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BEAR-Pidemic on D Street: Sensex, Nifty at two-year lows

The Sensex dropped 2,919.26 points (8.18 per cent) to close at 32,778.14.

ET Bureau|
Last Updated: Mar 13, 2020, 08.14 AM IST
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Sentiment is unlikely to turn around anytime soon in the global and local markets as panic grips investors and more cities and countries enforce lockdowns.
Carnage. Dictionaries say the word is derived from the Italian word Carnaggio, and is defined as the killing of a large number of people.

Stock markets around the world witnessed the massacre of a different kind beginning Wednesday evening, as a massive destruction of investor wealth eroded confidence and sent stocks tumbling in the worst one-day show since the 2008 global financial crisis.

Wall Street plunged into bear territory on Wednesday, after falling 20.5 per cent from alltime highs. The slide continued on Thursday, when benchmarks plunged a further 8 per cent after opening, forcing trade to be halted temporarily.US President Donald Trump’s belated intervention via a month-long ban on flights from Europe and the absence of a coordinated fiscal or central bank stimulus dashed investor hopes.

India and other Asian markets followed on Thursday morning, with local stocks tipping into bear territory after logging the worst fall in terms of points. The Sensex and Nifty have fallen over 21 per cent from all-time highs. The indices posted their worst performance in percentage terms since 2008 on Thursday.

The Sensex dropped 2,919.26 points (8.18 per cent) to close at 32,778.14. The Nifty fell 868.25 points (8.3 per cent) to end at 9,590.15. The indices, which closed at a two-year low on Thursday, have fallen more than 8 per cent on a closing basis only three times till date.

The BSE Midcap has fallen 21 per cent. On Thursday, it closed at a three-year low. The BSE SmallCap closed at a four-year low after falling by the same magnitude.

The Volatility Index (VIX) — the measure of fear — jumped 34 per cent to 42.32, the highest level in 11 years. This suggests heightened worries about near-term risks. The VIX has crossed the 40-mark on only three occasions in the past decade.

“It looks like a market in trouble, and we don’t know how long it will last,” said Raamdeo Agrawal, chairman, Motilal Oswal Financial Services. “The fear in market is of the same level as during 2008 crisis.”

Carnage may continue

The carnage looks set to continue on Friday, and most likely into the next week, with US stocks failing to regain their footing on Thursday and the SGX Nifty futures on the Singapore stock exchange sinking below the 9000 mark at close (down 14.53 per cent).

“It’s possible that there is still more downside for equity markets and upside for volatility in the near term,” said Brendan Walsh, portfolio manager, Franklin Templeton Multi Asset Solution Fund.

Thursday’s selloff wiped out Rs 11.38 lakh crore of investor wealth. Since February 19, when the turbulence erupted, India has lost Rs 32.37 lakh crore in market capitalisation.

As in 2008, the aversion to equities is apparent across the globe, as is the rush for safer assets such as US Treasuries and gold.

In India, foreign investors dumped shares worth Rs 3,475 crore on Thursday, extending their selling spree to the 13th straight day. They have sold Indian shares worth over Rs 36,000 crore since February 24 — the most ever during a two-week period.

“The selloff is being led by FPIs, who are in risk-averse mode and cutting exposure to emerging markets, including India,” said Nilesh Shah, managing director, Kotak Mutual Fund. “It is difficult to take a call on where the bottom of the market is.”

Elsewhere in Asia, markets ended sharply lower with Japan’s Nikkei declining 4.4 per cent, Hong Kong’s Hang Seng Index falling 3.6 per cent and South Korea’s Kospi dropping 3.8 per cent. In Europe, the broader Euro Stoxx 50 sank 7.9 per cent.

Sentiment is unlikely to turn around anytime soon in the global and local markets as panic grips investors and more cities and countries enforce lockdowns.

(What's moving Sensex and Nifty Track latest market news, stock tips and expert advice on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds.)

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