably bad case-scenario,” said Amar Ambani, senior president and head of research at YES Securities India Ltd in Mumbai.
“If the coronavirus issue continues for a longer time, it will start affecting earnings,” said Vineeta Sharma, head of equity research at Narnolia Financial Advisors Ltd in Mumbai, “We are going cautious on Nifty and large-cap stocks.”
All 19 sector sub-indexes compiled by BSE Ltd dropped, led by a gauge of metal companies which dropped 7%, the most in five years.
All Sensex shares fell except ITC Ltd, which rose 0.1%.
Reliance Industries contributed the most to the Sensex’s decline, with a 4.2% tumble; Tech Mahindra Ltd slumped 8.1%.
Meanwhile the Indian rupee (INR) yesterday slumped to a six-month low against the US dollar (USD), tracking a rout in domestic equities. The rupee yesterday fell to a six-month low of 72.27 against the US dollar as compared to its previous close of 71.56.
The rupee closed at 72.17 against the US dollar, after trading in the range of 71.81 to 72.27 during the day. Other Asian currencies were also weak today as investors dumped emerging market assets to seek the safety of US treasuries and other assets like gold amid the rapid spread of coronavirus epidemic outside China. A spike in new infections outside China has shattered hopes that the economic fallout could be contained within a few months. Despite a weaker rupee, IT stocks in Indian markets saw strong selling pressure yesterday. “The Indian markets tracked the rout in global indices and crashed as coronavirus’ repercussions on global economy continue to deepen.
There are concerns that the outbreak is spreading to the world’s largest economy – USA as well as certain parts of Europe and that will adversely impact the global supply chains big time, thereby affecting economic growth of most of the nations.
In the Indian markets, even defensives like IT tumbled despite a weak rupee indicating increasing anxiety amongst investors,” said Ajit Mishra, VP Research at Religare Broking.
Global stock markets were headed for the worst week since the depths of the 2008 financial crisis as investors ditched risky assets on fears the coronavirus would become a pandemic and derail economic growth, Reuters reported.
Asian stocks tracked another overnight plunge in Wall Street’s benchmarks yesterday with the markets in China, Japan and South Korea all posting heavy losses.
MSCI all-country world index fell 0.3% after 3.3% drop on Thursday.
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