Stocks are off to another volatile day with the Nifty and the Sensex hitting limit down within the first hour of trading as concerns loom that the coronavirus pandemic could shut down the global economy.
Analysts have come out with various estimates about the likely economic impact of the pandemic. Let’s just say things don’t look very good at the moment.
Join us as we cover the top business stories through the day.
India’s retail sector hit hard by coronavirus shutdown
The shutdown imposed by the government to slow the spread of the coronavirus pandemic has affected businesses across the board as consumers refuse to step out of their homes.
Reuters reports on the current state of India’s retail sector: “The coronavirus pandemic amid an economic slowdown has hit revenue at Indian retailers selling non essential items like clothes and jewelry by 75% so far and is likely to cause widespread job losses, an industry body said on Monday.
About 40% of the six million employees working in India’s modern, rather than traditional, retail sector could likely lose their jobs in the next four months if the government does not intervene, Kumar Rajgopalan, chief executive, Retailers Association of India (RAI), told Reuters.
“Unless the government provides some relief, revenues will slide by 90% in the next six months,” Rajgopalan said, suggesting moratoriums on the payment of loans, and on the payments of the goods and services tax (GST) and other government duties.
The RAI represents 500,000 stores in India, including brands like V-Mart, Shopper’s Stop, Future Group and Avenue Supermarts, which operates the grocery chain D-Mart.”
US bond yields jump as government borrowing expected to soar
The coronavirus pandemic is expected to push governments to borrow and spend more to deal with the economic consequences.
And the effects of greater government borrowing are starting to show in the sovereign bond market.
Reuters reports: “Futures on safe-haven U.S. Treasuries jumped at the open Sunday night, implying Friday’s fall in ten-year Treasury note yields would continue as more states joined the shutdown of huge swaths of the American economy to contain the runaway spread of coronavirus.
The CBOT contract on the U.S. 10-year note was last up 31/32nd with an implied yield of 0.67 percent, closing back in on the 10-year’s record-low yield of 0.318% on March 9.”
RBI may soon allow repo operations in corporate bonds
Corporate bond yields have spiked amid the economic uncertainty surrounding the coronavirus pandemic, but the RBI may be stepping in soon to get things under control.
Reuters reports: “The Reserve Bank of India may soon allow corporate bonds as collateral for repurchase operations in an attempt to cool the recent sharp uptick in corporate bond yields in the wake of the coronovirus outbreak, two sources told Reuters.
“We have to work it out. Under the RBI Act, we are not allowed to take any other collateral other than government securities. But we are not looking upon that as an impediment,” a senior official said.”
Why has the rupee fallen against the dollar?
The story so far: The rupee slumped on Friday to a record closing low of 75.20 against the U.S. dollar as deepening concerns about the economic fallout of the COVID-19 pandemic sent global investors scurrying to dump most assets, especially emerging market holdings, and opt for cash and the relative safety of the greenback. The rupee has now depreciated by more than 5.3% in 2020, with the bulk of its losses, a 4.1% slide, having occurred in March.
Stock market update: Stocks continue to plunge after trading resumes
The Sensex and the Nifty are down over 11% at the moment after trading resumed following the 45-minute break.
The Sensex is down over 3,300 points while the Nifty is trading at around 7,700, well below its crucial support level of 8,000.
The Sensex hit the lower circuit earlier today as coronavirus fears got the better of investors who fear a global recession.
Global economy hit by worst shock since 1930s
As fears of a global recession loom amid the rapidly spreading coronavirus pandemic, how does the current economic slump compare against ones in the past?
While official data is yet to arrive, Reuters offers a guesstimate:
“There are no government statistics yet on the scale of the current downturn, but taking the oil industry as a proxy for economic demand, consumption appears to have fallen by around 10 million barrels per day, or 10%, within the space of a single month.
The first-round shock to the system is enormous even before any second and third-round impact on business and consumer spending.
In 1945, demobilisation and the conversion from wartime to peacetime production caused industrial output to drop by 30-35% progressively over 12 months.
