The BSE Sensex gained 1.05% to close at 41,323 points. (HT )
The BSE Sensex gained 1.05% to close at 41,323 points. (HT )

Markets recover on signs virus may be abating

  • Markets in Japan, Hong Kong and South Korea gained following a slight fall in the number of new coronavirus cases
  • FIIs bought Indian shares worth $1.94 bn so far in Feb; domestic investors pumped 1,056.71 crore into Indian equities

Indian stocks gained more than 1% on Wednesday as investors pinned hopes on likely government measures to counter the impact of the coronavirus outbreak on the economy.

The BSE Sensex rose 428.62 points, or 1.05%, to close at 41,323, while the National Stock Exchange’s Nifty index gained 1.11% to 12,125.90 points.

Finance minister Nirmala Sitharaman met top company executives on Tuesday to assess the impact of the outbreak on India and promised measures to contain the damage.

Sectors such as pharmaceuticals, chemicals and solar equipment are experiencing disruption because of delayed arrival of raw materials from China, she added.

In Asia, markets in Japan, Hong Kong and South Korea gained, while China closed marginally lower following a slight decline in the number of new cases of coronavirus infection.

According to Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services Ltd, market sentiments turned positive after new cases of coronavirus infection fell and Sitharaman’s promise of measures to offset the impact.

“The government also hinted at considering some relief for the troubled telecom sector, which uplifted the market. Markets revived on hopes that the impact of the coronavirus on the global economy would be short-lived," he said. “Going forward, markets would continue tracking the global developments around coronavirus and thus could continue witnessing volatility."

India sources a considerable share of capital goods and intermediate goods from China, and the industrial clampdown in the worst-affected Chinese province of Hubei is most likely to impact industrial production and consumption in India.

Reserve Bank of India governor Shaktikanta Das said the coronavirus outbreak will have a limited impact on India but that global GDP and trade will definitely get affected, PTI reported.

Only a couple of sectors in India are likely to see some disruptions, but alternatives are being explored to overcome those issues, he said. India’s pharmaceutical and electronic manufacturing sectors are dependent on China for inputs and they may be impacted, Das said in an interview to PTI.

“It is definitely an issue, which needs to be closely monitored by every policymaker whether in India or any other country. Every policymaker, every monetary authority needs to keep a very close watch," he said.

Kotak Institutional Equities said India appears relatively immune to the partial shutdown in China. However, it also warned that a prolonged shutdown may have a material impact on certain sectors through pricing (metals, oil, gas and consumable fuels and pharmaceuticals), supply chain shocks (consumer durables and pharmaceuticals) and travel (IT services).

“We would expect parts of India’s service economy to be affected due to coronavirus although this may be contained if India does not see any material increase in the number of new cases (unaffected as of now)," it said in a note on 18 February.

Despite the coronavirus scare, foreign institutional investors (FIIs) continued to invest. In February, FIIs were net buyers of Indian shares worth $1.94 billion, while domestic institutional investors pumped 1,056.71 crore into Indian equities.

Vodafone Idea surged 38% to end at 4.19 on Wednesday. The company’s chairman, Kumar Mangalam Birla, met telecom secretary Anshu Prakash on Tuesday amid fears that the government may invoke the company’s bank guarantees, a move that may threaten the very survival of India’s second-largest telecom operator.

Analysts at IIFL Securities Ltd said the government may try to prevent a collapse of Vodafone Idea.

“We believe Vodafone Idea continuation or a three-player market with price hikes is a more bullish scenario for both Bharti and Jio than a Vodafone Idea collapse or two-player market, as the government may disallow price hikes to avoid public backlash," it said in a note on 18 February.

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