Stocks

Sensex sinks 1,448 points as coronavirus scare grows

PALAK SHAH Mumbai | Updated on February 28, 2020 Published on February 28, 2020

Black Friday: The BSE Sensex plunged 1,448 points on Friday (February 28) as rising coronavirus cases outside China stoked fears of a pandemic that could dent world growth. Pic: Paul Noronha

₹5-lakh-cr investor wealth wiped out as global sell off spooks markets

Nearly ₹5.5-lakh-crore in market-cap in investor wealth was wiped out on the BSE on Friday as the fear of the coronavirus spreading and causing wide-spread supply chain disruptions spooked the market and the Sensex crashed 1,448.37 points, or 3.64 per cent, to 38,297.29, its second-worst fall since August 2015. The NSE Nifty index fell 414.10 points, or 3.56 per cent, to 11,219.20. The BSE market-cap was down to ₹146.87-lakh crore.

The markets were taking the cue from global bourses, also ravaged by a sell-off on fears of the coronavirus turning into a pandemic. This week alone, $5-trillion in value was wiped out from world stocks amid the fastest market collapse in history. In India, brokerages estimate that investor wealth of around ₹12-lakh-crore worth may have been wiped off over the week as Sensex and Nifty have crashed 10 per cent from their peaks.

No corporate growth in 2020?

The spread of the virus from China to Korea, Japan, Europe and the US has all but brought global travel and trade to a standstill, sparking fears that companies will not generate any growth in 2020. This led to the fastest withdrawal of money from stocks since the 2008 financial crisis, say experts.

The stock market confidence was severely shaken, after World Health Organization Director-General Tedros Adhanom Ghebreyesus said on Thursday that the virus has “pandemic potential” and declared that more than 83,000 people in some 50 countries have been infected.

Global benchmarks down

The MSCI ACWI and MSCI World Index, benchmarks that track global firms, are down 9 per cent since Monday and set to mark their worst week since 2008.

In the US, the S&P 500 plunged 2.5 per cent at open on Friday. The Nasdaq 100 sank 2.3 per cent. In Europe, too, stock markets were down more than 3 per cent on Friday.

 

The domestic market was also nervous about the GDP growth numbers that were to be announced, post trading hours. The rupee’s plunge did not help matters.

Rupee plunges

“Rupee was holding strong against the dollar the past few months, but on Friday it broke the six-month trading range of 72 against the dollar on rising volumes and open interest. This shows money has started flowing out and a further fall in rupee will accelerate this trend,” said Rohit Srivastava, chief strategist at IndiaCharts.

But Amar Ambani, Senior President and Institutional Research Head, Yes Securities, struck an optimistic note: “While there is no telling what will happen in the next trading session, my sense is we will be better-off a couple of months hence.”

“The market fall is factoring in a reasonably bad case-scenario. But I hope a cure will be found and the coming of summer will reduce the virus’ effect in many countries. Fact is there have been deadly disease attacks in the past as well and have been dealt with.

“Even as this issue drags near-term growth, what lends support is the beaten-down market multiple. We must remember that the broader Indian market has been in a consolidation phase since the start of 2018. The near-term index support level is difficult to call, but time-wise, the market impact should not last long,” said Ambani.

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Published on February 28, 2020
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