MARKET MAYHEM CONTINUES

The global rout in the light of the Coronavirus taking a pandemic shape and the vagaries around crude oil prices hit the markets hard on Thursday.

At the day’s low, the National Stock Exchange’s Nifty 50 and S&P BSE Sensex lost over 950 points (-9.09%) and 3,204 points (-8.98%) to fall to 9,508 points and 32,493.1 points, respectively, over their previous day’s close. The day’s low for both the benchmark indices was also their new 52-week low.

Thursday was the 38th trading session since January 20, when the Nifty 50 and Sensex recorded their life-highs at 12,430.5 points and 42,273.87 points, respectively. And, at the day’s low, Nifty 50 lost 2,922.5 points while the Sensex lost 9,780.77 points from their life-highs. That is a decline of 23.51% in the NIfty 50 and and 23.14% in the Sensex, in just 38 trading days.

According to Vinod Nair, head of research at Geojit Financial Services, recession fears increased after the World Health Organisation (WHO) declared coronavirus a pandemic which forced investors to sell off risky assets. “Fresh travel bans across nations is contributing to the fears that the economic impact will be much larger than earlier estimates,” he said.

At close of day’s trade, Nifty 50 recovered some lost ground by closing 868.25 points (-8.3%) lower than Wednesday’s close. Similarly, Sensex closed 2,919.26 points (-8.18%) lower at 32,778.14 points. Both the benchmark indices also broke their Monday’s record of the largest single-day loss.

The S&P BSE MidCap and SmallCap mirrored the losses of their larger peers as well. At the day’s and 52-week’s low, the MidCap and SmallCap tanked 1,212.89 points (-9.03%) and 1,186.45 points (-9.32%), respectively.

At close on Thursday, the MidCap and SmallCap closed 1,052.78 points (-7.84%) and 1,110.26 points (-8.72%) lower, respectively, compared to the previous day’s close.

The much-hyped initial public offering (IPO) of SBI Cards and Payment Services, which closed on March 5, made public its basis of allotment of shares applied in the IPO. While analysts are calling the volatility of the day as the effect of panic in global markets, some market veterans are likening the SBI Cards’ IPO to that of much-hyped IPO of Reliance Power about 12 years ago. In 2008, the Anil Ambani-controlled RPower had fixed the issue price of ₹450 a share for non-retail investors and ₹430 for retail investors. However, things did not go as planned for those who had got the IPO allotments. The meltdown in global markets which would mark the start of the financial crisis hit the India markets and the RPower IPO. The company’s shares plunged to as low as ₹355, wiping out a huge chunk of investors’ wealth.

“SBI Cards is to 2020, what Reliance Power was to 2008,” says a senior investor.

The anxiety in the markets also reflected in the stock price movement of private lender YES Bank, whose near-collapse induced moratorium added pain to the global problems. YES Bank tumbled 21.7% to touch its day’s low of ₹22.55 a share. The stock recovered partly to end trading 13.02% lower at ₹25.5 a share.

Meanwhile, the State Bank of India (SBI) plunged 14.85% to touch its day’s as well as its 52-week low of ₹208.8 a share. SBI stock finally closed the day 13.23% lower at ₹212.75 a share, compared to its Wednesday’s close.

The public sector bank also notified the exchanges that its board, at a meeting on Wednesday, approved the purchase of 725 crore shares in YES Bank at a price of ₹10 per share, subject to regulatory approvals.  While SBI’s ₹7,250 crore investment in the beleaguered private bank will remain within the 49% cap proposed by RBI, the impact of the purchase consideration could further hammer the stock price on Friday.

Joseph Thomas, head of research, Emkay Wealth Management says that investors who have implemented their investment plan in a phased manner would be surprised with Thursday’s fall, but relatively less affected due to deferred commitments over a longer time span. “(This is) a time eminently suited for building portfolios for the longer tenure,” he says.