Indian markets continue to wobble: Sensex sheds over 800 points, nifty settles below 9,000

Indian markets continue to wobble: Sensex sheds over 800 points, nifty settles below 9,000

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Domestic equity markets benchmarks Sensex and Nifty were under renewed pressure in another day of hectic trading, as volatility continued to pulse through the stock markets.  

The volatility index, India VIX, surged over 7 per cent to a 12-year high level of 63.14, signalling market turbulence will likely persist.

Courtesy a last-hour selloff in banking and information technology (IT) counters, benchmark indices, which held on to steady gains for most part of the day, ended with losses for the second straight day.

The Sensex plunged 810.98 points or 2.58% at 30,579.09 (lowest since May 24, 2017), while the Nifty ended below the crucial 9,000-mark at 8,966.70, dropping 230.70 points or 2.51% (since March 10, 2017).

Nifty FMCG and Pharma were in the green, while all other sectoral indices ended with losses led by the Nifty Media index’s 6 per cent drop. Nifty Bank, Nifty Financial Services and Nifty Private Bank indexes also fell between 4-4.5 per cent each.

Nifty Private Bank index was the top laggard, down 4 per cent dragged by IndusInd Bank, ICICI Bank and Federal Bank. Nifty FMCG index settled higher in an otherwise weak market led by gains in Godrej Consumer Properties, HUL and Dabur India.

ICICI Bank, HDFC, Infosys, HDFC Bank, Kotak Mahindra Bank, Bajaj Finance, Axis Bank and TCS collectively contributed over 700 points fall in the Sensex.

On the flip side, shares of Yes Bank surged nearly 60% to close at ₹58.65 apiece after hitting an intraday high of ₹64.15 on the BSE.

Obviously, Reserve Bank of India (RBI) governor Shaktikanta Das’ assurance on Monday that Yes Bank depositor’s money continues to be safe and the RBI will support the crisis-hit bank with liquidity has gone down well with investors.

Markets were on Monday rife with speculation that the RBI would announce an inter-meeting repo rate cut in sync with what most large central banks across the world have done to bolster their economies amid the raging coronavirus pandemic.

The markets’ hopes were, however, dashed when the central bank said the rate decision will be taken by the MPC. While not closing the door on a rate cut, the RBI governor added  that no possibility can be ruled out.

With the RBI’s Monetary Policy Committee meeting from March 31 to April 3 to assess the state of the Indian economy and decide whether to lower interest rates in a move to bolster the economy, investors will be watching closely in the coming days to see what the RBI has to offer to help the economy.

Online trading firms like Wisdom Capital think the RBI’s conservative stance to act in tandem with the developing situation, rather than engage in knee-jerk fiscal policy reactions, is measured and prudent.

Ensuring liquidity by announcing two important measures – a rupee-dollar swap to prevent any undue volatility in the exchange rate and additional LTRO to the extent of Rs 1 lakh crore to address any sudden liquidity requirements in the banking system.- is more critical than the rate cut at this moment.

At  the same time we believe , the RBI will have to go beyond rate cuts and into more creative means.

Historically, cuts have not always been positive.