Investors lose Rs 11.4 trillion in 6 days; selling overdone, say analysts

Continuous selling for six sessions in the Indian markets in line with global peers that have tumbled as coronavirus fears escalated has shaken investor confidence and made a serious dent in their portfolios. Total investor wealth, as measured by cumulative market value of all listed stocks on the BSE, has dropped by Rs 11.4 trillion in the past six trading days to Rs 147 trillion – its lowest level since October 16, 2019, exchange data show.

On Friday, the S&P BSE Sensex tumbled 3 per cent, or 1181 points, in intra-day deals to 38,565 levels. From a level of 41,323 on Wednesday, February 19, 2020, the index has tanked 6.7 per cent in the past six trading days.

Given the recent developments, analysts see more pain in store for global markets in the backdrop of the coronavirus health scare. That said, they do believe the selling in the Indian markets has been overdone as the country has remained relatively immune to the flu till now.

“Indian markets have been following the global trend and I don’t think there is any issue here right now as regards coronavirus. On the contrary, we are better-off with the energy and commodity prices falling. However, we will be hugely vulnerable if any such cases were reported in India. That said, there is no other catalyst as well that can hold up the markets. If one is convinced about the long-term prospects, this is the time to buy fundamentally sound companies,” says Jigar Shah, chief executive officer at Maybank Kim Eng Securities.

Among sectors, refineries, financials including banks and information technology (IT) have seen more than Rs 1-trillion market-cap erosion in the past six sessions. Automobiles, infrastructure including realty, aviation, logistics, power generation & distribution and shipping sectors have corrected more than 10 per cent from the February 19, levels.

“The selling seems to be overdone. Foreign investors are now concerned that the Indian markets could be impacted given the proximity to China. For the Nifty50 index, 11,000 seems to be a good support level. That said, there are a number of people who have created shorts in the market and the recovery could be as swift as the fall on the slightest positive news,” said U R Bhat, managing director at Dalton Capital.

Stock-wise, Reliance Industries, was the top loser in absolute terms, which lost Rs 1.04 trillion market-cap in the past six days. Tata Consultancy Services (TCS) saw market-cap erosion of Rs 53,133 crore, followed by ICICI Bank (Rs 31,063 crore), Housing Development Finance Corporation (HDFC)  (Rs 28,996 crore), Infosys (Rs 25,339 crore) and HDFC Bank (Rs 24,270 crore).

“Markets now need to start pricing for one of two things. Either coronavirus is going to spread, making an untold number sick and killing many others, and economies will go into lockdown as supply-chains are badly hit; or governments are going to lockdown anyway, the public are going to rapidly scale back most activities, and supply chains will again be badly hit. In either case, don’t buy the dips,” advises Michael Every, senior strategist for Asia-Pacific at Rabobank International.

Meanwhile, 84 stocks from the S&P BSE 500 index hit 52-week lows on the BSE on Friday. The list includes ACC, Wipro, Larsen & Toubro, Oil and Natural Gas Corporation (ONGC), GAIL (India), Hero MotoCorp, Hindalco Industries, ITC, Mahindra & Mahindra (M&M) and Lupin.