Sell, sell sell as India imposes lockdown

This morning, it was nothing but sell, sell, sell from the opening bell on Dalal Street. 

After the number of coronavirus cases in the country surpassed 400 over the weekend, and the death toll increased to seven, with a lockdown in much of Asia’s third-largest economy, the benchmark equity indices on the BSE and National Stock Exchange (NSE) registered their worst single-day fall in history after they settled around 13 per cent lower on Monday, and the rupee tumbled to a new low.Within minutes of opening, BSE Sensex was down by over 2,100 points or 7 per cent at 27,758.82 and by 9:40 am, it sank further, down by 2,700 points. Simultaneously, NSE Nifty tanked by 500 points or almost 7 per cent at 8,154.80 in early trade and then fell 746 points to 8,000.

Trading was halted for 45 minutes as the Sensex slid 10 per cent a little before 10 am. The sell-off continued when trading resumed. In a span of 10 days, it was the second instance of trading halt in Dalal Street. Earlier, on March 13, Nifty hit lower circuit in the opening deals for the first time since May 2009. Monday was a rough start to the week with S&P BSE Sensex plunging 3,935 points or over 13 per cent to settle at 25,981 levels with all the 30 constituents ending in the red. On the NSE, the benchmark Nifty tanked a whopping 1,135 points or 13 per cent to end the session at 7,610. 

With fear guage India VIX rising 6.64 per cent to 71.56 levels, our analysts at Wisdom Capital are feeling lousy seeing the casualties piling up. Shares of automobile firms sank as heavyweights like Maruti Suzuki and M&M took big blows. Banking and oil stocks also took a heavy blow during early trade hours.Nifty Private Bank index plunged over 17 per cent to 9,030 levels. Axis Bank was the biggest loser in the index – down 28 per cent at Rs 310 apiece.Meanwhile, rupee dropped to 76 level against the US dollar in Monday’s trade, raising fears of further foreign outflows. Already FPIs have pulled out over Rs 50,000 crore domestic equities in roughly two weeks. 

The market is in despair with 75 districts across the country under lockdown and a large number of companies having announced the closure of plants and factories.

These plant closures will weigh in heavily on the sectoral stocks over the next few days as lockdowns could be increased and extended if the virus spreads to more areas.

While Prime Minister Narendra Modi is set to meet top industry leaders, online traders and investors urge the government to provide some concessions to the broader industry at this juncture to help deal with the novel coronavirus crisis.

On Friday, market regulator SEBI raised margin requirements and capped derivatives exposure. Many investors consider the measures, aimed at discouraging traders from aggressively building short positions at a time when volatility in the nation’s equities has spiked, unfair.

 Put simply the measures are intended at curbing market volatility and protecting smaller investors. According to investors, short-selling was an “essential part of markets.” However, our view at Wisdom Capital is quite simple: In market crashes led by global risk-off trades and deleveraging, such measures have always been ineffective. SEBI’s move is not a game changer in preventing short selling. 

The stock market crash this manic Monday is evident of the fact that the measures have so far failed to meet their prime objective: Convincing the market of the level of preparedness of Indian authorities to handle a medical emergency of this scale. 

Markets are most often driven by fear and greed and in this case it is despair and fear driving the Indian stock markets.

Only a fall in coronavirus cases can save the sensex from a further beating. 

“Test, test, test” is the message that World Health Organization Director General Tedros Adhanom Ghebreyesus gave to all countries on March 16, 2020. 

So, ramping up testing capacity, speedily isolating sick or suspected patients, and initiating policies that limit public gatherings or require working from home are measures we need.With the S&P BSE Sensex Index last week marking its biggest weekly decline since October 2008, many analysts believe the lockdown  will probably worsen an economy already set to slow to an 11-year low.