In the 1974/75 recession, U.S. industrial output fell by around 15% over roughly 20 months, according to data from the Federal Reserve.
In 2008/09, U.S. industrial output declined by almost 20% from its pre-recession peak, but the decline was stretched over a period of roughly 18 months.
But the current downturn could easily prove the steepest since 1945. In scale and sudden onset, it looks more like the dynamics of the 1930s Depression or the violent business busts of the late 19th and early 20th centuries.”
Coronavirus | Automakers to shut down manufacturing plants
Amid national efforts to curtail the spread of the novel coronavirus, nearly all automakers in the country, including market leaders Maruti Suzuki and Hero MotoCorp, have announced temporary shutdown of their manufacturing plants.
“With the safety and well-being of employees as top priority in view of the escalating COVID-19 situation, Hero MotoCorp has decided to halt operations at all its global manufacturing facilities — including in India, Colombia and Bangladesh — and the Global Parts Centre (GPC) at Neemrana with immediate effect until March 31, 2020,” the country’s largest two-wheeler manufacturer said in a statement.
Rupee tanks to all-time low against US dollar
The rupee has weakened past the 76/USD mark for the first time in history as the demand for dollars continues to shoot up amid high economic uncertainty.
PTI reports on the development: “The Indian rupee slipped further by 95 paise to 76.15 against the US dollar in opening trade on Monday amid sharp rise in coronavirus cases in the country and heavy selling in domestic equities.
Forex traders said market participants are concerned that the sharp rise in coronavirus cases, with nearly 400 cases in the country, could weigh on the economy.
The rupee which opened on a weak note at 75.90 at the interbank forex market, lost further ground and touched a low of 76.15 against the US dollar, registering a decline of over 95 paise over its last close.
The local unit had settled at 75.20 against the US dollar on Friday.”
Trading halted as Sensex hits limit down
Trading in stocks has been halted for 45 minutes after the Sensex hit the lower circuit this morning. Early signals from SGX Nifty this morning had suggested that the indices would hit limit down.
The Nifty was close to 7,900 when trading halted, threatening to breach an important support level.
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Sensex crashes over 2,000 points, Nifty below 8,100
Stocks have crashed once again this morning amid fears that the coronavirus pandemic could cause a significant shutdown of the economy.
The Sensex at the moment is down over 2,000 points while the Nifty is below the 8,100 mark.
It is worth noting that the Nifty found support at around the 8,000 mark last week. Overnight, US stock futures hit limit down.
Ashish Rukhaiyar offers more details:
The 30-share Sensex was down 2,172.17 points or 7.26% to trade at 27,743.79. The broader Nifty was at 8,122.40, down 623.05 points or 7.12%.
The VIX index jumped almost 7% in the first hour of the session. More than 1,100 stocks were in the red, as against around 120 gainers. In the Sensex pack, all 30 stocks were in the red with financials and automobiles leading the declines.
Axis Bank, ICICI Bank, Bajaj Finance, IndusInd Bank, Maruti Suzuki India, M&M, ITC and Hero Motocorp were anong the top losers, shedding over 8% each.
Sebi introduces new trading rules to tackle market volatility
To mitigate the extreme levels of volatility seen in stocks, the chief markets regulator has imposed position limits and other restrictions.
Reuters reports on the revised trading rules that come into effect today: “The country’s market halved position limits for certain stock futures, restricted short-selling of index derivatives and raised margin rates for some shares in a bid to curb “abnormally high” volatility.
The measures will come into effect from March 23 and continue for one month.”
Sensex, Nifty expected to open limit down
The bechmark indices, judging by the open in the SGX Nifty this morning, are all set to hit the circuit breaker at open.
The Nifty had notably hit the lower circuit earlier this month, just minutes after trading began on March 13.
Analysts attribute the fall to the rapid spread of the coronavirus pandemic in India, which has led to the shutdown of economic activity in several cities across the country.