Sensex plunges 1,448 pts as rising coronavirus fears erode over Rs 5 lakh crore in investor wealth

Economic growth slowed to 4.7 per cent in October-December 2019

People pass by the BSE bull outside BSE Building, as the Sensex goes down, in Mumbai | PTI People pass by the BSE bull outside BSE Building, as the Sensex goes down, in Mumbai | PTI

India’s equity markets crashed on Friday, wiping off more than Rs 5 lakh crore in investors’ wealth, tracking a global sell-off in stocks as concerns rise over the rapid spread of coronavirus outside China. 

The benchmark BSE Sensex plunged 1,448 points or 3.6 per cent to end the session at 38,297.29 points. The wider NSE Nifty 50 index tumbled over 431 points or 3.6 per cent to close at 11,201.75 points. 

The Sensex was down 7 per cent for the week, marking the worst week for the market in the last four years and biggest single day fall since February 2018, noted Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services.

Over the last few days, several countries including Italy, Iran and South Korea have reported a surge in corona virus cases. On Thursday, Brazil reported its first case, a person who had travelled to Italy tested positive for Covid-19. On Friday, Nigeria, New Zealand and Lithuania confirmed first cases of the virus outbreak. 

The rapid spread of the virus outside China has raised concerns that it may turn into a global pandemic and hit global economic growth. As the virus spreads, investors are dumping stocks globally. 

In Asia, Japan’s Nikkei 225 Stock Average, South Korea’s KOSPI, Singapore’s Straits Times Index and the Shanghai Composite Index, all ended more than 3 per cent lower. 

In Europe, the FTSE 100 in London, Germany’s DAX Index, the CAC 40 index in Paris, Madrid General Index and the OMX Stockholm All Share Index traded down 3 per cent or more. Overnight on Thursday, the Dow Jones and S&P 500 indices in the US had slumped more than 4 per cent.  

Global markets felt the impact of the spread of coronavirus and the Indian equity markets were not immune to the trend, said Shibani Kurian, head of equity research at Kotak Mahindra Asset Management.

“Markets the world over, are grappling with the uncertainty of the impact of this epidemic on growth and global demand. The rapid spread of the deadly virus outside the epicenter i.e. China has caused further panic,” Kurian said.

There are growing fears that the virus outbreak and curbs on travel in several markets, could sharply squeeze consumer demand. Imports of key raw materials, spare parts and even finished goods is also likely to take a hit, which in turn will hurt production. 

Several companies, from British digger maker JCB to India’s TVS Motor, have warned that their production will be impacted as they grapple with a shortage of parts coming from China. Elsewhere, retail stores, bars and restaurants in many cities, particularly in China, are shut, and airlines have cut flights to many affected destinations, which will impact their earnings. 

In the domestic market, 29 stocks of the 30 share Sensex closed in the red. Tech stocks like Tech Mahindra, TCS, Infosys and HCL Technologies ended 4 per cent to 8 per cent lower; lenders like HDFC Bank, State Bank of India, Kotak Bank and ICICI Bank fell 2 per cent to 6 per cent and consumer stocks like Nestle, Hindustan Unilever, Titan and Asian Paints declined 2 per cent to 3 per cent.

“Markets fear that it (coronavirus) could turn into a pandemic. Investors are fearful that it might lead to a global recession as the outbreak is spreading,” said Khemka.

Foreign institutional investors have been selling shares, which has led to the pressure on Indian stock markets. 

“Foreign institutions have sold a net $1.5 billion worth stock in the first four sessions this week – besides another $1.2 billion in single stock futures and $500 million in index futures. In sum, their positioning has turned significantly bearish,” noted S. Hariharan, head – sales trading at Emkay Global Financial Services.

On Friday, too, they net sold $428 million in equity markets, according to data from depositories. 

Analysts also said that investors were watching out for India’s GDP growth, which was announced after markets closed. India’s economy grew at 4.7 per cent in the October-December quarter, official data showed, while growth in the previous quarter was revised sharply upwards to 5.1 per cent from 4.5 per cent. How investors react to this on Monday will have to be watched out for.

Khemka expects the markets to remain “volatile and weak” till the coronavirus outbreak is controlled. 

“The numbers regarding the spread of the disease and how far it can be contained will drive the markets next week. Measures by governments to boost respective economies will also be watched out for,” said Vinod Nair, head of research at Geojit Financial Services. 

A prolonged shutdown of factories in China and the spread of the virus to other countries will have an impact on India and investors will focus on the impact of the disruption in supply chains on Indian companies, added Kurian of Kotak AMC.