Yes Bank, coronavirus and US Fed moved market this week; here’s what to expect further

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Updated: Mar 07, 2020 1:09 PM

Analysts think that Coronavirus and Yes Bank are likely to remain the highlights of next week.

coronavirus, US Fed, globval market, market reviewMajor drags came from the banking sector, specifically PSU Banks, which corrected more than 7%.

It was another tumultuous week on Dalal Street that started with a positive response for SBI Cards and Payment Services IPO, followed by Coronavirus cases increasing in India and the US Federal Reserve cutting rates by half a percentage point, only to end with the Reserve Bank of India stepping up to save the cash-strapped Yes Bank. S&P BSE Sensex ended the week down 1,340 points at 37,576; while the broader NSE Nifty 50 slipped 351 points this week to end at just below the 11,000-mark.

Major drags came from the banking sector, specifically PSU Banks, which corrected more than 7%. Another sector that has seen a major fall is media with a fall of more than 8% for the week, whereas, IT and Pharma remained a major tool for index management, in process, they have gained 2.96% and 5.83% respectively,” said Vishal Wagh, Research Head, Bonanza Portfolios.

SBI Cards and Payment Services IPO: Investors did not shy away from the SBI Cards IPO oversubscribing it 26 times. Qualified Institutional Buyers (QIB) alone poured in more than Rs 1 lakh crore for the IPO. Bids were received for a total of 266 crore shares against the 10 crore shares that were offered under various categories.

Coronavirus: Global markets witnessed sharp sell-offs as Coronavirus continued to spread. During the week the number of Coronavirus cases in India touched 30. Raamdeo Agrawal, Managing Director of Motilal Financial Services during a conference call at the start of this week said that the fear of Coronavirus spreading might change consumer behaviour and investor behaviour resulting in bad earning profiles for companies.

US Fed cuts rates: In a weekly note Jimeet Modi, Founder and CEO of Samco Securities said, “It was widely felt by the market participants that the recent US Fed rate cut of 50 bps was a proactive step. But it was actually the reverse. Mr. Market’s behavior dictated the Fed to reduce interest rates which can be inferred from the 10-year US Treasury yields which had started to fall from 1.50% since mid-February to nearly 1% when the Fed formally reduced the rate.” The rate cut by the Fed had quite the opposite reaction than what the central bank had thought. US stocks rose for 15 minutes post the rate cut and then it was a downward trend for the entire day.

Also read: Why US stocks fell instead of rising after US Fed rate cut; here’s how human psyche played out

Plan to save Yes Bank: On Thursday when the news broke of SBI getting approval to save the troubled lender, Yes Bank. However, later in the day, RBI put Yes Bank under a moratorium, limiting withdrawal by customers which saw a negative reaction from investors as the scrip tanked 80% on Friday. “Yes Bank-saga remained treat of the week for the bears. On an intraday basis, it has almost lost 80% over the close of Thursday. As news flow suggests there may be a quick solution to the issue but one needs official confirmation,” said Wagh. RBI has now come up with a plan to restructure Yes Bank which will see SBI put in Rs 2,450 crore in the bank.

The week ahead: Analysts think that Coronavirus and Yes Bank are likely to remain the highlights of next week. “Markets seem to be in a bearish trend with heightened volatility for the time being and investors will be watchful for any news regarding the number of confirmed Coronavirus cases around the world. Domestically also, Investors will be waiting for clarifications on the Yes Bank issue,” said Vinod Nai, Research Head at Geojit Financial Services. While Jimeet Modi thinks the week ahead will see investors drift away from equities till clarity emerges. He added, “However, investors and high taxpayers will have a very good opportunity to invest in ELSS funds before the year-end to take advantage of 10-12% correction in frontline stocks. Investors should also accumulate respective leaders from private sector banks, NBFC, FMCG, IT and pharmaceutical sectors as these will provide a good return on investment from a 3-5 years perspective.”

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