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Markets test demonetisation levels before a small recovery; Sensex falls 2%

Most stocks continued to see volatile moves because of the uncertainty created by the coronavirus pandemic

Sundar Sethuraman  |  Mumbai 

Traders monitor BSE index at a brokerage firm, as the Sensex goes down, in Mumbai | PTI
PTI

The benchmark Nifty on Thursday slipped below 8,000 — the levels last seen in the aftermath of demonetisation — before recouping two-thirds of its losses, thanks to a sharp recovery in index heavyweights HDFC Bank, Infosys and ITC.

The 50-share index of blue-chip companies dropped as much as 7.5 per cent to 7,833 before ending at 8,263, with a loss of 2.4 per cent, or 205 points, over its previous day’s close. The after hitting a low of 26,714, ended at 28,288, down 2 per cent, or 581 points. Experts said the recovery could prove to be fragile if the global selloff continues.

Most stocks continued to see volatile moves because of the uncertainty created by the coronavirus pandemic. The across Asia and Europe also continued to fall even as global policymakers announced measures to limit the damage caused by the crisis. US stock, too, were in the red.

The number of packages over the few days, however, has proved ineffective to stem the fall.

“Policymakers have already spent a lot of ammunition. The easy solution of monetary easing has been used by them multiple times, and that has helped only temporarily,” said Deepak Jasani, head retail research, HDFC Securities.

Markets test demonetisation levels before a small recovery; Sensex falls 2%

Some of the latest measures announced include the European Central Bank’s ^750 billion ($815 billion) debt-buying programme and the US Federal Reserve’s launch of a programme to support money-market mutual fund. While India, too, has taken measures, the effort pale in comparison to the other nations, said experts.

“India is facing the pandemic when its economy is weak. The policy response has a lot to catch up, rapidly. Delaying rate cuts at present is costly while hiking oil taxes and defending the rupee seem ill-suited. Decisive monetary and fiscal expansion and dealing with the dislocations associated with lockdowns is urgent,” said Edelweiss in note.

Market players said the recovery in the Nifty from the day’s low of 7,833 was crucial.

“The levels of 7,900 and 7,800 have a special significance. On the day of demonetisation, the Nifty saw a level of 7,890. Technically, until the market is above the levels of 7,800, we can expect a gradual recovery towards 8,800 levels. Below the level of 7,800, we could see the levels of 7,500 or 7,300,” said Shrikant Chouhan, technical research analyst at Kotak Securities.

Market experts said the selling by overseas investors is the cause of the turmoil. In the past month, they have dumped equities worth over Rs 55,000 crore. Most investors are pulling out from all asset classes and holding on to cash.

“Overseas selling will not stop selling unless the virus is contained or when valuations become so cheap that it does not make sense for them to sell,” said Jasani.


Markets test demonetisation levels before a small recovery; Sensex falls 2%

Nearly 1,206 stocks hit their 52-week lows and 442 were locked in the lower circuit on Thursday. Two-thirds of the components ended the session with losses. Bajaj Finance was the worst-performing stock and fell 10.24 per cent. ITC, on the other hand, was the best-performing stock gaining 7.5 per cent. HDFC Bank, after selling below Rs 800, rose sharply to end at Rs 895, up 1.9 per cent over the previous day’s close.

All the BSE sectoral indices, except one, ended the sessions with losses. Metal and capital goods stocks fell the most, and their gauges fell 7.2 per cent and 6.2 per cent, respectively.

Currently, the cumulative value of all BSE listed stocks is Rs 109 trillion, down by Rs 51 trillion in two months.

First Published: Fri, March 20 2020. 00:27 IST
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