Stocks Go From 10% Slump to 4% Gain in Wild Day for India Market
Rupee Slides to Record Low as Virus Spread Worsens Sentiment
(Bloomberg) -- Indian stocks posted their biggest advance since September on a day when losses of 10% set off a market-wide circuit breaker, the nation’s first such suspension since 2009.
But brokers in dealing rooms in Mumbai are still trying to soothe the frayed nerves of their clients, who much like their peers across the globe, endured the worst week for equities in more than a decade.
“We’re getting calls asking what is to be done now, should we hold or add more capital, and our advice to them is there will be opportunities once the sentiment stabilizes,” said Ketan Karkhanis, senior vice president and head - equity relationship services at ICICI Securities Ltd. in Mumbai.
The S&P BSE Sensex rallied 4% to 34,130.5 at the close in Mumbai, erasing losses of as much as 10.3% that led to the 45-minute trading halt. This makes it the largest daily trading range on the main index in recent years. Still, the India NSE Volatility Index, the stock market’s fear gauge, ended at levels not seen since May 2009, signaling market turbulence will likely persist.
India become the latest equity market to take a pause on Friday, a day when Korea, the Philippines, Thailand and Indonesia witnessed rapid declines that triggered circuit breakers. The slide followed the worst Wall Street session since 1987, with investors spooked that emergency fiscal and monetary stimulus won’t be enough to stave off a recession.
“What’s certain is that 2020 is likely to be volatile on account of U.S. equities losing steam, poor global economic numbers, possible credit crunch overseas and our own challenges,” said Amar Ambani, senior president and head of research at YES Securities India Ltd. in Mumbai.
The slump in assets threatens to hurt India’s already fragile economy that’s expanding at the slowest pace in 11 years. The Reserve Bank of India’s efforts to calm the currency market by announcing $2 billion of the FX swaps on Thursday weren’t enough to lift sentiments. The rupee rose 0.3% to 73.9950 after falling by as much as 0.4% to 74.5250 per dollar, a record low.
“Past lows are not a line in the sand,” and there is a risk of the rupee hitting 78 and then 80, said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore. Such a big sell-off “will ignite major concerns because of the ability of such moves to exacerbate capital outflows.”
RBI said in a statement on Thursday that it is closely monitoring the global situation and “stands ready to take all necessary measures” to ensure the normal functioning of financial markets. The rupee has come under pressure as foreigners unloaded $1.2 billion worth of local bonds and $2.7 billion of shares so far this month, data compiled by Bloomberg shows.
Sovereign bonds also fell, with the yield on benchmark 10-year bonds climbing nine basis points to 6.32% after surging by 17 points on Thursday.
Harihar Krishnamoorthy, a treasury market veteran, said the current rout can’t be compared with 2013. The year of the taper tantrum had a larger impact on Indian assets in the absence of tailwinds from lower oil prices, which can lead to annual savings of $50 billion, he said.
For the cash-strapped government of an oil-importing nation, the collapse in crude prices couldn’t have come at a better time. Analysts at Kotak Institutional Equities estimate that a $10 per barrel drop in the price of oil lowers the inflation rate by 30 basis points.
“You tell your guys -- just look at the macro picture, put in the numbers and forget who comes on television,” Krishnamoorthy said.
--With assistance from Subhadip Sircar.
To contact the reporters on this story: Nupur Acharya in Mumbai at nacharya7@bloomberg.net;Ishika Mookerjee in Singapore at imookerjee@bloomberg.net;Kartik Goyal in Mumbai at kgoyal@bloomberg.net
To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net, ;Arijit Ghosh at aghosh@bloomberg.net, ;Lianting Tu at ltu4@bloomberg.net, Ravil Shirodkar, Anto Antony
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