Stock markets likely to bleed further this week
More pain lies ahead for the domestic equity investors as Coronavirus is still at a threatening stage in India and globally infected people count has risen to more than three lakhs compared to two lakh just four days back. In India, the number of infected people have risen to 341, with seven people dying of the infection, so far. Several companies have shut down factories as a precautionary measure.
Hero MotoCorp has decided to halt operations at all its global manufacturing facilities – including in India, Colombia and Bangladesh — and the Global Parts Centre (GPC) at Neemrana with immediate effect until March 31, 2020, the company informed stock exchanges on Sunday.
Gains posted by the Sensex and the Nifty-50 under the Narendra Modi government since 2014 are at risk this week as the rupee value could further plummet due to the massive selling by foreign portfolio investors (FPIs).
The Sensex rallied 5.75
The market is now oversold. Short covering may lead to sharp volatility. Also, when liquidity is low, selling in cash market can lead to crash in prices. —
Chief investment strategist, Geojit Financial Services
per cent or 1,627.73 points on Friday on short covering. But with the situation getting worsen globally, the Indian equity markets could face higher selling pressure on Monday.
A new circular issued by the Securities and Exchange Board of India (Sebi) on Friday to curb shortselling could have an impact on the equity markets on Monday as they would open amid huge negative sentiment in the wake of coronavirus spreading all over the world.
V.K. Vijayakumar, chief investment strategist at Geojit Financial Services, said, “Tightening of rules on short-selling can bring down excessive volatility during times of crisis like this. Therefore, it has to be welcomed. However, there can be unintended consequences in the time of panic. The market is now oversold. Short covering may lead to sharp volatility. Also, when liquidity is low, selling in cash market can lead to crash in prices.”
The rupee closed at a record low on Friday at
75.24 per US dollar amid persistent selling by foreign portfolio investors. Friday provisional data showed FPIs were net sellers of Indian equities worth `3,345.95 crore.
As per NSDL data, FPIs have sold shares worth
`49,507 crore and bonds worth `49,228 crore and total outflows in March
2020 so far are `95,485 crore or $12.5 billion, according to an estimate.
India’s foreign exchange reserves fell by $5.35 billion to $481.9 billion in the week ended March 13, according to data published by the RBI. “The decline in the reserve indicates RBI intervention through dollar selling to control volatility and steep depreciation. The dollar hit record highs versus the rupee and may continue doing so as investors flock to US treasuries,” said forex consultant IFA Global.
The restriction on the export of 26 active pharmaceutical ingredients (APIs) and their formulations will not be applicable for special economic zones. Following a representation of the industry, the government has also clarified that other products, coming under the same HS codes of the restricted items, can be freely exported.
On March 3, the government had restricted export of 26 APIs, including paracetamol, antibiotics and vitamins, as well as the formulations made out of these APIs in the backdrop of rising incidence of coronavirus.
The government has clarified that restriction did not apply to SEZs and other items in the HS codes of these products were not restric-ted. The clarification comes after the industry expressed their concerns.
Financial Chronicle reported about the expressed by industry.
As drugs meant for the export market cannot be utilised in the domestic had concerns the market, pharmaceutical exporters had asked the government to exempt the “drugs manufactured for export purpose only” from the restrictions.
Further, Pharmexcil in a letter to Directorate General of Foreign Trade (DGFT) had also informed that the customs officers were not allowing the export of other items falling under the same HS codes of the products being restricted.
The exporters had apprehended that they might face legal proceedings by foreign buyers if they were not able to fulfil their previous orders due to export restriction.
Non-supply of one item would sometimes result in the cancellation of entire order and companies could end up blacklisted or may be forced to pay huge penalties.