Sensex drops over 300 points, Nifty down; foreign fund outflow, coronavirus fears weigh global investor sentiment

FP Staff

The Sensex dropped over 200 points in the opening session on Thursday as incessant foreign fund outflow and coronavirus overhang weighed on global investor sentiment.

The 30-share index dropped 382.80 points, or 0.96 percent, to 39,506.56, while the NSE Nifty fell 120.45 points, or 1.03 percent, to 11,558.05.

Top losers in the Sensex pack included HCL Tech, HDFC Bank, TCS, M&M, IndusInd Bank, Sun Pharma, ICICI Bank and Reliance Industries. On the other hand, Titan, NTPC, Nestle India and Kotak Bank were trading with gains. In the previous session, the Sensex settled with a loss of 392.24 points, or 0.97 percent, at 39,888.96, and Nifty plummeted 119.40 points or 1.01 percent to end at 11,678.50.

According to analysts, an intense spread of coronavirus is pushing investors away, according to a PTI report. There is sharp foreign fund outflow led by a strong dollar index, as investors reduce their exposure to emerging markets amid global uncertainty. On a net basis, foreign institutional investors sold equities worth Rs 3,336.60 crore, while domestic institutional investors bought shares worth Rs 2,785.67 crore on Wednesday, data available with stock exchanges showed.

Brent crude oil futures fell 1.19 percent to $52.18 per barrel. The rupee appreciated 2 paise to 71.63 against the US dollar in the morning session.

Rupee up

Afer opening flat, the Indian rupee appreciated by 5 paise to 71.60 against the US dollar in early trade on Thursday amid easing crude oil prices and weakening of the greenback in the overseas market.

Forex traders said easing crude oil prices and weakening of the American currency vis-a-vis other currencies overseas supported the rupee, while weak opening in domestic equities and sustained foreign fund outflows weighed on the local unit.

At the interbank foreign exchange the rupee opened at 71.65 then gained further ground and touched a high of 71.60, registering a rise of 5 paise over its previous close.

On Wednesday, rupee had settled for the day at 71.65 against the US dollar.

On the domestic front, market participants will be keeping an eye on third quarter GDP number and better-than-expected number could extend gains for the currency, traders said.

The domestic unit, however, could not hold on to the gains and was trading at 71.67 against the dollar at 1004 hrs. Meanwhile, investor sentiment remained fragile amid concerns over the impact of coronavirus outbreak on the global economy, forex traders said.

The death toll from the new coronavirus epidemic now stands at 2,744 in mainland China and there are now nearly 78,500 cases in total, according to the National Health Commission.

Domestic bourses opened on a negative note on Thursday with benchmark indices Sensex trading 289.66 points lower at 39,599.30 and Nifty down 87.45 points at 11,591.05.

Foreign institutional investors (FIIs) remained net sellers in the capital market, as they sold shares worth Rs 3,336.60 crore on Wednesday, according to provisional exchange data.

Brent crude futures, the global oil benchmark, fell 1.12 percent to trade at 52.83 per barrel.

Asian stocks slide deeper as pandemic fears grow

Oil and Asian share markets extended losses on Thursday as the rapid global spread of the coronavirus kept investors on edge and seeking safety in gold and bonds, according to Reuters.

Rising fears of a pandemic, which US health authorities have warned is likely, had already wiped more than $3.6 trillion from global stock markets by Wednesday's close.

China accounts for about 96 percent of cases and has instituted dire containment methods that have paralysed global supply chains.

But most new infections are now being reported elsewhere, with news on Thursday of a jump in cases in South Korea accompanied by a warning that the virus may be spreading in California..

South Korea reported 334 new cases on Thursday, its largest daily rise since its first case was confirmed on 20 January. China reported 433 new infections.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.5 percent and is down more than 4 percent for the week.

Australia's S&P/ASX 200 dropped 1 percent by lunchtime and has lost 7 percent this week. Japan's Nikkei .N225 fell 1.7 percent to its lowest since October. The Hang Seng fell 1 percent. Gold climbed 0.7 percent.

"The market was complacent until last week as central banks and governments were at the rescue," said Desh Peramunetilleke, head of microstrategy at Jefferies in Hong Kong. "The rising infection cases beyond Chinese shores has certainly raised the pandemic risk," he said. "The current earnings estimates do not yet factor in such risk and are therefore vulnerable to further downgrades."

A show of confidence from President Donald Trump, who sought to play down the risks to the United States at a White House press conference, offered little solace to traders focused on the virus' spread.

US stock futures ESc1 fell as far as 1 percent as he spoke, while European stock futures STXEc1 fell 2 percent in Asian trade, suggesting a possible catch-up drop in stocks there.

Fresh record-low yields on benchmark 10-year US Treasuries overnight, and the morning's firm demand for dollars, yen and Swiss francs underscored the worried mood.

The only bright spot, ironically, was China's stock market, which steadied in relief that domestically, at least, the outbreak appears to be under control.

Shrinking China

The virus has driven an enormous flight of assets out of Asia as investors try to isolate themselves from both the outbreak itself and the cost of what has now been more than a month of paralysis in the world's second-biggest economy.

New Zealand's government said on Thursday it might need to pump money into its economy, where China accounts for about a quarter of exports, should the fallout cause a global recession.

Capital Economics now expects Chinese growth to contract this year.

"The economic risks from extended disruption are non-linear," Capital's chief Asia economist and its senior China economist, Mark Williams and Julian Evans-Pritchard, said in a note. "The longer it continues, the more likely it is that some firms won't be able to pay workers, and will have to either cut pay, lay people off or shut down altogether."

The latest wave of selling has already driven the China-sensitive Australian dollar to a new 11-year low and pushed U.S. oil to a one-year trough, where they mostly sat on Thursday.

Last at 1.3088%, the yield on benchmark U.S. 10-year Treasuries is less than one basis point firmer than an all-time low hit overnight.

US crude CLc1 made a fresh one-year low of $47.84 per barrel in Asian trade, while gold rose to $1,649.78 per ounce.

--With inputs from agencies

Also See: Sensex regains 40,000-mark during intraday trade, Nifty above 11,700; Ultra Cement, SBI, HCL Tech in green

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