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Global stock markets on Monday got a glimpse of the much feared ‘black swan event,’ a rarely seen extreme situation. In India, it was the biggest intraday fall for Sensex in absolute terms as it plunged 2,326.35 points in the afternoon.
Nifty, too, slipped below the 10,500-mark for the first time since December 2018. In just 36 trading days, Sensex has gone from a 52-week high of 42,273.87 on January 20 to hit a 52-week low of 35,109.18 as on March 9 — a fall of 17 per cent.
Bourses in Asia and Europe were down 5 per cent while the stock markets in the US were put on freeze for 15 minutes as the Dow Jones index crashed by 2,000 points at open. Tech-heavy Nasdaq index hit a 7 per cent lower circuit. The situation on Wall Street was reminiscent of the aftermath of 9/11 terror attacks.
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After all, global events triggered the two previous bear markets and the current declineA 30 per cent crash in the global crude oil prices overnight and the continuous bad news on the coronavirus front were the two factors behind the world stock market rout. Sensex closed at 35,634, down 1,942 points. Nifty index closed at 10,451, down 538 points.
If the inclusion of Mauritius in the ‘grey list’ and endemic spread of coronavirus was not enough to roil the market sentiment for past two weeks, the Saudis declared an overnight price war in the oil market. Before Asia commenced trading, futures of S&P, Nasdaq and Dow Jones were all in 5 per cent lower circuit freeze.
Japan, the first market to open in Asia, commenced the day with a fall of over 5 per cent. It was followed by Hong Kong, down over 5 per cent, and China (3 per cent). India was trading lower by 3 per cent at open and closed the day down nearly 5 per cent.
‘Poison out of the system’
“Poison seems to be out of the market now. All that unreasonable liquidity that had propelled markets to high levels is out. It is highly unlikely that crude oil prices will go back to $50 in the near future. India’s rupee has surprised by not falling very fast. Forex reserves for touching $500 billion for the first time. We have to see where the rout ends. Like 2008, this is a one-time opportunity to buy stocks. But we need more evidence in terms of market stability for that,” said Rahul Arora, CEO, institutional equities, Nirmal Bang.
“At 18, RSI (relative strength index), a measure of market resilience, is at its lowest since the 2008 financial crisis. It shows a sharp pull back is in the offing. You can also tell this by trading volumes on the NSE, which were highest ever on Monday. Net short positions in derivatives are highest ever too. Together, all this suggests a selling climax,” said Rohit Srivastava, chief strategist, IndiaCharts.
Reliance Industries was the worst hit by the crude oil crash. The stock fell 13 per cent in a single trading session, the steepest fall in nearly a decade, to close at ₹1,014. RIL’s market-cap is down from ₹10-lakh crore to ₹7-lakh crore.
Foreign portfolio investors sold stocks worth ₹6,500 crore in the cash market.
The rupee closed at 74.17 against the US dollar, slumping by another 30 paise to touch a 17-month low. Global gold prices spiked above $1,700 an ounce.
Crude oil prices were in a free fall, plunging nearly 30 per cent as Saudi Arabia declared a price war and its rival, Russia, has said that it can survive at $25/barrel for a decade.
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