Sensex stages sharp recovery
At the close of trading, the Sensex rose 4.04%, while Nifty was up 3.81%
MUMBAI: Indian stocks recovered on Friday after a 10% decline in benchmark indices triggered the first trading suspension in 11 years, as investors returned to buy equities on hope of government and RBI action to stanch the market carnage caused by the new coronavirus pandemic.
The Sensex rose 1,325 points, or 4.04%, at the close of trading to 34,103.48, after slipping below the 30,000-point level to 29,388.97 earlier in the day. The Nifty was up 365.05 points, or 3.81%, to 9,955.20.
The Sensex had fallen as much as 10.3% in 15 minutes at the start of trading, triggering a circuitbreaker that caused a 45-minute suspension.
MUMBAI: Indian stocks recovered on Friday after a 10% decline in benchmark indices triggered the first trading suspension in 11 years, as fraught investors from Mumbai to Manila returned to buy equities on hope of government and central bank action to stanch the market carnage caused by the new coronavirus pandemic.
At the end of a nerve-wracking week for equity investors worldwide, the Bombay Stock Exchange’s benchmark 30-stock barometer, the Sensex, rose 1,325 points, or 4.04%, at the close of trading to 34,103.48, after slipping below the psychological 30,000point level to 29,388.97 earlier in the day. The National Stock Exchange’s 50-stock Nifty was up 365.05 points, or 3.81%, to 9,955.20.
The Sensex had fallen as much as 10.3% in just 15 minutes at the start of trading, erasing ₹13 lakh crore of investor wealth and triggering a market-wide circuitbreaker that caused a 45-minute suspension, the first since May 2009, before starting to recover lost ground to stage its sharpest one-day recovery. The wild swings marked the widest trading range on India’s most closely followed stock market bellwether in recent years.
“There’s a global re-pricing of risk and India’s getting swept up in that wave,” said Rainer Michael Preiss, equity chief investment officer at the Global CIO Office in Singapore.
As Friday ended, brokers in Mumbai were still trying to calm the frayed nerves of their clients, who much like their peers across the globe, have endured a gutwrenching week for equities.
“We’re getting calls asking what is to be done now, should we hold or add more capital, and our advice to them is there will be opportunities once the sentiment stabilises,” said Ketan Karkhanis, senior vice president and head of equity relationship services at ICICI Securities Limited in Mumbai. “Nobody anticipated such a sharp and swift decline.”
Investors experienced a rollercoaster day on other Asia-Pacific markets as well. Australian stocks staged a record intraday swing to close up 4.4%. Thailand pared a plunge of 13% to gain 0.3%, and the MSCI Asia Pacific Index gauge trimmed its loss to 1.9% after sinking as much as 6.7%.
Traders cited multiple reasons for the sudden bounce, from simple bargain hunting to short covering, hopes for more stimulus and a potential vaccine being developed by a Canadian company to cure the coronavirus.
“People are probably thinking there will be some kind of policy measures to support markets,” on top of ones already announced, said Tomoichiro Kubota, a senior market analyst at Matsui Securities. “We could see a huge rebound in the short term given how much the market has fallen. But it doesn’t feel like the mid-term downward trend will change. The market will continue to trade in high volatility.”
The Sensex lost 2,919 points, the biggest one-day decline in absolute terms, or 8.18%, on Thursday to a two-year low, a day after the World Health Organisation declared the new coronavirus a pandemic and President Donald Trump clamped a ban on travel between Europe and the US, exempting the UK. Investors in Indian stocks had lost ₹11,27,160.65 crore on Thursday.
Indian markets also entered bear market territory on Thursday, joining Australia’s S&P ASX 200, Japan’s Topix, The Jakarta Composite, Singapore Straits Times, the UK’s FTSE 100, Germany’s DAX and the Dow Jones Industrials Average,having shed 22% from their January peak. A market is defined as being in a bearish grip when it has shed 20% from its peak.
Friday’s slide began after Wall Street experienced its worst session since 1987, with investors spooked that emergency fiscal and monetary stimulus will not be enough to stave the coronavirus from plunging the economy into a recession. The DJIA plunged 2,352.60 points, or 9.9%, to 21,200.62 points.
“We are seeing broad-based capitulation,” Joel Ng, an analyst at KGI Securities (Singapore) Pte., said before trading in India was halted. “It’s also a chain reaction from market-wide deleveraging, margin calls and programmed trading funds exacerbating negative market sentiment.”
The worst may not be over yet. The India NSE Volatility Index, the stock market’s fear gauge, is trading at levels not seen since May 2009, signalling market turbulence will likely persist. The rupee rose 0.4%on Friday after falling by as much to ₹74.5250 per dollar, a record low. Even that relief may not last long.
“Past lows are not a line in the sand,” and there is a risk of the rupee hitting 78 and then 80 per dollar, said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd in Singapore. Such a big sell-off “will ignite major concerns because of the ability of such moves to exacerbate capital outflows.”
Central banks globally have been providing liquidity to calm wild swings in financial markets. In the latest developments, the Bank of Japan will probably expand its stimulus at a meeting next week, people familiar with the matter have said, while the Reserve Bank of India (RBI) pledged to use its record $481 billion foreign-currency arsenal to stem the market rout. The Bank of Korea is also considering an emergency board meeting and will take steps to stem excessive foreign exchange movements.
“The equity markets have by now priced in at least a technical recession lasting two quarters,” said Eli Lee, head of investment strategy at Bank of Singapore. “The larger question is whether we could see a longer fundamental recession.
RBI said in a statement on Thursday that it was closely monitoring the global situation and “stands ready to take all necessary measures” to ensure the financial markets function normal llay. The rupee has come under pressure as foreigners unloaded $1.2 billion worth of local bonds and $2.7 billion of shares so far this month, data compiled by Bloomberg shows.
The government’s chief economic adviser Krishnamurthy Subramanian said on Friday that the government and RBI were ready to take steps to calm the markets over coronavirus, says chief economic adviser.
(Bloomberg, Reuters and PTI contributed to this story)