Investors jittery as coronavirus-infected sensex dives nearly 3,000 points

Investors jittery as coronavirus-infected sensex dives nearly 3,000 points

India’s longest ever bull market that started after the Lehman crisis faces its gravest test yet: a swiftly-spreading coronavirus that threatens to transform a once-booming stock market into a nightmare.

Following a World Health Organization declaration that the coronavirus outbreak is now a pandemic, US President Donald Trump took the dramatic step of announcing sweeping new travel restrictions on 26 European countries, to the US for the next 30 days to stop the spread of the virus. The UK, Ireland and other non-Schengen countries are unaffected. US citizens are also exempt. The new rules will go into effect Friday at midnight.

This led Indian shares deeper into bear territory on Thursday, escalating the market panic triggered by the COVID-19 pandemic. 

After a brief pause on Wednesday, an incessant selling in the stock markets on Thursday forced shares to plunge deeper into a bear market in India even as investors and online traders struggled to figure out just how much economic damage the novel coronavirus will cause.

The S&P BSE Sensex slipped as much as 2,919 points (8.18 per cent) to 32,778 on Thursday, the most in over two years. Sixteen out of the 30 constituents of the index ended at a 52-week low.

Major laggards in the BSE pack include SBI (13.23 %), ONGC (12.63 %), Axis Bank (11.6 %) and Tata Motors (11.11 ).

Similarly, the Nifty 50 too, sank below the key 10,000-mark for the first time in more than two years, as it crashed 868 points (8.3 per cent) to closeat 9,590. In the process, the 50-share NSE Benchmark entered bear territory – a 20 per cent fall from its most recent peak in January.

All 11 sectoral indices compiled by NSE ended lower on Thursday, led by the NSE Nifty PSU Bank Index that witnessed a 13.2 percent fall.  YES Bank was trading as top Nifty loser, falling 12.67%. Nifty Metal index too slipped 9.71 per cent weighed by weakness in Welspun Corp, Jindal Steel and Vedanta. Shares of Bharat Petroleum traded 12% lower and Axis Bank, Adani Ports dropped 9-10% each.

According to Reuters, Reserve Bank of India may announce liquidity-boosting measures and ease repayment issues to sectors that have been disrupted by supply chains being interrupted due to the coronavirus outbreak.

The rupee today fell to as much as 74.34 per dollar to near its record low of 74.48, a level hit in October 2018 crashed to near a record low against the US dollar in the backdrop of a global risk-off sentiment.

Volatility also spiked on account of crash in global stock markets and fall in crude oil prices.

It is clear that volatility is increasing each day as there is a lot of panic among major global investors due to the viral epidemic.

If the decline continues, with the S&P BSE Sensex plunging 20% below its record high, the bull market expansion cycle that began in March 2009 will officially be over.  

You may now ask: Is the stock market much too risky? And should I be buying? Well, it depends on how soon the Government offsets the negative impacts of coronavirus disruptions. Till then anxiety will rule on Dalal Street, as investors fret over a lack of clarity surrounding measures to combat the economic fallout of the new coronavirus.

And for all value chasing investors, this drop may be a good time to load up on cheap stocks. At Wisdom Capital, however, we would like to keep all investors safe. So Be warned:You can never be sure that this is the end of the market correction.

But when all hope is lost, the market rises again – not necessarily quickly.