A big selloff in banking stocks drove Indian markets sharply lower today. Extension of lockdown and weak global markets amid rising US-China tensions sapped optimism that had led to 14% gains in April. The Sensex today slumped 2002 points or 6% to close at 31,715 while Nifty plunged 5.75% to 31,715. The government on Friday extended the nationwide coronavirus lockdown for another two weeks while easing some restrictions in lower-risk zones.
Banking stocks led the fall today with Nifty Bank index slumping 8.3% today on concerns that bad debts may spike after coronavirus crisis brought the economy to a sudden halt. HDFC Bank, Bandhan Bank, Axis Bank, IndusInd Bank, Federal Bank and ICICI Bank fell between 7% and 10%.
India's manufacturing activity contracted at its sharpest pace on record in April as a lockdown to combat the rapid spread of the coronavirus led to a slump in demand and massive supply chain disruptions, a private sector survey showed.
The Nikkei Manufacturing Purchasing Managers' Index, compiled by IHS Markit, plunged to 27.4 last month from March's 51.8, by far its lowest since the survey began in March 2005 and its first time below the 50-mark separating growth from contraction in nearly three years.
Global risk sentiment took a hit after US President Donald Trump last week threatened new tariffs on China to retaliate for the spread of the novel coronavirus, putting the brakes on optimism about an economic re-start as countries ease restrictions.
The India VIX index, commonly referred to as fear gauge, today spiked 29% to 43.74, reflecting the nervousness among investors. The rupee today slumped to 75.72 against US dollar.
Here is what analysts said on today's market action:
Ajit Mishra, VP - Research, Religare Broking Ltd.
"The abrupt end of the recovery has certainly caught the participants completely off-guard and we might see the index drifting further lower ahead. With no major development on the local front, we feel the global cues would continue to dictate the market trend. However, any news on a stimulus package for the ailing sectors may provide a breather."
Vinod Nair, Head of Research at Geojit Financial Services
"In sync with global markets, the Indian benchmark indices lost around 5.6% with an increase in the volatility index by around 28%. Globally, rising trade war tensions between US-China and domestically, dire economic news added to the negativity. The extension of the lockdown and the fear that the economy and businesses will take longer to get back on track, impacted the markets. Indian market will continue to be driven by global news flow and domestic earnings commentary. "
Sumeet Bagadia, Executive Director, Choice Broking
"On back of global cues, the Nifty gave a gap-down opening and continued its downside movement. At present level, the index has strong resistance at 9450 while downside good support comes at 9170-9000 level."
Narendra Solanki, Head- Equity Research (Fundamental), Anand Rathi Shares
“Indian markets opened lower taking negative cues from its global peers in Asia. Although the major markets in Japan and China were closed for holidays, stocks in other Asian markets fell as tensions between the US and China weighed on investor sentiment. The sentiments also remained downbeat after Indian manufacturing activity growth declined sharply in the month of April 2020, amid national lockdown restrictions to help stem the spread of the coronavirus disease."
Source - LIVE MINT