Covid scare: Global markets slip into red – investors wary about prospects of quick economic recovery
Indian equities started the week in the red with benchmark indices declining on Monday as tepid global cues weighed. Rising novel coronavirus cases across the world have made investors wary about the prospects of a quick global economic recovery which made them dump risky assets. The benchmark Sensex was down by 209.75 points or 0.60% to close at 34,961.52. The 50-share Nifty was down by 70.6 points or 0.68% to close at 10,312.4.
During Monday’s trading session, the benchmark Nifty traded in the red throughout the day but saw a strong pullback in the last hour after falling as low as 10,223.6. The benchmark took cues from the Dow Futures and European markets after they recovered and ended the session off the day’s lows.
UR Bhat, director, Dalton Capital Advisors (India), said, “A bigger correction cannot be ruled out and may even be warranted, given the renewed uncertainty about the lockdown and the spread of the infection in the places where it has been lifted. The international markets too have corrected at the end of last week on these worries.” According to him, in India too for instance, there is a possibility of the lockdown getting extended in some form on the lines of the Maharashtra government decision today. “The economic consequence of an extended lockdown has the potential to test the recent market lows over a period of time,” Bhat added.
Asian shares extended the losses of the US markets on Friday where the Dow Jones Industrial Average fell as much as 730.5 points after the country witnessed a record number of Covid-19 cases in its Western and Southern states. Stock markets in China, Taiwan, and Hong Kong were down between 0.61% to 1.01%. South Korea’s Kospi declined as much as 1.93% during Monday’s trading session. Conversely, benchmarks in European countries such as France, UK and Germany were up between 0.03% and 0.47%. The European markets recovered on Monday after the Dow Futures turned positive and were up by 130 points at the time of press. The stock futures kept wavering throughout the day preempting a choppy trading session for the US markets.
In India, the recovery rate of Covid-19 cases has risen but the number of active cases is still surging. According to Kotak Institutional Equities, the overall recovery rate bumped up further with recovered cases to confirmed cases at 59% as of June 27 against 55% as on June 20. “India is still not able to achieve the second milestone of peaking of active cases. The authorities have no option but to follow a balanced approach between lives and livelihoods,” the brokerage said in its report. It added that it does not see any changes in the current state governments’ strategy unless there is an increase in the fatality rate.
June saw the highest inflows so far this year with foreign portfolio investors (FPIs) buying stocks worth $2.74 billion. FPI buying this month has surpassed the buying in January which stood at $1.3 billion. The FPIs had sold Indian stocks for three straight months from March to May and have turned into net buyers this month as a result of the rush of global liquidity. According to provisional data on the exchanges, FPIs sold stocks worth $99.6 million and domestic institutional investors bought stocks worth $172.6 million. The futures and options segment saw volumes worth `9.56 lakh crore against the six-month average of Rs 13.9 lakh crore.
The biggest losers on Nifty were Coal India, Axis Bank, Tech Mahindra, Hindalco, and State Bank of India down by 4.96%, 4.7%, 3.18%, 3.14%, and 2.79%. On the other hand, the biggest gainers were Britannia, HDFC Bank, Cipla, Kotak Mahindra Bank, and ITC, were up by 2.13%, 1.8%, 1.43%, 1.41%, and 1.23%. Sectorally, the only gainer was Nifty FMCG. The biggest sectoral loser was Nifty Realty, down by 3.55%, followed by Nifty PSU Bank, Nifty Metal, Nifty Media, Nifty IT, and Nifty Auto. Among the broader indices, Nifty Midcap and Nifty Smallcap were down by 1.6% and 1.38%, respectively.