Investors lose over $5.5 trillion as markets fret over impact of coronavirus
Equities lost 7% this week, the biggest sell-off since the international financial crisis of September 2008
The coronavirus epidemic is wreaking havoc on the Indian market. More than ₹5.5 trillion of investors’ wealth was wiped off on Friday, the result of the biggest single-day decline in shares since August 2015.
And, as the rapid spread of the virus spiked worries of a global recession, equities lost 7% this week, the biggest sell-off since the international financial crisis of September 2008.
On Friday, the Sensex closed at 38,297.29, down 1,448.37 points, or 3.64%, while the 50-share index was at 11,219.20, down 414.10 points, or 3.56%. This is Sensex and Nifty’s biggest single-day decline since 24 August 2015.
On Friday, investors in India lost a notional ₹5.53 trillion, taking this year’s losses so far to ₹8.67 trillion.
Amid fears of a disruption in global economic activity markets in Japan, China, Hong Kong and Korea were down by up to 4% on Friday.
Shibani Sircar Kurian, head, equity research, Kotak Mahindra Asset Management Co., said: “Markets the world over are grappling with the uncertainty of the impact of this epidemic on growth and global demand…A prolonged shutdown of factories in China and the spread of the virus to other countries would have an impact on India as well."
Deepak Jasani, head, retail research, HDFC Securities, said that the cash market turnover on the NSE shot up significantly, as the sharp fall led to heightened trading activity.
Technically, with the Nifty moving down further, and in a free fall, traders will need to watch if the Nifty can now hold above the next major support at 11,090; else the current downtrend is likely to continue. Any pullback rallies could find resistances at 11,382-11,536, said Jasani.
From here on, domestic equity markets will focus on Q3FY20 gross domestic product (GDP) growth data, impact of disruption in supply chain for Indian companies, any further spread of coronavirus outside the epicentre and the reaction of policy makers around the world, Sircar Kurian added.
According to Care Ratings Ltd, the impact on the Indian economy, too, will depend on whether or not the coronavirus spreads to other countries with which India has trade links and whether it is temporary or more permanent in nature.
India exported a total of $16.7 billion of goods to China in FY19. Exports to China witnessed a CAGR growth of about 28% between FY17 and FY19.
Gold, considered a safe haven, has been the biggest gainer as funds are getting transferred to bullion due to uncertainty with interest rates on the decline, stock markets getting volatile and growth prospects which were otherwise just about neutral now being revised downwards. Gold prices have risen around 7% in this year so far while rising 2.53% in February alone.
Crude oil prices have declined quite sharply, contrary to expectations that the Organization of the Petroleum Exporting Countries (OPEC) would try and lift the price to over $60 per barrel by invoking output cuts. However, fears of a global recession have taken crude down to around $51 per barrel with prices falling 22.83% since beginning of this year and 12.5% this month.
The dollar continues to be a strong currency which also means that others would tend to weaken over time. The rupee closed at 72.21 per dollar, a 60 paise fall on Friday. It is down 1.09% against the dollar in 2020 so far.