Nifty50 sees nearly 10% erosion of dollar returns so far in 2020

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Updated: Mar 04, 2020 8:05 AM

Between January and now, the Indian market has under-performed many of its peers such as the Hang Seng, Shanghai Composite and Taiwan TAIEX.

Nifty50, sensex, Indian market, Hang Seng, Shanghai Composite, Taiwan TAIEXThe Nifty50 has never experienced a fall of this depth in the last eight years through 2019. The index has been yielding positive return in five out of the eight years.

With foreign portfolio investors (FPIs) pulling out money from Indian equities amid global risk-off moves following the rapid spread of Covid-19 across the globe, the Nifty50 has given up close to 10% in dollar terms so far in 2020. The fall in dollar returns is more than the gains made by the broader gauge for the whole of 2019, Bloomberg data showed.

The rupee on Tuesday breached the 73-mark against the dollar for the first time in 16-months, after FPIs pulled out funds from both the equity and debt markets. FPIs have offloaded shares and bonds worth $3.5 billion in the last six sessions through Monday. The local currency has lost 2.6% so far in 2020.

Jinesh Gopani, head – equity at Axis MF, said: “It is very difficult to predict what will happen over the next two months, unless one knows what will be the final outcome of the virus issue. As a result, one can expect a high volatility. If these issues continue to prevail over a longer period, there would be some impact on the fourth quarter earnings.”

Meanwhile, the Union health ministry on Tuesday said six cases with high viral load have been detected during a sample testing in Agra. These are the ones who had come into contact with the Covid-19 patient from New Delhi, the release said.

The Nifty50 has never experienced a fall of this depth in the last eight years through 2019. The index has been yielding positive return in five out of the eight years. Analysts at Nomura expect a relatively lesser impact on Nifty50 earnings due to the virus spread and find this correction as an opportunity to accumulate beaten down stocks. The impact on Indian companies is primarily on account of near-term supply chain disruptions and changes in commodity prices, they said.

According to Nomura, compared to peers in Asia, India is relatively less exposed to the disruptions emerging from Covid-19 outbreak.

“In our assessment, the impact on Nifty earnings on account of Covid-19 disruption is likely to be less than 5% for FY21, over and above our expectation of a 5% cut in consensus earnings due to slower economic recovery,” the brokerage said in a note.

Between January and now, the Indian market has under-performed many of its peers such as the Hang Seng, Shanghai Composite and Taiwan TAIEX. Amit Khurana, head of equities and research at Dolat Capital Market, said companies from IT, Hotels, Airlines, Materials and key businesses associated with these sectors will see earnings cut for fiscal year 2021.

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