MONDAY MAYHEM AT THE MARKETS

It was mayhem at the equity markets on Monday. Both the benchmark indices, the S&P BSE Sensex and NSE’s Nifty 50, recorded their new 52-week lows of 35,109.18 points and 10,294.45 points, respectively, as fears over the Coronavirus impact, the crude oil war between Saudi Arabia and Russia, and the fallout of the YES Bank crisis triggered a massive sell-off at the bourses.

From Friday’s close of 37,576.62 points, the 30-share Sensex plunged 2,467.44 points or 6.6% to hit its lowest point of the day, as well as its 52-week low. Similarly, the Nifty 50 also fell 695 points or 6.7% to touch its day’s low of 10,294.45 points. However, some buying at the lowest levels ensured a marginally more respectable closing.

On January 20, just 36 trading days ago, the Sensex and Nifty had recorded their life-highs of 42,273.87 and 12,430.5 points; at Monday’s low points, the Sensex and Nifty 50 were down by 16.95% (-7,164.69 points) and 17.18% (-2,136.05 points), respectively, from their life highs.

At the end of Monday’s trade, the Sensex and Nifty 50 lost 1,941.67 points (-5.17%) and 538 points (-4.9%) to close at 35,634.95 points and 10,451.45 points, respectively. These declines at close broke the previous such records of both the benchmark indices, set on January 21, 2008, when the Sensex closed down 1,408.35 points and Nifty 50 closed 496.5 points lower than the previous day. This was at the peak of the global financial meltdown.

Deepak Jasani, head-retail research at HDFC securities, said the Indian markets were facing a deluge of negative triggers. Global markets started falling on Friday after oil prices went into a tailspin. Oil prices fell after a pact between Russian and the Organization of Petroleum Exporting Countries (OPEC) fell apart. Moscow refused deeper cuts in production to cope with the coronavirus outbreak and in retaliation, OPEC removed all limits on its production; this resulted in the worst one-day crash in crude prices (more than 30%) in nearly 30 years, which added to the panic triggered by the escalation of the coronavirus epidemic. “The panic began after Saudi Arabia shocked oil markets by launching a price war,” Jasani said.

News of Italy placing 16 million people under semi-lockdown and the number of confirmed cases rising in Europe added to the negative sentiment. To top it, China’s exports fell 17% in the January-February period compared to the year-ago period, while imports fell 4%, data released over the weekend showed. “This data shows the slow recovery in China,” Jasani explained, adding that at this time the markets had just started to recover from the YES Bank issue.

YES Bank, the biggest gainer

While the larger market was bleeding, shares of beleaguered lender YES Bank showed unusual strength. Friday’s closing price of ₹16.2 a share remained the day’s low for its stock. And at the day’s high of ₹22.8, YES Bank had recovered 40.74% over its previous close; the stock closed at at ₹21.25 on Monday. On Friday, YES Bank had recorded its new 52-week low of ₹5.55. Thus, at Monday’s close, the stock had recovered by 282.88% over its 52-week low.

But the broader market didn’t witness a recovery. The Sensex saw its market capitalisation (m-cap) dip by ₹3.8 lakh crore on Monday, from Friday’s ₹70.28 lakh crore to ₹66.48 lakh crore. Reliance Industries (RIL), which was directly affected by the swing in crude oil prices, fell 13.79% to record it new 52-week low of ₹1,094.95 on Monday. The stock closed at ₹1,113.15 on Monday, down 12.35% from Friday’s close.

The sharp fall meant that RIL, otherwise the largest Indian company by market capitalisation, lost that crown to TCS. The IT major ended Monday with an m-cap of ₹7,40,045.3 crore, which was ₹34,389.75 crore more than RIL’s m-cap of ₹7,05,655.56 crore on Monday.

According to Vinod Nair, head of research at Geojit Financial Services, the risk of recession has increased, fuelled by the crash in crude oil prices and rising coronavirus cases outside China. “Even though the fall in crude oil prices is positive for India in the long term, short-term concerns weighed, with FII outflow in emerging markets,” he said. “Coronavirus fear is intensifying and fresh travel bans seem to have hurt global economic sentiments more than feared.”

Similar fears were echoed by Ajit Mishra, vice president-research at Religare Broking. Mishra expected the Indian markets to remain under pressure in the near-term since the sentiment was weak on the worries of a slowdown across the globe. “Investors would continue to monitor crude oil prices, currency movement, and the updates on the spread of coronavirus cases as these factors are keeping the markets on edge,” he said. “On the domestic front, inflation data such as IIP and CPI scheduled this week would be on the investor’s radar.”

Mumbai-based Manav Chopra, head of research-equity at Indiabulls Securities, said that important support levels had been easily breached in such an environment. “Bottom-fishing should be avoided until the markets indicate fatigue on the downside,” Chopra said. He stressed that it would be important to watch out for the weekly close on the Nifty. “The index is likely to face stiff resistance as and when recovery happens and volatility is likely to remain higher.”

HDFC Securities’ Jasani said that technically, with the Nifty moving down further, the short-term trend remained down. “The Nifty could test the recent lows of 10,295-10,138 in the coming sessions,” he said. “Any pullback rallies could find resistance at 10,637-10,744.”

Meanwhile, the U.S. markets tanked 7% after opening on Monday, triggering a 15-minute trading halt for the first time since December 2008. The S&P 500 and Nasdaq indices plunged 7%, while the Dow tumbled 7.1% after the markets opened on Monday. If losses reach 13% after trading resumes, it would lead to another 15-minute halt. And if the markets tank 20%, they will close for the day.