Shrugging off the global markets rally and likely benefits of the mega economic package announced on Sunday, the equity benchmarks witnessed a sharp plunge as investors were cautious over rising number of coronavirus cases in the country. Globally, while economies are gradually opening up due to slowdown in new cases, India announced its fourth lockdown. Major economic hubs are in the red zone which accounts for 46 percent of GDP, while the activity in green and others zones are not activated at full capacity.
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Sensex crashed 1,069 points on Monday tracking massive selloffs in banking and auto stocks as government’s fiscal stimulus package failed to revive confidence in domestic investors. The 30-share BSE index ended 1,068.75 points or 3.44 percent lower at 30,028.98, while the broader NSE Nifty plunged 313.60 points or 3.43 percent to 8,823.25.
Goldman Sachs report that the Indian economy will contract 45 percent in Q1 FY21 also dented sentiments. The market made a negative start; however, selling got accelerated with passing session, ending at day low level with a loss of 3.4 percent. Economic sensitive sectors witnessed a sharp selling with banking index ending with a loss of 7 percent. IT and pharma, however, ended in green. The coronavirus situation and economic development in the country will remain the crucial factors for the markets in coming trading sessions.
Sumeet Bagadia, Executive Director, Choice Broking, told Firstpost: The Nifty ends below 8,850 on lockdown extension; Cipla gains 5 percent. Among sectors, except IT other sectoral indices ended lower, with Nifty Bank falling over 6 percent followed by auto, metal and Infra. On technical front, the index has halted the movement at 161.6 percent FRL, i.e. 8,820-level of its previous up move. Furthermore, it has closed below 21 and 50 DMA which further points to weakness in the counter. At the present level, the index is having a good resistance level at 9,150-level while support comes at 8,740-levels.
IndusInd Bank was the top laggard in the Sensex pack, cracking around 10 percent, followed by HDFC, Maruti Suzuki, Axis Bank and UltraTech Cement. On the other hand, TCS, Infosys, ITC and HCL Tech closed with gains.
Paras Bothra, President of Equity Research, Ashika Stock Broking, told Firstpost,"Domestic markets opened lower despite positive global cues and dragged by muted domestic sentiments as government's Rs 20 lakh crore stimulus package came far lower than what markets were expecting. Besides, lockdown has also been extended till 31 May although with new riders. There will be sharp disconnect between the global markets and domestic bourses as the rally in global bourses will majorly be backed by fiscal measures," he said.
Traders and investors remained on edge as the Home Ministry extended the lockdown for another two weeks till 31 May to contain the spread of coronavirus, said Narendra Solanki, Head- Equity Research (Fundamental), Anand Rathi to PTI
Manish Hathiramani, Index Trader and Market Analyst, Deen Dayal Investments, told Firstpost, "the markets continued their downtrend with no signs of recovering. I expect this southward trend to continue, the first pitstop would be 8650-8750 range where the markets might decide to take a breather. At that point, traders can again go short by initiating positions in the 8700 8750 Put Options of 28 May expiry. The next level to watch out for would be 8200.
The relief package announcements appeared falling short of meeting market expectations on any demand side reforms, triggering an intense selloff in the domestic market, he noted.
The government, in its first four tranches of the stimulus package, focussed on credit line to small businesses and new fund creations to be shouldered by banks and financial institutions with very little extra budget spending.
In the last set of measures, the centre on Sunday announced plans to privatise PSUs in non-strategic sectors and suspend loan default-triggered bankruptcy filings for one year, and also gave a Rs 40,000-crore hike in allocation for the rural employment guarantee scheme to provide jobs to migrant workers.
The domestic market started off the week on a negative note despite positive cues from global market peers as global economies across the world continue to lift lockdown restrictions, allowing more businesses to cautiously open, Solanki said.
Bourses in Shanghai, Hong Kong, Tokyo and Seoul ended on a positive note, while those in Europe were trading significantly higher in early deals.
Globally, the number of cases linked to the disease has crossed 47.13 lakh and the death toll has topped 3.15 lakh.
The number of COVID-19 cases in India spiked to 96,169, while the death toll rose to 3,029, according to the health ministry.
Rupee settles 33 paise lower at 75.91 against US dollar
The rupee plummeted 33 paise to close at 75.91 (provisional) against the US dollar on Monday, tracking weak domestic equities and foreign fund outflows.
Forex traders said rising crude oil prices and concerns about the effectiveness of the fiscal stimulus package also weighed on investor sentiment. Besides, market participants said the extension of the nationwide lockdown could weigh on the economic outlook of the country, according to PTI.
The local unit opened sharply lower at 75.85, then lost further ground to finally settle at 75.91 against the US dollar, down 33 paise over its previous close. It had settled at 75.58 against the US dollar on Friday.
The government on Sunday extended the coronavirus lockdown for two more weeks with the fourth phase providing more relaxations outside the containment zones.
Though some restrictions were eased, "but the extension could further worsen the economic outlook for the current fiscal year, which could weigh on the currency further," Reliance Securities said in a research note.
Gold thrives on flight to safety; palladium jumps
Gold jumped more than 1 percent on Monday to its highest since October 2012 after a batch of weak data knocked hopes for a speedy global economic recovery while auto-catalyst palladium surged to a three-week high.
Spot gold was up 1 percent at $1,758.55 an ounce by 0931 GMT and U.S. gold futures rose 0.8 percent to $1,770.70, according to Reuters.
“The market continues to speculate about negative interest rates in the U.S. and extremely low interest rates and cheap money all over the world,” said Commerzbank analyst Eugen Weinberg.
“Also, fears of economic crisis are unfolding given the very weak data in the United States and elsewhere.”
Data published on Friday showed US retail sales and industrial production both plunged in April, with the coronavirus crisis continuing to pummel the U.S. labour market.Data in Japan, meanwhile, confirmed that the world’s third-largest economy slipped into recession in the first quarter.
Brent at one-month high, US oil tops $30 as restrictions ease
Oil prices climbed by more than $1 a barrel on Monday, with benchmark Brent hitting a one-month high and US crude topping $30 supported by optimism about the re-opening of economies and output cuts by major producers.
Brent crude was up $1.21, or 3.7 percent, at $33.71 a barrel by 0912 GMT, its highest level since mid-April, according to Reuters.
US West Texas Intermediate (WTI) crude was up $1.59 or 5.4 percent at $31.02 per barrel, its highest since mid-March.
“Optimism on the demand side of the oil equation has helped prices climb further, with gasoline demand coming back as governments ease confinement measures,” said Rystad Energy’s senior oil markets analyst Paola Rodriguez Masiu.
---With inputs from agencies
Updated Date: May 18, 2020 16:30:24 IST