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Crash, pause and rally: Sensex swings 5,380 pts

BSE Mumbai -- Indian equity markets went on a free-fall on Thursday as investors pressed and held the 'sell' button after the World Health Organisation declared the novel coronavirus outbreak a "pandemic" and the United States suspended travel from Europe. Exphoto By Pradip Das,2020 March 12th, Mumbai.

Friday’s mega recovery doesn’t mean that markets have returned to the bull phase. Downside risk for the Indian markets cannot be ruled out in the near term, given uncertainty across the globe.

The Sensex on Friday skyrocketed over 4,715 points from its intra-day low and closed with a gain of 1,325 points, or 4.04 per cent after markets went on a ride, with trading being halted for the first time in 12 years. The index closed the session at 34,103.48 after swinging 5,380 points (intra-day low to intra-day high).

Benchmark indices plunged over 10 per cent in opening trade. The Sensex, which dived over 3,300 points in the opening session, staged a pulsating recovery after US stock market futures surged 400 points and European bourses showed signs of a recovery.

Explained

Volatility likely to stay high

Friday’s mega recovery doesn’t mean that markets have returned to the bull phase. Downside risk for the Indian markets cannot be ruled out in the near term, given uncertainty across the globe.

The BSE and the NSE suspended trading for 45 minutes around 9.20 am after the Sensex and the Nifty plunged 10 per cent in line with the global sell-off as the coronavirus pandemic triggered recession fears. However, when trading resumed, domestic indices surged as investors snapped up battered stocks available at attractive cheap valuations amid expectations of stimulus measures by the US and other nations.

Domestic institutions were heavy buyers and accumulated stocks worth over Rs 5,867 crore, while foreign investors pulled out another Rs 6,000 crore from the equity market. With this, withdrawals by foreign investors from India have come close to Rs 20,000 crore in the last four sessions.

The Nifty settled 365.05 points, or 3.81 per cent, up at 9,955.20 after hitting an intra-day low of 8,555.15. The Sensex plummeted 3,473 points or 9.24 per cent, while the Nifty lost 1,034.25 points or 9.41 per cent during the week. Investor wealth, or market capitalisation, worth around Rs 15 lakh crore has been wiped out in the last four sessions.

The rupee rebounded 48 paise to 73.80 against the dollar after the RBI assured steps to maintain liquidity in forex markets and announced a $2 billion dollar-rupee swap deal.

Downside risk for the Indian markets cannot be ruled out in the near term, given uncertainty across globe, analysts said. “The improvement in domestic macro data (IIP and easing CPI) is a good sign. However, growth recovery still remains evasive and therefore there are high expectations that the RBI may cut rates in its next policy meet to offset the impact of coronavirus as well as economic slowdown. Meanwhile, in the near term, we expect volatility to remain high and maintain cautious stance,” said Ajit Mishra, VP - Research, Religare Broking.

Chief Economic Advisor Krishnamurthy Subramanian also said the government and the RBI will take all necessary steps to quell the “fear sentiment” created due to the coronavirus outbreak.