Markets sneeze with Covid-19

Sensex tanks 1,448 points, its second biggest single-day fall in history

The coronavirus scare led to sheer mayhem in global equity markets on Friday on fears that the rapid spread of the deadly virus could nudge the global economy into a recession. The massive global sell-off extended into the Indian market and equity benchmarks Sensex and Nifty-50 fell more than 3.5 per cent.

With large markets like the US and Europe reporting virus infection cases, the market fears that the global supply chains could be derailed. With more than 50 countries reporting confirmed cases, US equity benchmark Dow Jones Industrial Average fell 4.42 per cent, or 1,191 points on Thursday, the most in history and triggered a 3-4 per cent fall in major Asian markets.

Sensex and Nifty-50 had big gap down opening by more than 2 per cent and the Sensex plunged over 1,000 points in the very first hour of trading and the index recorded an intra-day fall of 1,525.69 points. The Sensex finally closed 1,448.37 points, or

3.64 per cent down, at

38,297 points, its secondbiggest fall in history, while the Nifty-50 closed 3.71 per cent, or

431.55 points down at

11,201.75.

The mad sell-off wiped out investors’ wealth worth `5,45,452.52 crore, with the total market capitalisation of BSE-listed companies coming down to `1,46,94,571.56 crore from `1,52,40,024.08 crore the day before.

During the week, the Sensex plunged by 2,872.83 points, or 6.97 per cent, and the Nifty, by 879.10 points, or 7.27 per cent.

On Friday too foreign portfolio investors were net sellers of equities worth `1,428.74 crore while the domestic institutions did the heavy lifting with net buying worth

`7,621.16 crore as per the provisional data.

Vinod Nair, head of research at Geojit Financial Services said, “This fall is in the backdrop of coronavirus infections cropping up in Europe, the Americas and WHO warnings of a global pandemic. This fear combined with the fact that markets had already run up, has also triggered a “risk-off” attitude amongst the foreign investors who have emerged as net sellers this month.”

The volatility index India VIX soared as much as 33.4 per cent during the day, indicating a spike in volatility and fear among the market participants.

Jimeet Modi, founder & CEO, Samco Securities, said, “This week’s fall is a valuation play with coronavirus as the scapegoat. The frothy valuations needed the markets to correct.”