Sensex Drops to Three-Year Low as Virus Torments Fragile Economy
India Stocks Stay Wild as Sensex Swings to Loss From Early Gain
(Bloomberg) -- Indian equities declined anew, with the benchmark index tumbling to a three-year low, as worries mounted that the world’s second-most populous nation could become the next global hotspot for coronavirus infections, further damaging an already fragile economy.
The S&P BSE Sensex slumped 5.6% to 28,869.51 to its lowest level since March 2017, marking a third straight session that ended in losses after the gauge entered a bear market last week. The NSE Nifty 50 Index also tumbled 5.6% Wednesday, with the India NSE Volatility Index, the market’s fear gauge, topping 63 -- a level last seen in 2008.
Lenders contributed the most to the drop with IndusInd Bank Ltd.’s shares plunging by a record as the recent government-backed rescue of peer Yes Bank Ltd. soured sentiment for others in the sector. The S&P BSE Bankex dropped 7% to also end at its lowest level since March 2017.
A sudden spurt in shares of some state-run companies in the final hour of the session was a source of excitement on an otherwise rough day. Oil and Natural Gas Corp. and Oil India Ltd., two of the nation’s biggest explorers, jumped at least 40% before giving up most of those gains at the close.
“There was speculation of rebalancing by some state-run exchange traded funds and buying by some insurers,” said Sameer Kalra, founder of Target investing in Mumbai. “Some short-sellers also saw their stop-losses getting triggered in some state-run stocks in the last hour of trade.”
Foreign Outflows
India has reported 147 infections and three deaths, while 276 of its citizens abroad have contracted the disease, with experts warning containment steps that proved successful elsewhere in Asia may not work locally. The fallout from the epidemic is fueling a dash for the dollar as investors weigh the biggest threat to the world economy since the 2008 global financial crisis. Global funds have pulled a combined $8.5 billion from local shares and bonds so far in March, sending the rupee to near an all-time low.
The central bank on Tuesday announced a currency swap and measures to boost liquidity but held back from following global peers with an emergency rate cut.
Action on Virus Key
“The spread of Covid-19 outside of China and in India has substantially raised market concerns on demand destruction and a significant near-term impact on economic growth,” Nomura Holdings Inc. analysts Saion Mukherjee and Neelotpal Sahu wrote in a note.
“Swift and relatively strong” government measures have made investors price in a 15% cut in earnings, while valuations have come close to the levels from where the market has bottomed since 2011, Jefferies India Pvt analysts Mahesh Nandurkar and Abhinav Sinha said in another report.
“Containment of covid-19 will be key” for foreing investments in India stocks, ICICI Securities Ltd. analysts Vinod Karki and Siddharth Gupta wrote in a note. Sill, the “economy is not overheated and stimulus by policy makers should ensure a soft landing,” the note added.
The Numbers
- All of 19 sector sub-indexes compiled by BSE Ltd. dropped, led by a gauge of banks
- 28 out of 30 Sensex members dropped
- IndusInd Bank Ltd. was the biggest loser on the benchmark index, with a 24% slide
- Oil and Natural Gas Corp. rose 9.8% after earlier slumping as much as 4.2%
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