ESB Sensex ended the 1942 period at 35,635 points, while the NSE Nifty stood at 10,451, down 538 points. The stock market crash has wiped out Rs 6.50 lakh crore from the wealth of equity investors.
Growing fears about the spread of the coronavirus and falling crude oil prices have given the bears ammunition to push domestic stock indexes down in Mumbai’s trade.
Strong sales by foreign investors and doubts about the stability of India’s financial systems following the crisis of India’s fifth largest private lender, YES Bank, also eased the mood.
So, is the oil price crash solely responsible for this chaos? India is generally a winner in the event of an oil price correction, but investors have felt problems. Why? By the buzz of Dalal Street, here are the main factors driving the market in Monday’s trade:
Falling oil prices
Crude oil prices hit more than 30% after Saudi Arabia’s decision to lower prices and increase production after failed talks with OPEC + countries, marking the biggest crash since the first Gulf War. This resulted in a collapse of shares of large energy companies in India, including Reliance Industries and CGSB, which fell 12%.
Analysts say the oil crash is largely negative for India, although it is highly dependent on imports. “The impact is much more severe in regions that depend on oil prices. India cannot really tolerate too high oil prices, but neither can India tolerate it when oil prices are too low. India really needs a situation of gold caps. Net-net, for emerging markets, this means less growth, less reflation, more pressure in high-yield markets and higher spreads. Very low oil prices are negative for emerging countries, not positive, “said Viktor Shvets of Macquarie.
Covid-19 panic deepens
Investors panicked over the economic damage from the coronavirus epidemic. The number of people infected with the virus has exceeded 1,077,000 worldwide while the epidemic has affected more countries. The death toll in Italy has jumped more than 130 in the past 24 hours to 366 as the country has locked out a large region and quarantined almost 16 million people. In West Asia, Riyadh has closed schools and universities.
In the United States, two more people died of the new coronavirus in Washington State, bringing the national death toll to 19, while the number of confirmed cases in New York rose to 89. Various estimates analysts have determined the total loss from the virus to rise to $ 2.4 trillion. It could wipe out $ 211 billion from Asia-Pacific economies this year, warned S&P Global.
Questions about financial stability
The YES bank crisis has raised concerns about the stability of the country’s banking system, adding to the woes of domestic investors, traders said.
Many financial entities are exposed to YES Bank bonds which have been downgraded by rating agencies. The domestic rating agency Icra has downgraded the bonds of the paralyzed bank by a value of Rs 52,612 crore.
YES Bank has already defaulted on the payment of coupons on Basel II Tier I bonds on March 5. Icra is concerned that the bank will also default on a future coupon payment on lower Basel II Tier II bonds, unless the restrictions are lifted.
FII output
The relentless sale by foreign institutional investors added to the woes of Dalal Street. During the past 15 sessions, the REITs have withdrawn a net crore of Rs 21,937 from Indian stocks, showed the NSE data compiled by Accord Fintech. Since February 24, FII have been net sellers of stocks in India every day.
Market veterans like Raamdeo Agrawal blamed him on the takeover of ETF by foreign investors amid a sense of risk permeating financial markets globally, which has led to massive withdrawals.
Global markets plummet
Major stock markets around the world were trading in red, discouraging traders on Dalal Street. The Japanese Nikkei fell 5.2% and the Australian commodity market fell 6.4%.
The largest MSCI index of Asia-Pacific stocks outside Japan lost 3.9% on its worst day since late 2015, while Shanghai blue chips fell 2.8%.
Investors dropped 30-year US bond yields below 1% on bets, Federal Reserve would be forced to cut interest rates by at least 75 basis points at its March 18 meeting, although it only brought about an emergency easing.
Energy stocks took a hit and the E-Mini futures for the S&P 500 plunged 4.89%. EUROSTOXXX 50 futures fell 5.9% and FTSE futures fell 6.8%.