Global selloff: Markets slump for second day on coronavirus scare

Published: January 29, 2020 2:24:54 AM

Meanwhile, the foreign portfolio investors (FPIs) continued to buy Indian stocks, mopped up shares worth $719.3 million in the last five sessions.

The stock of the largest banker by market capitalisation has given up close to 4% so far in 2020.

By Urvashi Valecha & Yoosef KP

Indian equities slid for the second day in a row on Tuesday, as investors continued to weigh the financial impact of the outbreak of the Coronavirus in China. The sell-off in the equity market came at a time when the broader markets joined the rally since the beginning of January. Markets also remained jittery ahead of the US Federal Reserve meeting on Wednesday. BSE Telecom fell the most on Tuesday, followed by BSE Metal, down by 2.6%. The BSE Telecom index plunged as much as 4.1% after Bharti Airtel’s Africa unit posted a 21% y-o-y fall in Q3 earnings. The negative sentiment rubbed off on most sectoral indices.

The Nifty Midcap and Smallcap have gained 6.6% and 8.6%, respectively, since January 1. In contrast, over the last two years through 2019, the Nifty Smallcap had lost 35.8% whereas the Nifty Midcap came off 19.1%. Interestingly, the last year’s best performers — Bank Nifty and Nifty Financial Services — have declined the most in January after Nifty Metal Index. While the Bank Nifty declined 4.4%, the gauge for financial services has slid nearly 2%. Banking stocks have been under selling pressure with the onset of earnings season, the reason being tepid performance, higher slippages and elevated provisions reported by some banks. For instance, HDFC Bank reported a 33% y-o-y earnings growth but also saw an increase in slippages. The stock of the largest banker by market capitalisation has given up close to 4% so far in 2020.

While the Sensex lost 188.26 points to close the session at 40,966.86 points, down 0.46%, the broader Nifty50 settled at 12,055.80 points, down 0.52% from the previous close. UR Bhat, director, Dalton Capital Advisors India, observes, “The implications of coronavirus could be serious enough to affect the market in a big way with pronounced economic dimensions. Given that a lot of people keep travelling to and from China and the fact that the spread of the virus does not seem to have been contained, trade and commerce would be certain casualties.”

Bhat also added there are some reports suggesting that it was a part of biological warfare experiment gone wrong. Moreover, the information flow from China is somewhat limited and no one knows if the problem is far more serious than what has been reported. The buying in the broader market picked up of late after two years of bearish mode.

The number of companies with a market capitalisation of Rs 1,000 crore or more has risen to 709 on Tuesday from a low of 684 at the end of December 2019.

Meanwhile, the foreign portfolio investors (FPIs) continued to buy Indian stocks, mopped up shares worth $719.3 million in the last five sessions. So far in January, the overseas investors have bought shares worth $2.2 billion after pumping in $14.23 billion in 2019. Neelesh Surana, chief investment officer at Mirae AMC, is of the view that “there is anxiety because of coronavirus. This is an event, no one knows when it will peak out and till then there will be some kind of volatility”.

In Asia, Korea’s Kospi fell as much as 3.1% on Tuesday. While Chinese, Taiwan and Hang Seng markets remained shut for the Lunar New Year, Indonesia’s Jakarta Composite closed 0.4% lower.

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