Sensex drops 2,919 pts, ends at 2-yr low amid global rout

THURSDAY’S CARNAGE ON DALAL STREET ERODED INVESTOR WEALTH WORTH ~11,27,160 CRORE

nMUMBAI: Indian equities descended into bear market territory and the rupee neared a record low against the US dollar on Thursday amid a global markets rout after the World Health Organization (WHO) declared the novel coronavirus outbreak a pandemic, intensifying concerns over the extent of its impact on the world economy, and as US President Donald Trump clamped a ban on travel between Europe and the US.

Investor wealth worth ~11,27,160.65 crore was wiped out in the sell-off that caused the Bombay Stock Exchange’s benchmark Sensex to tumble 2,919.26 points, or 8.18%, to end at a two-year low of 32,778.14 points. It was the biggest one-day decline in the Sensex in absolute terms. Likewise, the broader, 50-share National Stock Exchange bellwether, the Nifty, gave up the 9,600-point level, slumping 868.25 points, or 8.3%, to 9,590.15.

All 30 components of the Sensex ended in the red and sovereign bonds declined. A bruising day for global equities saw trading halts being triggered from Bangkok and Manila to Jakarta and Karachi as US futures pointed to more heavy losses on Wall Street.

Indian stock indices have now slumped 22% from their January peaks, meeting the common definition of a bear market, as investors succumbed to fears that the virus outbreak will derail efforts to shore up an already slowing

economy.

The rupee, Asia’s worst-performing currency this month, weakened as much as 1% despite this week’s slump in oil prices. The Indian government late on Wednesday suspended most visas in a bid to contain the epidemic as the WHO declared the outbreak a pandemic, amid intensifying concerns over its impact on an already slowing economy. In its annual budget presented in February, the government estimated economic growth in the current fiscal year ending in March would be 5%, the lowest in 11 years.

“The very fact that the WHO has called the [coronavirus] outbreak a pandemic is a cause for worry for investors, especially since this comes against a backdrop of a slowing Indian economy,” said Gaurav Dua, head of capital market strategy at the broker Sharekhan Ltd.

The rout wasn’t limited to the Indian markets. The MSCI Allcountry World Index fell as much as 2.3%, the lowest intraday level since January 2019. The gauge is 20% below its record closing high of February 12. The sell-off has wiped out over $11 trillion in the index’s capitalisation.

In the US, in overnight trade, the Dow Jones Industrials index fell into a bear market and futures pointed Thursday to another rout in New York and Europe. It was on course for its worst day since 1987 as trading was halted for the second time this week after a big sell-off at the opening bell tripped the so-called circuit breakers.

European equities followed as investors fled risk assets amid concerns about the cost to earnings and global growth from the spreading coronavirus. The US has restricted travel from Europe, and underwhelming stimulus measures disappointed investors.s&p 500 futures plunged as much as 4.9%, while Euro Stoxx 50 futures tumbled 8.3% to mid-2016 lows. MSCI’S broadest index of Asia-pacific shares outside Japan fell 3.2%.

“There is no place to hide aside from cash,” said Alberto Tocchio, chief investment officer at Colombo Wealth SA in Lugano, Switzerland. “Meltdown phase is continuing with an exceptional strong selling pace. What seems to be very clear is that if this virus continues to spread and containment measures are prolonged and extend further, that’s clearly going to have more of an impact on global growth and earnings.”

Australia’s S&P/ASX 200, Japan’s Topix, the Jakarta Composite, Singapore Straits Times, the UK’S FTSE 100, German’x DAX Index and the Dow Jones Industrial Average are among the indices that have hit bear market territory this week.

The global stock rout deepened as US President Donald Trump stopped short of offering a detailed rescue package, even as Australia and the UK unveiled stimulus measures. Trump’s clampdown on European travellers is a severe setback to the ailing airline industry. The restrictions, which will not apply to the UK, will go into effect Friday.

One silver lining was that China reported only 15 additional coronavirus cases as of March 11, the lowest number since January 8. Eight of the new cases were from Hubei, the province at the centre of the outbreak, according to a statement from China’s National Health Commission.

“The way global risk-off is going, I expect the weakening pressure to intensify further,” said Prakash Sakpal, Asia economist at ING Groep in Singapore. “This and other domestic economic negatives, more importantly increasingly weak financial system, have been outweighing the positive of crashing oil price.”

The global risk-off sentiment has caused foreigners to pull $2.1 billion from Indian stocks this month, the most since August. They unloaded ~7,090 crore of sovereign debt on Wednesday.

