Stocks fall as more states impose covid restrictions
Sensex crashed over 1,469 points in early trade, ended the day down by 883 points
MUMBAI: Stock markets plunged as much as 3% on Monday before recouping some losses, as more states curbed mobility and business to contain the raging pandemic, darkening the prospects for economic recovery and corporate earnings.
After losing nearly 1,469.32 points in intraday trading, the 30-share Sensex ended 882.61 points, or 1.81%, lower at 47,949.42. The broader Nifty fell 1.77% to 14,359.45. Equities in other parts of the Asia-Pacific mostly rose, led by China’s Shanghai Composite Index, which gained 1.49%.
“The worsening of the pandemic situation and the consequent lockdowns by various state governments is creating uncertainties about the pace of economic growth from here. No wonder Indian equities witnessed intense selling pressure and are distinctly underperforming the other comparable equity markets in Asia,” said Gaurav Dua, senior vice-president and head of capital market strategy at Sharekhan by BNP Paribas. He added that though the earnings season has started on a positive note, the near-term outlook would remain cloudy and keep markets volatile.
India now adds the highest number of covid-19 cases in the world and currently has the second-highest number of total cases, behind only the US. Economists are downgrading their economic growth forecasts for India for FY22 as states tighten restrictions.
Delhi decided to impose a sixday curfew from 10pm Monday night till 5am on April 26, after reporting around 25,000 new cases in a day. Chief minister Arvind Kejriwal said the city’s health infrastructure has been pushed to the limit, and a lockdown at this time is needed not just to break the chain of infection but also to augment health infrastructure, including beds, oxygen supply and life-saving drugs. Maharashtra, which is already under lockdown-like restrictions till May 1, on Monday decided to limit timings for grocery stores as well.
“We grow even more concerned that rising covid-19 cases pose a risk to our still shallow recovery. Covid-19 cases have jumped seven times a day from a month ago. It remains to be seen if the cases subside with the state-level lockdowns that we are seeing. Our base case sees real GVA (gross value added) rebound to 9% in FY22 from a contraction of 6.4% in FY21,” Indranil Sen Gupta and Aastha Gudwani, economists at BofA Securities, said in a note.
According to BofA estimates, a national lockdown, if imposed for a month, could reduce India’s annual gross domestic product (GDP) by 100-200 basis points. However, they feel that the normal rain forecast this year is a relief.
Meanwhile, India VIX or India volatility index jumped 10.2% to end at 22.49, reflecting rising investor anxiety.
Foreign institutional investors (FIIs) continued to dump Indian equities in April. They were net sellers of Indian shares worth $395.27 million this month so far. Domestic institutional investors were, however, net buyers of ₹1,465.31 crore worth shares in April.
The rupee weakened by 0.7% to end at 74.88 per dollar. “Rising cases of covid have soured sentiments in rupee, the result of which has been a broad-based depreciation in the rupee. RBI is expected to be active and may intervene aggressively to curb volatility. Over the near term, we expect a range of 74 and 75.50,” Anindya Banerjee, deputy vicepresident, currency derivatives and interest rate derivatives at Kotak Securities said.