Sensex, Nifty fall over 4% amid global oil rout, coronavirus spread

After posting sharp gains in the previous four trading sessions, the markets once again countered intense selling pressure on Monday, as the global shutdown due to coronavirus and slump in oil prices triggered fresh risk aversion among investors.
 

The Sensex dropped 1,375 points, or 4.6 per cent, to end at 28,440, while the Nifty 50 index declined 379 points, or 4.4 per cent, to end at 8,281. Financial stocks were the worst hit. Global oil prices crashed due to fall in demand because of the global shutdowns.
 

After some moderation in the past few sessions, the selling by foreign portfolio investors accelerated. On Monday, they sold shares worth nearly Rs 4,400 crore, fretting over the economic impact due to the sudden halt to economic activity. “The forecasts released by brokers and various agencies for the economy and earnings across sectors are all negative,” said Andrew Holland, CEO, Avendus Capital Alternate Strategies.
 

“Though measures like the RBI’s interest payment deferrals are steps in the right direction, it will only ease things for a few months. But after three months, we will have companies with cash flow issue,” Holland added.
 

Market players said investors were worried about the cascading effect of delays or defaults in their payments over the coming days. Many companies have started delaying payments as sales have come to a standstill. Hero MotoCorp, the largest two-wheeler manufacturer in the country, on Monday said it had halted full payment to vendors.

Many agencies have warned both domestic and global economic growth will halve in this fiscal. "As the situation is still evolving, quantifying the economic impact of Covid-19 is extremely challenging. Under our alternative scenarios, assuming disruptions would last until mid-May (optimistic scenario) or September (downside), India's FY21 real GDP growth could range between 4 per cent year-on-year (YoY) and -0.2 per cent YoY (negative GDP, the first time since FY1980)," said Gautam Chhaochharia, head of India research, UBS Securities.   

Last week, the International Monetary Fund had said the global economy had entered a recession that will be worse than in 2009.
 

Investors dumped banking and financial stocks with HDFC and Bajaj Finance dropping 11 per cent each. "The impact of Covid-19 has been severe on banking stocks, even the better run ones, due to their cyclical nature and high leverage. So far, we have very few data points to predict any impact on earnings, while the stock price reaction assumes a pretty severe impact," Investec said in a note.

Holland said there are fears that there could be problems in the recovery of retail loans.
 

The market breadth was negative on Monday, with total declining stocks at 1,351 and those advancing at 930 on the BSE. All the Sensex components, barring six, ended the session with losses. Over a third of the Sensex components fell  4 per cent or more. Tech Mahindra and Nestlé India were the best-performing stocks and rose 5 per cent and 4.5 per cent, respectively.
 

All the BSE sectoral indices barring two ended the sessions with losses.

Brent crude hits lowest since Nov 2002

Oil prices fell sharply on Monday, with  Brent hitting its lowest in 18 years. Brent future was down $2.54, or 10 per cent, at $22.39 a barrel by 22:51 IST, after earlier dropping to $21.65 per barrel. Reuters