Share markets witnessed extreme volatility this week as bears took over. S&P BSE Sensex fell 2,847 points and the border NSE Nifty-50 dropped 787 points.
Share markets witnessed extreme volatility this week as bears took over. S&P BSE Sensex fell 2,847 points and the border NSE Nifty-50 dropped 787 points. On the last day of the week, Nifty tanked 10 per cent in the initial hour of trade after which trading was halted for 45-minutes. “Such fall can only be witnessed in financial markets because they are liquid but not witnessed in real economy. Contrary to this in a similar situation, a farmer will not sell his land if for one year the weather is bad, similarly, investors too should not be selling their core equity holdings just because this year will be bad for the economy,” said Jimeet Modi, Founder and CEO, SAMCO Securities & StockNote. Modi added that the wisest rule in investment is: when others are selling, buy.
Sensex records worst single-day fall: S&P BSE Sensex tanked as much as 3,204 points or 8.98 per cent on Thursday only to trim some losses to end down by just 2,919 points on the day. “Recession fears increased after WHO declared coronavirus a pandemic which forced investors to sell off risky assets. Fresh travel bans across nations are contributing to the fears that economic impact will be much larger than earlier estimates,” said Vinod Nair of Geoit Finance about Thursday’s fall.
Coronavirus becomes a pandemic: During the week, the World Health Organisation (WHO) officially declared the Coronavirus as a pandemic, spiking fear among investors across the globe. Siddharth Mehta, Founder & CIO, Bay Capital said, “The shock that coronavirus seems to have wrought on the world markets is unparalleled in recent history. The fact that it has gone on to affect mobility and social interaction has only amplified the sense of panic which is abundantly reflected in financial markets.” India recorded a jump in cases this week and saw its first two Coronavirus-related deaths.
Trading halted on Friday: As a measure to curb the extreme volatility, trading was halted on the stock exchanges on Friday morning for a brief 45-minutes. After trading resumed Sensex staged a 4,700 point recovery from the day’s low. Stock market witnessed a halt in trading for the first time in more than 12 years.
Yes Bank restructuring: After the Reserve Bank of India released the draft reconstruction plan for troubled private-sector lender Yes Bank last week, this week the reconstruction plan took shape. On Friday, the Union Cabinet approved the Yes Bank Reconstruction Scheme 2020, after which HDFC, ICICI Bank, Axis Bank, Kotak Mahindra Bank and Bandhan Bank announced their plans to purchase equity in the reconstructed bank. The total investment, from these private investors, is likely to be up to Rs 3,400 crore.
The week ahead: In the coming week market volatility is likely to take a toll on the listing of SBI Cards and Payment Services. Market players are also keeping an eye on the reconstruction scheme for Yes Bank. The scheme has introduced a three-year lock-in period for 75 per cent investment of those with 100 shares or more. Coronavirus spreading across the globe is likely to keep volatility high in the share market.