Investors across the world started selling risky assets amid concerns over rapid spread of Covid-19 across the geographies and the subsequent economic fallout of a pandemic.
Indian stocks recorded their biggest weekly fall 11 years, as equity markets across the world crashed on Friday and 437 stocks hit 52-week lows in BSE. Investors across the world started selling risky assets amid concerns over rapid spread of Covid-19 across the geographies and the subsequent economic fallout of a pandemic.
The Sensex slumped 1,448.37 points to mark its biggest single-day fall since August 2015. Indian markets followed global peers on Friday with both the Sensex and Nifty50 giving up 3.6% each. On Thursday, Dow Jones plunged 4.4% to record its biggest fall in two years and the fall continued even on Friday with the Dow Jones futures tanking 677 points in intra-day trade.
With Friday’s fall, the Sensex has shed 6% in February making investors poorer by Rs 9.6 lakh crore. At Friday’s close, the market capitalisation of BSE listed firms stood at Rs 146.87 lakh crore. Foreign portfolio investors (FPIs) have offloaded shares worth $1.6 billion in the last five sessions. FPIs had pumped in $14.2 billion in 2019, which was the highest in five years. A further fall in indices was arrested by local investors, who bought shares worth $2.2 billion during the same period. On Friday, overseas investors sold shares worth $198 million whereas local investors bought shares worth $1.06 billion, provisional data on bourses showed.
S Hariharan, head of sales trading at Emkay Global Financial Services, said overseas investors have also sold $1.2 billion in single stock futures and $500 million in index futures between February 24 and 27. “FPIs positioning has turned significantly bearish — their net short position in index futures is now the most bearish in data going back to 2014 (barring a single session in Aug 2019), while their net long position in single stock futures is the smallest since Jun 2019,” added Hariharan.
Friday’s fall also threw the broader rally off kilter, signs of which were visible towards the end of 2019. But with the recent bloodbath, both Nifty midcap and Nifty small cap have lost 1.8% and 2.7% respectively between January and now. Even the number of companies with a market capitalisation of Rs 1,000 crore or more fell back to 669 on Friday from the peak of 853 seen in December 2017.
Despite the recent sell-off, Indian equities continue to command a premium over global peers. At the present levels of 38,297.29, the Sensex trades at a price-earnings multiple of over 17.5 times one-year estimated forward earnings against the long-term average PE of 15.8 times. This compares with 10.6 times for Kospi and 12.7 for Jakarta Composite. Turkish and Russian equities were the cheapest in the emerging market with a forward price-to-earnings ratio of 5.6 and 6.4 respectively, Bloomberg data showed.
The negative sentiment rubbed off all sectoral indices on Friday. Of the 19 sectoral indices compiled, BSE Metal plunged 7%, followed by BSE IT and BSE Tech, falling 5.6% and 5.1% respectively.