“India is tracking developed markets, and we are heading for the same amount of correction due to outflows from both international and domestic investors,” said Ashish Chaturmohta, head of technical and derivatives strategy at Sanctum Wealth Management Pvt. in Mumbai.

A plunge in the global crude oil price remains a bright spot for the Indian economy. The price of crude crashed more than 30% on Monday after a price war erupted between Saudi Arabia and Russia. “The rupee may not fall as much as other asset classes thanks to the oil price crash, which could save $35-$40 billion per annum for India,” said Chokkalingam G, head of investment advisory Equinomics Research & Advisory in Mumbai. “It’s a bonanza for the Indian economy.”

Elsewhere in Asia, bourses in Shanghai dropped 1.52%, Hong Kong 3.66%, Seoul 3.87% and Tokyo cracked 4.41%.

(Bloomberg, PTI and Reuters contributed to this story) of the MLAS had not been accepted by the speaker. He also accused the BJP of holding the 19 party legislators hostage.

“Floor test cannot take place as the resignations submitted by 19 MLAS have not been accepted. They should physically come before the Speaker and speak for themselves. These MLAS have been held hostage by the BJP,” he said.

On Thursday, BJP MLA and former home minister Bhupendra Singh handed over the original copies of the resignation letters of three Congress MLAS — Bisahulal Singh, Aindal Singh Kansana and Manoj Chaudhary — to the speaker. Earlier, Singh had given the original copies of the resignation letters of 19 Congress MLAS to the speaker.

The Congress, before the rebellion, had 114 members in the 228 member assembly. It also has the support of four Independents, two Bahujan Samaj Party MLAS and one from the Samajwadi Party, but some of these lawmakers may now switch sides in case of an early floor test. The BJP has 107 lawmakers and in case the resignation of the 22 MLAS is accepted, the party will have a majority in the house with a reduced strength of 206. The majority mark would be 104.

According to Congress leaders, chief minister Kamal Nath’s strategy is to delay the voting on the trust motion in the assembly to frustrate the rebel legislators so that they can return to the party.

The party is convinced that governor Lalji Tandon who would be returning to Bhopal from Lucknow on Thursday night does not have powers to force the speaker to hold the trust motion.

“In the Karnataka assembly case, the Supreme Court has made it clear that the onus of running the house is on the speaker and governor cannot issue any direction in this regard,” a Congress leader said on condition of anonymity.

The Congress leaders did not rule out the possibility of deferring the budget session on the ground that 19 of its legislators were being held hostage in Bengaluru. “How can the government hold the session when the legislators are being held hostage. Let the BJP free our MLAS first,” said Congress Rajya Sabha member Vivek Tankha.

Tankha also said that if the Congress MLAS failed to turn up in response to the notices issued by the speaker, the party will have to move court. “We will tell the court as to how democracy is under threat in the country,” he said.

The BJP, however, denied that the Congress MLAS were being held hostage. Chouhan said all the Congress MLAS had gone to Bengaluru on their own and the BJP was not responsible for it. “The Congress should tell why its MLAS are unhappy with the government,” he said.

If the assembly session is deferred, the BJP may seek court intervention saying that the move clearly showed that the government lacked a majority on the floor of the house. “We are exploring all legal options,” said Mishra when reporters asked him about the possibility of deferment of the assembly session.

MP BJP spokesperson Dr Hitesh Bajpai said, “If the Congress leaders will move the court, we can also move the court. Congress government knows well that its days are numbered. That’s why it wishes to buy time and make the issue complex. The Congress leaders must admit frankly and honestly that they are running a minority government and CM Kamal Nath should resign.”

Another senior BJP leader, who was not willing to be named, said, “The party is exploring all the options to prove the government being in minority. The party has three options-- first, to demand a floor test; second, to introduce a no-confidence motion and third, to defeat the government during voting on motion of thanks to the governor’s address.”

Political analyst Girijashankar said, “The situation is heading for a showdown in the next few days when the state assembly’s budget session begins. If Congress MLAS who have tendered their resignation are not seen in the party camp then, of course, the government will have to admit that the numbers are not in its favour. However, it’s not an easy task for BJP too to see a floor test soon.”

According to Supreme Court judgments, the speaker has to convince himself that the resignations were not submitted under pressure or coercion before deciding on them.

“The speaker will consider a resignation only when it is submitted in proper format and in person,” an assembly secretariat official said. He said the speaker had the final power to run the house but his decision on the floor of the house can be challenged in court.