Trading was also halted in Korea, Thailand, Philippines and Indonesia after these markets hit their lower circuit limits. Barring Korea, all other markets too ended the day in the green alongside India.
Markets wildly gyrated on Friday, with the broader Nifty50 rallying as much as 5.9% during intraday trade after the indices hit a lower circuit during early trading hours for the first time in almost 12 years as foreign portfolio investors sold equities worth $816 million.
Trading was also halted in Korea, Thailand, Philippines and Indonesia after these markets hit their lower circuit limits. Barring Korea, all other markets too ended the day in the green alongside India. After the massive selling seen in the last few days, rainmakers are being asked if the markets have hit a nadir by investors sitting in the sidelines.
No strategist worth his salt is willing to call this a trend reversal yet as experts believe that the road ahead will continue to be turbulent. India’s Volatility Index or VIX spiked as high as 51.47% on Friday as markets swung wildly.
All the 19 sectoral indices compiled by the BSE closed higher on Friday with the BSE Telecom surging the most, up 6.4%. That was followed by BSE Finance, BSE Metal and BSE Oil & Gas, surging 5% each. Bank Nifty rebounded 1,195 points or 5% to close the session at 25,166.45 points after plunging nearly 11% in intraday trade.
Experts believe although the recovery will bring in some relief in the short-term, further pain cannot be completely ruled out because fears of an economic fallout of the Covid-19 is yet to be fully realised. Andrew Holland, CEO at Avendus Capital Public Markets Alternate Strategies, is of the view that the best thing to do is to sit on the sidelines as everything is moving very quickly. “When things improve, markets will react. It is better to wait for things to settle down,” he said.
While uncertainty around the novel pandemic is nowhere near subsiding, the 20% correction in the market has brought down pricey valuations of Indian equities, which has always remained frothy compared to its emerging market peers. However, market participants do note that uncertainties will continue to persist throughout 2020.
S Naren, executive director and chief investment officer at ICICI Prudential AMC, said market valuations have turned attractive post the recent correction and the current market conditions present attractive investment opportunities for a patient long-term investor. “However, one cannot discount the probable developments with regards to coronavirus in the times ahead and hence, the markets could remain volatile.
Existing SIPs should be continued and if possible one can also consider topping-up one’s investment,” Naren said. The broader Nifty50 fell by a whopping 1,035 points on Friday morning, before ending the session higher by 3.8% at 9,955.20. As on Friday, the Nifty50 is still at near two-and-a-half year low.
The benchmark Sensex fell by as much as 3,389 points on Friday before closing the session up 4.04% at 34,103.48. Even as trading halted on Friday morning, the Securities and Exchange Board of India (SEBI) notified that it was prepared to take suitable actions “as may be required”. However, with the Dow Futures reversing course, sentiments turned positive and buyers came into action, experts said.
Deven Choksey, managing director at KR Choksey Investment Managers, said: “They say derivatives are weapons of mass destruction. China did a smart job by preventing FII short-selling and curbing their trading when the Covid-19 broke out in their country last month. And their market wealth stood unaffected at $4.2 trillion despite of serious economic impact. India and rest of the world failed to check selling by FIIs/traded funds and in the process are paying a big price,” he said.
Choksey further pointed out that on Thursday, the FII net sell volume in the cash market was `3,475.29 crore while the total volume in the derivative market was `26.32 lakh crore. Even if 70% of the total volume or `18 lakh crore belonged to FIIs, the ratio of their cash to derivative market volume is over 500 times, he said.
Deepak Jasani- head Retail Research, HDFC Securities, told FE that crossing the 10,600-mark for Nifty50 will not be easy. ‘Post the cooling period that was imposed, the Dow futures recovered considerably leading to a change in the overall sentiments. Once the selling halted, buyers came back to the market that eventually resulted in the rally in the Indian markets. However, we think that the 10,600-mark for Nifty50 will not be easy to cross.
We believe there could be some sort of stability in the markets for a few days or maybe weeks, and then we may see another round of selling. This is because the impact of now known negatives on the economy/corporate sector may not be fully appreciated,’ Jasani said.
European markets too staged a smart recovery on Friday with the FTSE100, CAC 40 and DAX gaining over 7% each intraday while the Dow Jones futures added 1,110 points during Friday’s trade. US markets rebounded sharply after Thursday’s bloodbath. S&P 500 regained some lost ground while Dow Jones rose 4% in early trade.