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A large sell-off in bank stocks led Indian markets lower today. The extension of the closure and the weakness of world markets amid mounting tensions between the United States and China weakened the optimism that had led to gains of 14% in April. The Sensex today fell 2002 points or 6% to close at 31,715 while Nifty fell 5.75% to 31,715. The government on Friday extended the national coronavirus blockade for another two weeks, while easing some restrictions in lower-risk areas.
Bank stocks led the drop today with the Nifty Bank index falling 8.3% today due to concerns that bad debt may rise after the coronavirus crisis that suddenly stopped the economy. 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 fastest pace in April, as a blockade to combat the rapid spread of the coronavirus caused demand to drop and major disruptions in the supply chain, a private sector survey showed.
The Nikkei Manufacturing Purchasing Managers Index, compiled by IHS Markit, fell to 27.4 last month from March 51.8, by far its lowest level since the survey began in March 2005 and its first time below the 50 brands that separate growth from contraction in nearly three years. .
Global risk sentiment was shattered after United States President Donald Trump threatened last week with new tariffs on China to retaliate for the spread of the new coronavirus, curbing optimism about an economic restart as countries ease restrictions.
The India VIX index, commonly known as a fear indicator, rose 29% to 43.74 today, reflecting nervousness among investors. Today’s rupee fell to 75.72 against the US dollar.
Here is what analysts said about current market action:
Ajit Mishra, VP – Research, Religare Broking Ltd.
“The abrupt end to the recovery certainly surprised participants completely unprepared and we could see the index shift further downward. Without significant development on the local front, we believe global signals will continue to dictate the market trend.” Any news about a stimulus package for the sick sectors can provide respite. “
Vinod Nair, Head of Research at Geojit Financial Services
“In sync with global markets, the Indian benchmarks lost around 5.6% with an volatility index rise of around 28%. Globally, rising trade war tensions between the United States and China and Terrible domestic economic news added to the negativity. The extension of the blockade and the fear that the economy and companies will take longer to get back on track impacted the markets. The Indian market will continue to be driven by the flow of global news. and comments on internal earnings. “
Sumeet Bagadia, Executive Director, Choice Broking
“Following global signals, the Nifty opened a gap and continued its downside move. At the current level, the index has strong resistance at 9450, while good downside support hits the 9170-9000 level.” .
Narendra Solanki, Head- Equity Research (Fundamental), Anand Rathi shares
“Indian markets opened lower taking negative signals from their global peers in Asia. Although the main markets in Japan and China were closed for holidays, stocks in other Asian markets fell as tensions between the United States and China weighed on investor sentiment. Sentiment also remained depressed after growth in India’s manufacturing activity slowed sharply in April 2020, amid national blockade restrictions to help stop the spread of the coronavirus disease. “
