Explained: What has spooked Indian markets?

Explained: What has spooked Indian markets?

Selling pressure was visible across sectors such as metals, infrastructure, IT, capital goods, auto, banks and oil & gas stocks. (Express Photo/File)

Investors hit the sell button in early trade Friday, with Indian market indices, tracking the slide in global markets, dropping to near 5-month lows.

The S&P BSE Sensex saw a slide of over 1,000 points while Nifty50 breached the 11,300 levels in intraday trade. Selling pressure was visible across sectors such as metals, infrastructure, IT, capital goods, auto, banks and oil & gas stocks. The Rupee too slipped in the early trade, opening lower by nearly 40 paise.

Explained: Why Sensex and Nifty have tanked

The COVID-19 scare

The bigger question roiling markets is how badly the global economy will be hit, particularly if the spread of infections is not contained. Europe is emerging as the new hotspot for the disease while the US has also reported an increase in the number of cases. The situation in Iran is looking bad. Global equity research firm Jefferies warned that the “Large outbreaks of COVID-19 in South Korea, Italy, and Iran point to the risk of a global pandemic that, if not handled correctly, could swamp hospitals with acute cases." Jefferies further noted that “If not managed correctly, this could significantly rattle markets."

Impact supply chains and corporate earnings

Bank of America Corp. economists warned clients Thursday that they now expect 2.8% global growth this year, the weakest since 2009. A global recession is likely if coronavirus becomes a pandemic, and the odds of that are uncomfortably high and rising with infections surging in Italy and Korea, Moody's Analytics said on February 26. There will be an impact across sectors and supply disruptions, alongside the quarantine measures being undertaken in China and other countries would dent supply chains across geographies.

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India’s GDP Data

India's GDP is seen growing at 4.5-4.7 per cent year-on-year in the December quarter, with data scheduled to be released later in the day. The median forecast of a Reuters poll of economists pegged annual economic growth at 4.7 per cent in the December quarter, marginally higher than 4.5 per cent in the previous quarter thanks to a small rebound in rural demand, private consumption and government spending.