Bulls quarantined by coronavirus spread, Sensex ends below 40K-mark

Foreign portfolio investors (FPIs) sold shares worth Rs 3,337 crore, while domestic institutional investors (DII) tried to offset some selling by pumping in Rs 2,786 crore into stocks

The benchmark indices fell for the fourth consecutive session on Wednesday as investors across the globe shunned riskier assets because the spread of coronavirus showed no signs of abating. Experts say investors are fretting over the impact of the outbreak on the global economy and corporate earnings.

The benchmark Sensex dropped 3.5 per cent, or 1,434 points, in the four sessions and is showing few signs of a reversal as foreign institutional investors (FIIs) continue to pullout. On Wednesday, the index fell 392 points, or 0.97 per cent, to end at 39,889. The Nifty 50 index dropped 119 points, or 1.01 per cent, to close at 11,679, breaking key support levels. Barring one, all the BSE sectoral indices ended the session in the red.

According to the latest reports, coronavirus has spread to parts of Asia, Europe and West Asia. South Korea reported 284 new cases, raising the number of those infected to 1,261, the most outside China. Apart from this, the first case from Latin America was reported. Major European and Asian markets fell an average 1 per cent on Wednesday. Germany’s DAX fell 1.71 per cent, France’s CAC fell 1.11 per cent, UK’s FTSE fell 0.98 per cent, and China’s Shanghai Composite fell by 0.83 per cent.

Foreign portfolio investors (FPIs) sold shares worth Rs 3,337 crore, while domestic institutional investors (DII) tried to offset some selling by pumping in Rs 2,786 crore into stocks.

Analysts said apart from the economic woes, the controversial citizenship law and the resultant unrest in the national capital over the past few days have hurt India’s image of being the go-to investment destination.

Investors have moved from riskier assets to safe-haven assets, said experts.

Over the past four sessions, gold prices in India have risen by Rs 990, or 2.2 per cent, per 10 grams to Rs 42,284. Analysts said a global recession would be the likely consequence if the coronavirus becomes a pandemic.

“The outbreak in South Korea, Italy and Iran does not make sense and will spook the markets. These places are outside China and we do not know where it is coming from. The expectation that coronavirus was going to die down and there will be recovery is becoming less certain. When markets do not know what is happening, they factor in the worst,” said Andrew Holland, chief executive officer, Avendus Capital Alternate Strategies.

The outbreak has added to the woes of the Indian market, which is facing volatility because of issues like a weak economy, lacklustre earnings growth and lack of lending activity due to a crisis in the non-banking finance companies (NBFC) sector.

“Increasing concern regarding coronavirus the world over is impacting the global market. The economic impact is expected to be worse than thought earlier, forcing investors to stay away from risky assets. The domestic market is bracing for… subdued GDP (gross domestic product) growth, which is adding to the fear,” said Vinod Nair, head of research, Geojit Financial Services.

Barring seven, all the constituents of the Sensex ended the session with losses. Sun Pharma was the worst-performing stock and fell by 3.6 per cent, Maruti fell by 2.7 per cent, Larsen & Toubro fell by 2.5 per cent, and Infosys fell by 1.96 per cent.

On an overall basis, 1,655 stocks declined, and 808 advanced on the BSE. Market participants said concerns about coronavirus will affect the market movement.

“If the virus continues to spread, it will affect manufacturing and lead to supply chain disruption across the globe, including India. We were expecting the global economy to recover and now the outbreak is adversely affecting global growth. Till now it has affected a small part of global growth, but the damage would be more serious if it is not contained,” said Holland.