Markets Lose Cheer Amidst Virus Spread

Now that an increasing number of people have tested positive for the corona virus from such countries as Italy, Hong Kong, Iran and South Korea the markets have become increasingly subdued

Even as China reported a decrease in the new number of cases related to coronavirus, that wasn’t the case worldwide. China was able to curb the spread of the virus and thus slowly restart business operations throughout various regions in the country, albeit with precautions. But even as the world assumed steady revival in businesses post the virus crisis, a sudden increase was seen in positive coronavirus cases reported aboard a cruise ship, the Diamond Princess. The once abating fears started to emerge again. Moreover, cases are now being reported from countries like Italy, Iran and South Korea thereby raising the threat level alert.

Under the shadow of this disaster, during the fortnight, global indices began to crumble. US indices such as NASDAQ, S&P 500 and Dow Jones Industrial Average (DJIA) were down by 4.33 per cent, 3.93 per cent and 4.49 per cent respectively. On worries about the global economic impact of a potential pandemic, on February 25, 2020, S&P 500 and the Dow Jones Industrial witnessed their biggest one-day percentage losses in two years.

Similarly, European indices were trading in negative as well since FTSE 100 was down by 4.57 per cent, DAX fell by 4.35 per cent and CAC 40 dropped by 4.34 per cent. Hang Seng and Nikkei dipped by 1.54 per cent and 1.26 per cent respectively. Meanwhile, as the Chinese economy began to inch towards normalcy, investor confidence was boosted with the Shanghai index up by 4.87 per cent.

Among other global triggers was the scheduled visit of US President Donald Trump to India. The domestic indices Sensex and Nifty, similar to global markets, fell by 2.07 per cent and 2.30 per cent respectively. The Mid-Cap index was down by 2.47 per cent whereas the Small-Cap index fell by 1.61. Since many of Indian businesses are dependent on Chinese exports and imports of raw material, the impact of restricted travel was seen with a drop in majority of the sectoral indices. Metal plummeted by 7.10 per cent followed by Realty, Auto and Power all in negative by 5.95 per cent, 5.42 per cent and 5.53 per cent respectively. Bankex and FMCG fell by 2.41 per cent and 1.26 per cent. The IT index witnessed a flat growth of 0.37 per cent.

The trading data for the FIIs and DIIs showed that for the fortnight, FIIs were net buyers to the tune of Rs. 2,819.76 crore whereas DIIs were net sellers to the tune of Rs. 704.21 crore.

Because of the rising alarm levels, investors preferred traditionally safehaven assets such as gold and US Treasuries. Thus, gold surged by almost 7.04 per cent to Rs. 44,730 for 10 gram of 24-carat gold in the last few weeks and it is up by 5.63 per cent since the beginning of this month. Brent crude oil in the last couple of weeks was up by 2.98 per cent to Rs. 51.43 per barrel. Since the beginning of the month, Brent crude oil has gone up by 2.63 per cent. The rupee also weakened to about two-month lows against the US dollar when it fell to Rs. 71.90 against the US dollar on February 23, 2020.