Black Monday for trade as indices suffer worst fall
On Monday, investors lost around ₹14.22 lakh crore of wealth
NEW DELHI: India’s benchmark stock indices posted their biggest drop on record on Monday in a torrid start to the week as deepening concern over the extent of the coronavirus crisis and the lockdown it has prompted many states to declare, curbing commercial activity and the free movement of people and non-essential goods, caused another wave of selling by investors. The BSE Sensex plummeted 3,935 points, or 13.15%, from its close on Friday to 25,981 points when trading ended on Monday — its lowest close since December 2016. The National Stock Exchange’s Nifty dived 1,135 points (12.7%) to 7,634, its lowest since April 2016. Investors lost around ₹14.22 lakh crore of wealth, as measured by the decline in BSE’S market capitalisation.
The rupee closed at a record low of ₹76.20 to the dollar, down 100 paise from its previous close.
The global coronavirus pandemic came at a time when India’s economic growth had already slowed. The budget presented on February 1 had predicted that growth would decelerate to 6% in the year ending March, the slowest pace in 11 years.
“It was another Black Monday for the Indian equity market as the number of [coronavirus] cases is rising exponentially across the world as well as in India,” Tradingbells senior analyst Santosh Meena told PTI. Measures put in place by market regulator Securities and Exchange Board of India (Sebi) to curb volatility didn’t work, he said.
“The pandemic comes at a time when India was showing some signs of emerging out of a slowdown and this has been a setback,” Shibani Sircar Kurian, head of equity research at Kotak Mahindra Asset Management Company, told Bloomberg. “A prompt announcement of financial and monetary measures can help clam the market nerves,” she added.
Trading was suspended for 45 minutes on both exchanges just before 10am on Monday; this happens when the index dips by 10%. After trading resumed, the indices continued to fall. This is the second time in a fortnight (the first was on March 13) that trading has been suspended on account of the indices hitting the so-called lower circuit breaker.
Since its mid-january highs, the Sensex has lost 38%, and the Nifty, around 39% — a fall of 10% is considered a correction; 30%, a bear market; these levels would have to be considered a bloodbath. The fall of the markets has been driven almost exclusively since January by the highly infectious Sars-cov-2 virus that originated in Wuhan, China, and has since swept the world. The pandemic has roiled global markets and most economists believe that the global economy, could enter recession territory.
India has so far got off lightly from Covid-19 — as on Monday, there were 471 infections and nine deaths on account of it in the country, compared to over 350,000 infections and at least 15,500 deaths in the world.
Given the events of the past two months, India’s economic growth could fall below even the modest expectations of most analysts. Oxford Economics, for instance, has lowered its expectations of GDP growth in the three months ending March 31 to 3% from the previously estimated 4.3% With fears over the ability of companies to service their debt rising, the banking sector index on BSE fell 17% on Monday, its steepest decline ever.
On Monday, in a conference call, HDFC Bank’s CEO Aditya Puri called the RBI to announce “forbearance” – where borrowers are given more time to pay their debt.