Black Friday on the bourses

What the equity markets witnessed on Friday was nothing less than a blood bath. The benchmark S&P BSE Sensex lost 1,448 points, or 3.64%, to close the day at 38,297.29 points, triggered by fears of the coronavirus impact on the global economy. GDP numbers for the October-December quarter of FY20 which were released by the Central Statistics Office after market hours too were disappointing with growth at 4.7%—a marginal improvement over the previous quarter’s 4.5% (the lowest in six years).

The 30-share Sensex opened the day at 39,087.47 points, 1.66% lower than Thursday close of 39,745.66. And then there was no comeback. At the day’s low of 38,219.97, the Sensex had lost 1,525 points (-3.84%) over the previous day’s close.

Similar was the story with National Stock Exchange’s Nifty 50. It lost 458 points (-3.94%) at the day’s low of 11,175.05 from the Thursday’s close of 11,633.3 points; at day’s high of 11,384.8 points, it was down 248 points (-2.14%). It closed the day 414 points or 3.56% lower at 11,201.75 points.

Beyond the Sensex and Nifty 50, the S&P BSE MidCap fell 576 points (-3.83%) to the day’s low of 14,495.48, from the Thursday’s close of 15,072.19 points. The mid-cap index closed over 472 points or 3.13% lower at 14,600.02 from its previous day’s close. The S&P BSE SmallCap, too, fell 554 points or 3.9% to touch the day’s low of 13,654.93 compared to its previous day’s closing of 14,209.48. At 13,709.01, the small-cap index closed lower by 500 points or 3.52% from its Thursday’s close.

If one took a longer view, the Sensex and Nifty 50 on January 20 had hit their new life highs of 42,273.87 and 12,430.5, respectively. At Friday’s close, the respective indices have lost over 3,976 points (-9.41%) and 1,211 points (-9.74%) from their life highs. And the major cause of the recent market decline, according to experts, is the alarming spread of the Chinese coronavirus, particularly outside China.

“The Indian market nosedived along with global equities on fears that the coronavirus will hamper global growth,” says Amar Ambani, senior president and head of research at YES Securities. “The market fall so far is factoring in a reasonably bad case-scenario,” Ambani adds.

According to the World Health Organisation’s (WHO) report on February 27, the number of confirmed coronavirus cases stood at 82,294; China alone reported 78,360 cases and the rest were from 46 other countries.

WHO data reveals that between February 19 and 27, the number of confirmed cases in China has gone up from 74,280 to 78,630—a 5.9% increase. However, the number of cases outside China during that period jumped 296.5%—from 924 to 3,664. And, the count of countries with coronavirus cases also jumped from 25 to 46.

According to Rusmik Oza, head of fundamental research at Kotak Securities’ private client group (PCG), as the coronavirus is spreading across the countries, the fear factor in markets is going up. “Till the time the coronavirus was contained in Mainland China there was compliancy in global equity markets, but now as more cases are getting reported in various countries, the impact is sharper,” says Oza.

Ajit Mishra, vice president-research at Religare Broking, also opines that the Indian markets tracked the rout in global indices and crashed, as coronavirus’ repercussions on the global economy continue to deepen. “There are concerns that the outbreak is spreading to the world’s largest economy, the U.S., 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,” says Mishra. “In the Indian markets, even defensive sector like information technology (IT) tumbled despite a weak rupee indicating, increasing anxiety among investors,” Mishra adds.

Going forward the market will remain under pressure of the rising coronavirus cases and the reaction of global markets to the same. “In the coming days, the pandemic will be the biggest factor influencing the market behaviour,” Religare Broking’s Mishra opines. YES Securities’ Ambani too seems perplexed. “While there is 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,” Ambani says.