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Markets witness complete carnage on lockdown concern

Monday turned out to be a disappointing day of trade for Indian equity benchmarks as frontline gauges shaved off three and a half percentage points, as traders remained concerned over surging COVID-19 cases in the country. Fears of lockdown and additional curbs also spooked investors’ sentiments. Markets started the day with a gap-down opening on report that breaking all records, India has recorded a massive surge of 169,899 Covid-19 cases in the last 24 hours. Worldometer showed that with this, India has once again taken its spot as the second-worst hit nation with 13,525,364 cases in total. Sentiments also remain dampened on report that foreign portfolio investors (FPIs) have withdrawn a net Rs 929 crore from Indian markets so far this month amid concerns over rising COVID-19 cases denting the economic recovery. Market participants are also eyeing the macro-economic data -- consumer price index (CPI) and the Index of Industrial Production (IIP) -- to be out later in the day for further direction.

Markets extended massacre to end near intraday lows as traders continued to selloff risky assets after Fitch Ratings has said the second wave of COVID-19 infections poses increased risks for India’s fragile economic recovery and its banks. Sentiments also remain dampened after Reserve Bank of India (RBI) data showed that country’s foreign exchange reserves declined by $2.415 billion to stand at $576.869 billion in the week ended April 2. Besides, making a strong case for an additional economic stimulus to address the impact of the pandemic on the country's economy, the International Monetary Fund (IMF) Deputy Chief Economist, Petya Koeva Brooks has said that India, which is projected to grow at an impressive rate of 12.5 percent this year, needs to grow at a much faster pace to make up for the unprecedented contraction of eight percent that it clocked during the COVID-19 pandemic in 2020.

Weakness in global markets too dampened sentiments with European markets trading lower as investors held off from making big bets ahead of the earnings season, while British retailers were set to reopen as the economy emerges from a strict winter lockdown. Asian markets closed mostly lower on Monday, after producer prices in Japan were up 1.0 percent on year in March, the Bank of Japan said on Monday - exceeding expectations for 0.5 percent following the upwardly revised 0.6 percent contraction in February (originally -0.7 percent). On a monthly basis, producer prices jumped 0.8 percent - again exceeding expectations for 0.4 percent and up from 0.6 percent in the previous month.

Back home, auto stocks declined on report that the Society of Indian Automobile Manufacturers (SIAM) in its latest report showed that passenger vehicle wholesales declined by 2.24 per cent to 27,11,457 units in the 2020-21 fiscal as against 27,73,519 units in 2019-20. However, select pharma stocks were trading in green with report that Gilead has signed non-exclusive voluntary licensing agreements with pharma companies including Cipla, Dr Reddy’s Laboratories, Jubilant Lifesciences, Syngene, a Biocon company and Zydus Cadila Healthcare to manufacture remdesivir for distribution in 127 countries.

Finally, the BSE Sensex fell 1707.94 points or 3.44% to 47883.38, while the CNX Nifty was down by 524.05 points or 3.53% to 14310.80. 

The BSE Sensex touched high and low of 48956.65 and 47693.44, respectively. There was 1 stock advancing against 29 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index tumbled 5.32%, while Small cap index was down by 4.81%.

The top losing sectoral indices on the BSE were Realty down by 7.70%, PSU down by 6.00%, Industrials down by 5.93%, Metal down by 5.65%, Basic Materials down by 5.28%, while there were no gainers on the BSE sectoral front.

The lone gainer on the Sensex were Dr. Reddys Lab up by 4.83%. On the flip side, Indusind Bank down by 8.60%, Bajaj Finance down by 7.39%, SBI down by 6.87%, ONGC down by 5.54% and Titan Company down by 5.24% were the top losers.

Meanwhile, India Ratings and Research (Ind-Ra) in its latest report has stated that the recent spike in Covid-19 cases along with associated lockdowns, though localised, could disrupt foreign portfolio investments as well as domestic credit markets. It said India's second round of Covid outbreak is moving in a direction different from the global trend.

The report said ‘The cases seem to have abated in major countries and the massive vaccination drive is expected to anchor any meaningful surge. Therefore, the counter trends coupled with spurt in daily cases would be the cause for concern in the near term’. It said ‘While the mortality rates have remained benign, the infection rate is increasing at a much faster rate than earlier’. Notably, the agency expects that India's vaccination drive would minimise the impact, the duration would be a function of its pace.

However, the agency cited mounting Covid-19 cases in India as opposed to benign conditions in advance economies could have an adverse effect on the investors' risk appetite. It said ‘Also, a sharp economic recovery and reflationary trend have already been causing a rise in global yields. This also is a negative factor for risky assets such as equity’. It also said foreign portfolio investments (FPIs), especially into the equity, have been reasonably strong in recent months, any reversal from the trend however could destabilise the ongoing favourable conditions across the financial markets.

Similarly, for the domestic credit markets, the agency said that amid a cautious financial system, the condition was improving, allowing low rated issuers to access capital though at a significantly high cost. Some of these gains could reverse and risk aversion could increase. The agency believes conducive financing options is necessary, and volatile capital market condition impinges such proposition. The agency however also believes the enormous banking system liquidity and proactiveness from the Reserve Bank of India will alleviate the risk of a market failure.

The CNX Nifty traded in a range of 14,248.70 and 14,652.50. There were 4 stocks advancing against 46 stock declining on the index.    

The few gainers on Nifty were Dr. Reddys Lab up by 7.09%, Cipla up by 2.71%, Divis Lab up by 1.14% and Britannia up by 0.43%. On the flip side, Tata Motors down by 9.65%, Adani Ports down by 8.94%, Indusind Bank down by 8.57%, Bajaj Finance down by 7.25% and UPL down by 6.91% were the top losers.

European markets were trading lower, UK’s FTSE 100 decreased 56.98 points or 0.82% to 6,858.77, France’s CAC decreased 15.35 points or 0.25% to 6,154.06 and Germany’s DAX was down by 14.20 points or 0.09% to 15,219.96.

Asian markets closed mostly down on Monday amid concerns over resurgence of corona-virus infections globally. Chinese shares ended lower after China's leading disease control official admits that the effectiveness of Chinese corona-virus vaccines was low and the government is considering mixing them to get a boost. Further, Japanese shares fell as the country is struggling to get the fourth wave of infections under control as it prepares to host the 2020 Tokyo Olympics. However, Alibaba Group Holding shares jumped in Hong Kong, even after China's antitrust regulator slapped a record $2.8 billion penalty on the e-commerce giant following a month long investigation.

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