Market bottoms are mythical story book stuff. We began January, betting on a revival in smallcaps and midcaps; they did show some signs, but have now been battered to new lows. That has shattered investor confidence. Even most of the so-called quality names have been hammered quite a bit. Yet, analysts say what will emerge out of this mayhem is a set of a few stronger companies, and they will make a lot of money for investors. They say no matter which pocket of the market is looking alluring, the strategy should be to simply stick to quality.
STREET PULSE: Where we stand Nifty futures on the Singapore Exchange traded 750 points lower at 7am (IST), signalling another major selloff ahead on Dalal Street. Elsewhere in Asia, stock markets crashed as panic gripping world financial markets deepened, and even haven assets such as gold and bonds were ditched to cover losses in the wipeout.
HERE'S WHAT TO WATCH  | Japan's Nikkei was in freefall, dropping 10% and heading for its worst week since the 2008 financial crisis. MSCI's broadest index of Asia-Pacific shares outside Japan fell 2%. Australia's benchmark fell 7.6% and is set for its worst week on record. Hong Kong's Hang Seng fell 6.8%, its steepest drop since 2008. China's Shanghai composite fell 4%. |
| Wall Street witnessed its worst crash since Black Monday in 1987 overnight. Trade was halted on the S&P500 after it hit downdraft circuit breakers. It fell further when trade resumed, eventually losing 9.5% to close 27% below February's peak. Dow and the Nasdaq too fell more than 9 per cent. |
| Oil prices fell on Friday for a third day, with Brent crude set for its biggest weekly drop since 1991. Brent crude was down 67 cents, or 2%, at $32.55 a barrel after falling more than 7% on Thursday. For the week, Brent is set to fall 28%, the biggest weekly decline since the week of Jan. 18, 1991. WTI crude was down 66 cents, or 2.1%, at $30.84 after falling more than $1 earlier. |
| The rupee lost 0.77% to close at 74.21 per dollar on Thursday, its lowest level since October 10, 2018. The currency hit an intraday low at 74.34, very close to the all-time low of 74.48 on October 11, 2018. |
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SHORT SELLING BAN COMING? A ban on short selling and mandatory delivery-based trading are among the proposals being considered by the Securities and Exchange Board of India to reduce market volatility, Business Standard reports, citing people it didn't identify. The Finance Ministry last week asked the market regulator to take action to curb the stock market's fall, the newspaper said, citing sources.
Read More PANIC SHOPPING… Ecommerce platforms, retail chains and kirana stores reported a sharp surge in sales of staples, daily necessities and personal hygiene products in the past few days as panic buying took hold across India amid the fear of closures as Covid-19 cases rise. Deliveries have been delayed and some items such as sanitisers have gone off shelves or are unavailable online. Retailers and FMCG companies said there are no shortages and that they will speed up supplies to shops besides seeking to curb hoarding. They said sales are up 15-45% in various categories.
Read More HIGH COST NO OPTION… The exorbitant cost of index options, thanks to extraordinarily high volatility, is deterring traders from taking aggressive bets on the Nifty or the Bank Nifty even as derivatives experts are advising retail investors and traders to avoid the F&O market for now. Volatility, one of the chief determinants of an option's price, has surged this month following the carnage on DStreet. India Vix, a volatility index based on Nifty option prices, has rocketed 122% to 51.47 so far this month, coinciding with the 11.12% fall in the Nifty to 9,955.20 Friday.
Read More PASSIVE FUNDS IN A SOUP… Passively-managed equity schemes — Index funds and Exchange Traded Funds (ETFs) — mirroring the Nifty, could end up underperforming the benchmark due to restrictions on sale of Yes Bank shares, which exits the index by end of this month. The final reconstruction scheme for Yes Bank mandates a lock-in for existing shareholders up to 75% of their holding for three years. This means these passive funds will have to hold most of their Yes Bank shares even if the lender is not part of the Nifty. This could lead to a tracking error in these funds, say fund managers.
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FED GOES ALL OUT… The US Fed swept into action on Sunday to save the US economy from the fallout of the coronavirus, slashing its benchmark interest rate by a full percentage point to near zero and promising to boost its bond holdings by at least $700 billion. This was Fed's second emergency rate cut this month. In remarks underlining the sense of urgency, Fed Chair Jerome Powell told a hastily-assembled press briefing by telephone that the disruption to lives and businesses meant second quarter US growth would probably be weak and it was hard to know how long the effects would last. That left a clear role for fiscal policy to help cushion the blow, he said.
Read More RBI MAY FOLLOW SUIT… India's central bank is likely to reduce its benchmark repo rate sooner than previously expected even as it follows up last week's $2-billion swap auction with more timely and immediate measures to ensure adequate system liquidity through the current crisis. "There are businesses like tour operators and hotels and restaurant chains which may see dislocation," said a person familiar with the thinking. "These businesses may find it difficult to meet their payments if people stop turning up." Although Mint Road is not part of the global swap lines facility from the Federal Reserve, the central bank may join the rest of the emerging central banks in a coordinated attempt to avoid a financial markets freeze.
Read More TELECOM RELIEF SOON… The government is considering setting up an empowered group of ministers to oversee steps to tide over the adjusted gross revenue (AGR) crisis in the telecom sector. The eGoM will look at ways to lower levies such as licence fees and spectrum usage charge to help retain a three-private player market, as well as attract investments from new players. The government is also likely to request the Supreme Court to allow affected telcos to stagger payment of AGR liabilities over up to 20 years on net present value basis, at a reduced interest rate of 8%, against the 12% that is usually charged on dues, a senior government official told ET.
Read More Meanwhile... INDIA LEADS SAARC … India pledged $10 million toward a Covid-19 emergency fund and said it was putting together a rapid response team of doctors and specialists for Saarc nations as part of an initiative led by Prime Minister Narendra Modi. Modi made the announcements during a video-conference with Saarc leaders that he had proposed amid rising cases of the disease in the region. While India's offer was welcomed by all Saarc leaders, Pakistan used the occasion to raise the Kashmir issue, saying the lockdown there should be ended to help fight the coronavirus outbreak.
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