Covid-19: Sensex posts biggest quarterly fall, Nifty's worst in 28 years

Meanwhile, foreign portfolio investors (FPIs) have pulled out net of Rs 55,007 crore (approx. $7.4 billion) from Indian equities in March 2020

The S&P BSE Sensex has reported its sharpest quarterly fall, with the benchmark index slipping 28.6 per cent in the January-March 2020 period. The markets have entered a ‘bear phase’ following panic triggered by the rampant spread of Covid-19. A fall of 20 per cent or more from the peak for a stock or an index is considered bear market territory for that traded unit.

The Nifty50, which declined 29.3 per cent, recorded its sharpest quarterly fall since the June 1992 quarter, when it had fallen 32.2 per cent. The Sensex had tanked 28.1 per cent during the same quarter.

In 2019-20, the Nifty50 (down 26 per cent) and the Sensex (down 23.8 per cent) recorded their worst performance in over a decade. In 2008-09, the Sensex had recorded a 37.9 per cent decline, while the Nifty slipped 36.2 per cent as the global financial crisis roiled the markets and the economy.

Meanwhile, foreign portfolio investors pulled out Rs 58,348 crore (approximately $7.9 billion) from Indian equities in March 2020. It is the biggest monthly outflow, based on the National Securities Depository data available as far back as 2002.

Most analysts say the markets are factoring in the 21-day nationwide lockdown and will track developments related to the Covid-19 pandemic — both at the domestic and global levels. Any extension in the lockdown can further dent market sentiment.

 

 

“The Nifty’s correction already factors in the impact of the one-month lockdown. However, if the lockdown is more severe and the business impact extends well into the second quarter, we see further downside,” says Varun Lohchab, head of institutional research at HDFC Securities.

The sharp fall in the front line indices is led by financial sector stocks — banks, non-banking financial companies, housing finance companies, and insurance firms. The automobile, metal, and real estate sectors, too, are among the worst hit.

These sectors underperformed the market and fell between 40 per cent and 43 per cent during the quarter. However, the pharmaceuticals and fast-moving consumer goods sectors outperformed the market; they declined 11 per cent and 9 per cent, respectively. The information technology (IT) sector tumbled 18 per cent.

The IT, consumer staples, pharma, and chemicals sectors, according to Lohchab, are likely to ride out the current turbulence with low earnings hit and should form key portfolio weights. Telecom will also be largely insulated.

“While banking, financial services and insurance may have to absorb some negative impact, we continue to prefer large sector and niche market/segment leaders, given sharp price correction and resilient business models,” he says.

Of the 538 stocks from the S&P BSE500 and the Nifty500 indices, 114 stocks saw their market price more than halve during the quarter. The list includes IndusInd Bank, RBL Bank, Bandhan Bank, Indiabulls Housing Finance, PNB Housing Finance, Vedanta, Hindalco Industries, ZEEL, and Tata Motors. As many as 221 stocks were down in the range of 30 per cent and 50 per cent.

“Over the next few months, firms will assess the damage and that’s when another round of selling will come, which can take the Nifty to even 6,500 levels before it stages a recovery,” says A K Prabhakar, head of research at IDBI Capital.