Indices slump 4% as worries mount

Indian indices fall 4%; gloom prevails in other global markets also after Trump’s dire warning

The Indian markets dropped 4 per cent on Wednesday as investors sentiment remained sombre on fears that the Covid-19 pandemic would take a heavy toll — on both economy and life. Major markets across Asia and Europe fell between 1 per cent and 5 per cent.

The Indian markets dropped 4 per cent on Wednesday as investor sentiment remained sombre on fears that the Covid-19 pandemic would take a heavy toll — on both economy and life. Major markets across Asia and Europe fell between 1 per cent and 5 per cent.

US President Donald Trump on Tuesday warned of “very, very painful two weeks” and the government projected that the outbreak could kill up to 240,000 people in the country.

The benchmark Sensex declined 1,200 points, or 4.1 per cent, to 28,265, while the Nifty 50 index fell 344 points, or 4 per cent, to end at 8,254.

Nearly 90 per cent of their components ended with losses.

“The warning given by the US President was one of the reasons for subdued sentiment across the equity markets. Other factors responsible for pulling down the indices include banks in the UK suspending dividends to preserve capital and the Japanese central bank’s quarterly survey pointing to a recession,” said Deepak Jasani, head retail research, HDFC Securities. “The lockdown measures to contain the virus outbreak has upended business activity, raising the threat of corporate defaults and mass layoffs.”

Investors have been through a rollercoaster ride this week, with the markets tumbling 4 per cent on Monday, rallying 4 per cent on Tuesday, and then again falling below Monday ’s closing on Wednesday. The domestic markets will remain shut on Thursday on the ocassion of Ram Navami.

Experts said traders were in no mood to carry for ward their positions given the volatile global environment.

Overseas investors sold shares worth ~1,117 crore on Wednesday. In March, they yanked record ~62,000 crore from domestic equities. The huge sell-off saw the markets end the month with a 23 per cent decline and the first quarter of 2020 with a 29 per cent slide. This was the worst quarterly loss for the Sensex.

Market players said investors are assessing the damage lockdowns in several countries, including

India, and a virtual halt to economic activities will cause to corporate earnings. While global policymakers have responded with aggressive stimulus packages, investors remained sceptical whether they would be enough to offset the demand shock created by people staying at home and shutting down of companies and factories, which is resulting in huge job losses.

“Investor confidence is continuously being impacted because of mounting fears of a global recession, rising cases of Covid-19 infections, and weak macros leading to selling in the global markets, including India. Further, in the near term, there are no fresh positive triggers that can boost investor sentiments. We reiterate our cautious view on the markets and suggest extra care i n stock selection and risk management,” said Ajit Mishra, vice presidentresearch, Religare Broking.

Among the worst-performing Sensex stocks on Wednesday were Tech Mahindra, which fell 9.5 per cent, followed by Kotak Mahindra Bank, which declined 8.8 per cent. Hero Motocorp and Bajaj Auto ended with gains of 2.8 per cent and 1.3 per cent, respectively.

The India VIX index cooled off 7 per cent to end at 60. All the 19 sectoral indices of the BSE ended with losses, with the gauges for banking and technology stocks dropping the most — over 5 per cent each. The market value of all Bse-listed companies stood at ~110 trillion at the start of the financial year 2020-21, down from ~150 trillion at the start of the financial year 2019-20.