In the ongoing shakeout, financial markets have gone into a kind of feedback loop. First, concerns about the impact of coronavirus on the economy started hurting the markets, and now the markets are threatening to have an bearing on the real economy. The sharp drop in share prices creates a real challenge for companies with high leverage and those where business destruction has happened. If the risk-off phase were to prolong, the revival of the credit cycle gets pushed back, raising risk of fresh credit defaults down the line. This is why bank stocks have seen such an unprecedented hammering over the past couple of days.
STREET PULSE: Where we stand Nifty futures on the Singapore Exchange traded some 175 points down at 7am (IST), signalling some more selloff on Dalal Street. Elsewhere in Asia, markets struggled to find their footing in volatile trade on Thursday, as the latest promise of stimulus from the European Central Bank propped up sentiment.
Read More  | MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.25% amid choppy trade throughout the region, with Australia's benchmark running as much as 3% higher before returning to flat and Korea's Kospi gyrating. |
| Wall Street extended its deep sell-off on Wednesday over fears about the coronavirus, with the Dow effectively erasing the last of the once sizeable gains it had made under US President Donald Trump. The index closed Wednesday's session down 1,338 points or 6.3 per cent, falling to its lowest level since February 2017. The broader S&P500 fell 5.17 per cent and the Nasdaq 4.7 per cent. |
| Oil prices surged nearly 20%, bouncing back from days of heavy losses in a relief rally that may yet be short-lived, analysts warned. Brent crude rose by $2.10, or 8%, to $26.98 a barrel after tumbling 13% on Wednesday, while WTI crude gained $3.44, or 17%, to $23.81 after slumping nearly 25% in the previous session. |
| The rupee pared initial gains to close marginally down by 2 paise at 74.26 against the US dollar on Wednesday amid sustained foreign fund outflows and heavy selling in domestic equities. |
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YES BONDHOLDERS FIGHT ON… Yes Bank AT1 bondholders on Wednesday accused Yes Bank of disrespecting the Bombay High Court after the lender shot off a letter to NSDL requesting it to extinguish all AT1 bonds. The high court without passing any restraining order had said that any action taken by Yes Bank and RBI in the matter of AT1 bonds will be subject to further orders passed by the court.
Read More NIFTY HEADED FOR 4,500?… The brutal sell-off has pushed the stock market deep into a bear territory, but global chartists said the damage may be far from over. Nifty on Tuesday breached the key support of 9,000, which, according to analysts, could result in the index falling by at least 10-25%. US-based veteran trader Peter Brandt said his next target for the Nifty index is 6,400, breaching which, the index could fall to 4,500 level. The Nifty is down nearly 32% from all-time high of 12,430.50 hit in January this year and it has declined nearly 28% since February 1.
Read More INDIA GROWTH FORECAST CUT… S&P Global Ratings has lowered India's 2020 growth forecast to 5.2% from 5.7% estimated earlier, citing a global recession resulting from the impact of the Covid-19 pandemic. In an assessment of the Asia-Pacific region released on Wednesday in Singapore, S&P said India is also among the countries most vulnerable to capital outflows. Growth across the Asia-Pacific region would more than halve to 3% in 2020, it said.
Read More RESTAURANTS SHUT DOWN… Thousands of restaurants nationwide including popular Town Hall, the Wine Company, Whiskey Samba, Mamagoto among other chains have closed down, even as Gurgaon on Wednesday became the latest city to order closure of malls, restaurants, pubs, gyms, movie halls, weekly bazaars among others in the district as part of measures to fight spread of Covid-19. On Tuesday, the National Restaurant Association of India, which represents 500,000-plus restaurants, had advised its restaurant members to shut down dine-in operations till the end of March.
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ECB LIQUIDITY BOOSTER… In the latest move by a central bank to try to halt the spiraling economic and financial crisis sparked by the coronavirus epidemic, the European Central Bank kicked off a 750 billion euro ($820 billion) emergency bond purchase scheme after an unscheduled meeting on Wednesday. The move followed emergency interest rate cuts around the globe, enormous fiscal support packages and six central banks promising discount dollars to banks to alleviate a squeeze in greenback funding.
Read More INDIA PUMPS IN MONEY… RBI would enhance market liquidity with an additional bond purchase for as much as Rs 10,000 crore to prevent yields spike in corporate bond markets, opening up the possibility of intervention in markets beyond the government bonds and inter-bank markets. The central bank would purchase bonds in the shorter end of the tenor mostly bonds maturing in 2, 3 and 4-year basket as these have a direct impact on the corporate bonds market and the pricing of commercial papers (CPs).
Read More AVIATION PACKAGE COMING… India is planning a rescue package worth as much as $1.6 billion for the aviation sector, which has been battered after the coronavirus outbreak forced countries to close borders and brought air travel to a near-halt, two government sources told Reuters. The Finance Ministry is considering a proposal that includes temporary suspension of most taxes levied on the sector, including a deferment of aviation fuel tax, said the sources, who have direct knowledge of the matter.
Read More Meanwhile... GLOBAL BOND PUSH… Amid the chaos in the financial markets, the Indian government is working with about half a dozen global banks to structure sovereign bonds that would be eligible for inclusion in global bond indices, three people familiar with the matter said. Bonds maturing in four to 10 years could be sold without any overseas investor limit under this. This series of bonds is likely to be part of the borrowing programme for the new financial year beginning April 1.
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