Even in bloodbath, Indian equity market stands apart
Despite the massive sell off in the domestic market last week, Indian equity indices like Sensex and Nifty-50 did better than their global peers like the Dow, FTSE, Nikkei, Nasdaq and S&P 500.
Investors in the Indian market were spooked by the global meltdown in equities, leading to benchmark indices falling by 7 per cent last week. However, relatively the Indian indices outperofmed the US and European indices, which fell over 11 per cent, as fears of an impending global economic slowdown turned the week into the worst since the 2008 financial crisis for equities.
According to analysts, the selling was mainly on account of a sharp increase in the number of warnings from the top global companies, including Apple, Disney, Microsoft and Qualcomm that the coronavirus is hitting their businesses. Also, companies have seen a sharp reduction in demand for the products and services, especially in Asia.
Manufacturing, technology and pharmaceutical industries are seeing their supply chains disrupted by factory closures in China, triggering sell off in the sector stocks.
Global GDP forecast have been lowered for the first and second quarters of calendar year 2020, with downside risks still persisting. Global oil demand has also been lowered with downward revisions in demand from China and other Asian countries, experts said.
Even in the Indian market, sectors having global exposure, such as metals and IT, witnessed major selling last week. Shares of metal companies were the worst hit as the negative impact of the coronavirus outbreak on economic growth raised concerns of weak demand for metals. The uncertainty and fear in the market were visible from the 33 per cent spike in the volatility gauge, India VIX, the steepest such rise in two years.
The top 10 Indian companies saw a combined erosion of Rs 3.35 lakh crore in market valuation last week. RIL was the worst hit, as its market capitalisation (m-cap) declined by
Rs 99,430.93 crore to Rs 8.42 lakh crore followed by Tata Consultancy Services, the country's second most valued firm. TCS’s m-cap fell by Rs 58,293.29 crore to Rs 7.50 lakh crore. HDFC lost market cap by Rs 33,222.99 crore, Hindustan Unilever by Rs 15,792.31 crore and HDFC Bank by Rs 21,369.47 crore.
“As corona virus spread rapidly around the world, hopes that it would be contained has vanished and market fears that it could turn into a pandemic. Investors are fearful that it might lead to global recession as the outbreak is spreading to the world's largest economy, USA as well as Europe, which will impact the global supply chains big time and derail economic growth. Markets would remain volatile and weak till the fast spread of corona virus gets controlled,” said Siddhartha Khemka, head-retail research, Motilal Oswal.