The recent hit in the market had a continuous breakdown in the Sensex. The following 5 factors behind the market drop is elaborated as follows.
The biggest hit is due to the work gap from coronavirus, this has led to the loss of nearly Rs. 7 Lakh crores. Investors are dreading over this loss as it is the deepest hit in the history of Sensex.
The terms are that the rupee slips past 74 per US dollar on weak equities. The coronavirus has slowed down the fears. The impact on the Indian market suffered the worst loss in a single day. Panicking over the economic fallout of coronavirus outbreak.
A 25% slump in oil prices also hit the risk sentiment. The NSE Nifty 50 index closed down 4.90% at 10,451.45. BSE Sensex ended 5.17% or 1,941 points lower at 35,634, wiping out nearly ₹7 lakh crore of investor wealth.
The government bodies such as the markets regulator, the Securities and Exchange Board of India, declared on the market selloff, saying: “The perceived economic fallout from COVID-19 coupled with steep fall in global crude prices led to volatility in the securities market.”
Facts of the Sensex and the market selloff.
- The pandemic outbreak has whopping 110,000 people affected with coronavirus. This has hit the work culture and global recession, even more, leading to the worst fall in the market within a day. The count in the number of cases in India has exceeded over 40. The rupee was down also ended at 74.08 against the dollar.
“Global recession risks have risen. The longer the outbreak affects economic activity, the demand shock will dominate and lead to recessionary dynamics. In particular, a sustained pullback in consumption, coupled with extended closures of businesses, would hurt earnings, drive layoffs and weigh on sentiment. Such conditions could ultimately feed self-sustaining recessionary dynamics. Heightened asset price volatility would magnify the shock,” Moody’s Investors Service said in a note.
2. Oil prices sank over 25% in the one – day history of the economic fallout, since the Gulf war. Especially, after the price war launched with Russia by Saudi Arabia.
Experts breach on the decline in crude prices can boost the economic growth in India. One of the top global oil importers’ fell hard on Monday. State-run ONGC recorded its worst fall since 1995, dropping nearly 16%, while oil-to-telecoms conglomerate Reliance Industries Ltd dived 13%.
3. “The Indian markets continued the downslide led by weak global cues owing to crash in crude oil prices. The benchmark indices witnessed its biggest one-day fall as the selling pressure mounted and the Nifty index plunged down 4.9% to close at 10,451 levels. We expect Indian markets to remain under pressure in the near-term since the sentiments are weak on the worries of slowdown across the globe. Investors would continue to monitor crude oil prices, currency movement and the updates on spread of coronavirus cases as these factors are keeping the markets on edge,” said Ajit Mishra, VP – Research, Religare Broking Ltd.
- Marketing by the foreign institutional investors has most certainly contributed to the acute trades in Indian market. Over 10000 crore worth domestic equities have been sold by foreign investors.
According to Vinod Nair, who is the Head of Research at Geojit Financial Services, said: “Risk of recession increased fuelled by crash in crude oil prices and increasing virus cases outside China. Even though fall in crude oil prices is positive for India in the long term, short term concerns weighed with FII outflow in emerging markets. Coronavirus fear is intensifying and fresh travel bans seems to hurt the global economic sentiments more than feared”.
5) On the spread of the pandemic disease, Coronavirus. There is extreme panic and risk aversion at this point in global markets, IFA Global said in a note. US bond yields have hit new lows as investors bought them up as safe havens. “Bears hammered the index hard and Nifty tested 10,300 zone on the downside. Important support levels have been breached. Bottom fishing should be avoided until the markets indicate fatigue on the downside. Nifty has tested the weekly 200 exponentials moving average (EMA) which is placed at 10,370 zone. Index is likely to face stiff resistance as and when recovery happens and volatility is likely to remain higher. The immediate resistance zone is placed at 10,800 zone,” said Manav Chopra, head of research at Indiabulls Securities. (With Agency Inputs)