It seems like the stock market has no plans to show a spike as both Nifty 50 and Sensex closed with deep cuts, following a weak trend in other Asian markets.
The BSE Sensex fell 3,934.72 points or 13.15 per cent to end at 25,981.24, while the Nifty50 dived 1,135.20 points or 12.98 per cent to 7,610.25.
Selling pressure was seen across sectors including banks, Energy, FMCG, Healthcare, IT, Auto, Capital Goods, Consumer Durables, Metal, Oil & Gas, Realty.
The Indian rupee ruptured 76 against the US dollar for the first time, closing 108 paise down at 76.27 a dollar on account of a steep decline in equity and Foreign Institutional Investor (FII) selling.
The Nifty50 closed the week on March 20 with losses of over 12 per cent while the more significant destruction was seen in, the broader market space.
Following the volatility in the stock market which has so far disintegrated above Rs 60 lakh crore in terms of market capitalisation on the BSE in the last one month, SEBI has launched measures to curb the volatility.
SEBI’s measures include updating the market-wide position limit to 50 per cent, which will reduce new short positions in individual stocks.
Experts believe that contracting rules on short selling can bring down extreme volatility during times of crisis. However, there can be unintended outcomes during panics.
Currently, the market is now oversold, short-covering may lead to sharp volatility. Additionally, when liquidity is low, trading in the cash market can drive to a crash in prices.
Five points which could be could be weighing on markets.
Global Stock Market collapse:
Asian shares plunged as a rising tide of national lockdowns loomed to confuse policy-makers desperate efforts to cushion what is anticipated to be a deep global recession.
International stock markets such as China’s Shanghai Composite, Hong Kong’s Hang Seng, Australia’s ASX 200 and South Korea’s Kospi closed lower by 3-6 per cent.
Partisan battles block US Senate coronavirus bill:
As per the reports, partisan battles in the US Senate on March 22 held a coronavirus response bill from propelling, even as negotiations continued over Democrats’ demands for more federal funding for medical care including state and local efforts to combat the outbreak.
The measure wavered after it slipped to get the necessary 60 votes in the 100-member chamber to clear a procedural obstacle after days of negotiations. The failure of the proposal to move forward sends Democrats and Republicans back to the bargaining table.
Upsurge in Coronavirus infections:
The global death toll exceeded over 15,000, leaving more than 300,000 people infected. Almost one in three Americans were ordered to quarantine on March 22 to slow the spread of the virus, while Italy banned internal travel as deaths toll reached 5,476.
Coronavirus cases surged over 400 in India, pressing the centre and state governments to announce a complete shutdown of as many as 30 states and Union Territories and 548 districts across the nation where COVID-19 cases have been reported.
Due to a sudden spike in the cases in the country, the states will invoke Sections 188 and 269 of the Indian Penal Code, which are both bailable. As on March 24, Maharashtra and Kerala have reported the maximum number of COVID-19 cases in the country at 89 and 67, respectively.
The government also ordered that all inter-state buses, passenger trains, and metro services have been suspended across the country till March 31.
Automakers pause production:
Due to the coronavirus outbreak, India’s biggest automaker Maruti Suzuki India and rivals including Mahindra & Mahindra, Mercedes-Benz, Fiat Chrysler Automobiles (FCA) as well as Hyundai Motor Co stated they would halt car production in the country.
The move comes after automakers shut plants last week in Europe, the United States, Canada, and Mexico as the global death toll sharply increased.
FII selling continues:
FIIs net sold Rs 20,908 crore worth of shares in the week ended March 20, taking the total to Rs 51,243 crore in March so far. It was the biggest ever monthly outflow.
FIIs also pulled out more than Rs 52,000 crore from the debt market in the month so far, a net total of more than Rs 1.03 crore has been withdrawn from India.
From February 24, FIIs have consistently been net sellers to the tune of Rs 62,611.82 crore, which was over USD 8 billion in dollar terms (at 75.20 per dollar rate).