Coronavirus effect: Sensex crashes 807 pts, rupee falls

By: ENS Economic Bureau | Mumbai | Updated: February 25, 2020 4:32:45 am

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The rupee, meanwhile, fell by 34 paise to close at more than three-month low of 71.98 against the US dollar, tracking heavy selling in domestic equities and strengthening of the US currency in the overseas market. (Representational image)

Joining a global sell-off, Sensex on Monday plunged nearly 807 points as coronavirus (COVID-19) cases spread across the world, ringing alarm bells in more countries outside China.

The 30-share Sensex settled at 40,363.23, dropping 806.89 points or 1.96 per cent, the second biggest one-day fall in 2020, as bourses from Seoul to Hong Kong fell on worries over the impact of the virus on human lives and the economy. The broader NSE Nifty fell 251.45 points or 2.08 per cent to 11,829.40 after markets were caught in a panic-selling mode as investors turned nervous over a large number of new virus cases in South Korea, Italy and Iran.

The rupee, meanwhile, fell by 34 paise to close at more than three-month low of 71.98 against the US dollar, tracking heavy selling in domestic equities and strengthening of the US currency in the overseas market.

The stock market fall has sent gold, a safe haven asset in times of uncertainty, to a seven-year high, while high-yielding, riskier currencies including the Australian dollar and Indonesian rupiah, were all down. “Fears of secondary infections increasing outside of China sent risk assets in a tailspin and a wave of refuge-seeking into safe-haven. With the outbreak showing little sign of easing, investors are increasingly concerned it could have a much longer-term impact on the world economy, which was already stuttering, with a number of companies warning about their bottom lines,” said Deepak Jasani, head—retail research, HDFC Securities.

Spot gold prices rose 2.8 per cent on Monday, according to reports. Crude prices tanked on worries about plunging demand from China, the world’s biggest importer and consumer of the commodity, sending energy firms in the region sharply lower.

Global markets bore the brunt of rising virus cases in new regions other than China. Traders had been broadly optimistic that the virus — which has killed nearly 2,600 and infected 80,000 — was being contained outside China, but a spurt of infections and deaths in other countries including South Korea, Italy and Iran has fanned fears of a wider outbreak.

Explained

Long-term impact on world economy likely

With the coronavirus outbreak showing little sign of easing, investors are increasingly concerned it could have a much longer-term impact on the world economy, which was already stuttering. A number of companies have already warned about their bottom lines. The impact could also hit Indian companies which rely on Chinese suppliers. There could be production cuts and prices hikes, hitting the already sagging growth further. This will also be reflected on the stock markets.

“Demand for safe-haven assets spiked as fresh coronavirus cases in South Korea and Italy indicated that business impact could be higher than thought earlier. The Trump-Modi meet is not providing clues to the market regarding trade deal but market is hoping for some hint in the future,” Vinod Nair, head of research at Geojit Financial Services, said.

All Sensex components ended in the red, with Tata Steel plunging 6.39 per cent, followed by ONGC, Maruti, HDFC, Titan and ICICI Bank. Sectorally, the BSE metal index tumbled nearly 6 per cent, auto 3.39 per cent and telecom 3.33 per cent. All sectoral indices closed in the red. In the broader market, BSE midcap and smallcap indices sank up to 1.60 per cent. The IMF, meanwhile, warned that the deadly epidemic could put an already fragile global economy recovery at risk. Chinese President Xi Jinping on Sunday said the epidemic is the country’s “largest public health emergency”. The death toll from the virus rose to 2,592 in China on Monday.

Dow sinks 1,000 points

Meanwhile, stocks across the globe posted their largest decline in over two years on Monday.

At 1:06 pm ET, the Dow Jones Industrial Average was down 1,027.29 points, or 3.54 per cent, at 27,965.12 and the S&P 500 was down 116.33 points, or 3.49 per cent, at 3,221.42. The Nasdaq Composite was down 377.81 points, or 3.95 per cent, at 9,198.78. The S&P 500 fell below its 50-day moving average and the Dow slipped below its 100-day moving average, all closely watched indicators of momentum, according to a Reuters report. The pan-European FTSEurofirst 300 index lost 3.76 per cent, with Milan’s stock market down more than 5 per cent. MSCI’s gauge of stocks across the globe shed 2.82 per cent, its biggest single-day decline since February 5, 2018, when concerns over a spike in inflation sent stocks tumbling.

Emerging market stocks lost 2.71 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 2.58 per cent lower, while Japan’s markets were closed for a holiday.

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