Markets open weak: Sensex slumps over 400 points, Nifty drops below 9,200-mark; bank stocks slide

Equities fell on Tuesday, tracking Asian markets that dropped on worries about a second wave of coronavirus cases, following news of fresh infections in the Chinese city where the COVID-19 pandemic originated. The central Chinese city of Wuhan reported five new cases on Monday, casting doubts over efforts to lower coronavirus-related curbs as businesses restart and individuals went back to work.

Sensex dropped over 400 points in opening session on Tuesday dragged by losses in index-heavyweights HDFC twins, Reliance Industries and ICICI Bank amid weak cues from global markets.
After touching a low of 31,097.50, the 30-share index was trading 400.20 points or 1.27 percent lower at 31,161.02.

Similarly, NSE Nifty declined 103.95 points, or 1.13 percent, to 9,135.25.

The central Chinese city of Wuhan reported five new cases on Monday, casting doubts over efforts to lower coronavirus-related curbs as businesses restart and individuals went back to work. The Nifty banking index fell the most among the 12 sectoral indexes, with a 2.2 percent drop. Asian Paints was the top loser in the Sensex pack, falling over 3 percent, followed by HDFC duo, Maruti, ONGC, HUL, ICICI Bank and Kotak Bank.

 Markets open weak: Sensex slumps over 400 points, Nifty drops below 9,200-mark; bank stocks slide

Representative image. Reuters

On the other hand, UltraTech Cement, Tech Mahindra, Sun Pharma, ITC and NTPC were trading higher.

In the previous session, the BSE barometer settled 81.48 points or 0.26 percent lower at 31,561.22, and the broader Nifty fell 12.30 points, or 0.13 percent, to 9,239.20. Foreign portfolio investors purchased equities worth Rs 534.87 crore in the capital market on Monday, provisional exchange data showed. According to traders, weak cues from global markets on fears of a second wave of coronavirus infections spooked investors across Asia.

Rupee dips

In India, the death toll due to COVID-19 rose to 2,293 and the number of cases climbed to 70,756 on Tuesday, according to the health ministry.

Globally, the number of cases linked to the disease has crossed 41.77 lakh and the death toll has topped 2.86 lakh.

Asian stocks stumble on fears of second coronavirus wave

Asian shares skidded on Tuesday on growing worries about a second wave of coronavirus infections after the Chinese city where the pandemic originated reported its first new cases since its lockdown was lifted, Reuters said.

The central Chinese city of Wuhan reported five new cases on Monday, casting doubts over efforts to lower coronavirus-related restrictions across the country as businesses restart and individuals went back to work.

MSCI’s broadest index of Asia Pacific shares outside of Japan .MIAPJ0000PUS stumbled more than 1%, snapping two straight sessions of gains.

Hong Kong's Hang Seng index was among the hardest hit .HSI, down 1.4% followed closely by Australia , off 1.3%. Chinese shares dithered in early trade with the blue-chip CSI300 index .CSI300 off a shade. South Korea's KOSPI .KS11 faltered 0.9%.

As countries around the world gradually ease restrictions in an effort to restart their economies, investors are becoming anxious about a second wave of infections.

Germany’s Robert Koch Institute reported that the “reproduction rate” - the number of people each person infected with the coronavirus goes on to infect - had risen to 1.1. Any rate above 1 means the virus is spreading exponentially.

The worrisome news follows a fresh outbreak in night clubs in South Korea and record number of new cases in a day in Russia.

“The re-opening of the global economy will likely follow the shape of activity in China. Businesses there have restarted operations but are not necessarily at capacity,” Bob Baur, Chief Global Economist at Principal Global Investors.

“While businesses have mostly restarted, China’s households stay cautious. Restaurants are open, but seats are empty. Vehicle sales bounced off the bottom but are well below normal. Households in the U.S. and Europe will surely mirror this wary attitude even as activity picks up.”

Fund managers expect equity markets to stay the course through June and avoid retesting March lows given the massive monetary stimulus provided by the U.S. Federal Reserve and other major central banks.

Late on Monday, the Fed said it would start purchasing shares of exchange-traded funds that invest in bonds, one of several tools to improve market functioning in the wake of the coronavirus pandemic.

Markets are also keeping a wary eye on China’s trade relations with the United States as well as Australia.

U.S. President Donald Trump said on Monday he opposed renegotiating the U.S.-China “Phase 1” trade deal while Australian media reported that China has suspended imports from four abattoirs in an escalation of tensions.

On the policy front, investors will be looking to comments from Fed officials. James Bullard and Patrick Harker are due to make remarks at 1300 GMT and 1400 GMT, respectively, ahead of a highly anticipated speech from chairman Jerome Powell on Wednesday.

Overnight, the S&P 500 barely closed higher but the Nasdaq posted its sixth consecutive advance as technology and healthcare shares provided the biggest lift to all three major U.S. stock indexes.

The Nasdaq is now within 10% of its all-time high reached in February.

--With inputs from agencies

Updated Date: May 12, 2020 10:34:10 IST



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