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Indian markets suffered the worst single-day fall in absolute terms amid a global selloff as panic over the economic fallout of the coronavirus outbreak intensified. A 25% slump in oil prices also hit the risk sentiment. The NSE Nifty 50 index closed down 4.90% at 10,451.45.
BSE Sensex ended 5.17% or 1,941 points lower at 35,634, wiping out nearly ₹7 lakh crore of investor wealth. The country’s markets regulator, the Securities and Exchange Board of India, issued a statement on the market selloff, saying: “The perceived economic fallout from COVID-19 coupled with steep fall in global crude prices led to volatility in securities market.”
These are the 5 factors will let us know about today’s market selloff
1) The number of people infected with the coronavirus has topped 110,000 globally as the outbreak reached more countries and some experts have raised the spectre of global recession if the spread continues. Back in India the number of coronavirus cases has risen to 43. The rupee was down also ended at 74.08 against the dollar.
Moody’s Investors Service said “Global recession risks have risen. The longer the outbreak affects economic activity, the demand shock will dominate and lead to recessionary dynamics. In particular, a sustained pullback in consumption, coupled with extended closures of businesses, would hurt earnings, drive layoffs and weigh on sentiment. Such conditions could ultimately feed self-sustaining recessionary dynamics. Heightened asset price volatility would magnify the shock”.
2) Unnerving already panicked investors, oil prices sank more than 25% in their biggest one-day rout since the Gulf War after Saudi Arabia launched a price war with Russia. Analysts expect the decline in crude prices to help boost economic growth in India, one of the world’s top oil importers, but shares in large oil companies slumped on Monday. State-run ONGC recorded its worst fall since 1995, dropping nearly 16%, while oil-to-telecoms conglomerate Reliance Industries Ltd dived 13%.
3) Ajit Mishra, VP – Research, Religare Broking Ltd. Said “The Indian markets continued the downslide led by weak global cues owing to crash in crude oil prices. The benchmark indices witnessed its biggest one-day fall as the selling pressure mounted and the Nifty index plunged down 4.9% to close at 10,451 levels. We expect Indian markets to remain under pressure in the near-term since the sentiments are weak on the worries of slowdown across the globe. Investors would continue to monitor crude oil prices, currency movement and the updates on spread of coronavirus cases as these factors are keeping the markets on edge”.
4) Vinod Nair, Head of Research at Geojit Financial Services, said “Risk of recession increased fuelled by crash in crude oil prices and increasing virus cases outside China. Even though fall in crude oil prices is positive for India in the long term, short term concerns weighed with FII outflow in emerging markets. Coronavirus fear is intensifying and fresh travel bans seems to hurt the global economic sentiments more than feared”. Selling by foreign institutional investors have also contributed to the sharp selloff in Indian markets.
