Investors have lost nearly ₹9 lakh crore in last five days as the spike in COVID-19 cases bursts the market bubble

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Investors have lost nearly ₹9 lakh crore in last five days as the spike in COVID-19 cases bursts the market bubble
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  • Indian benchmark stock indices, Sensex and Nifty50, dropped over a percent and hit a six-week low in trade today (March 18)
  • The second wave of COVID-19 infection dents sentiment in the world’s fifth-largest economy.
  • While the market seems to be fearing another crash in economic activity, the most recent data does not seem to indicate that.
  • The Nomura India Business Resumption Index (NIBRI) for the week ending 14 March was short of the pre-pandemic normal by just 4.3 percentage points.
Investors lost about ₹3 lakh crore on the fifth straight day of losses in the Indian share market. The total loss in market capitalisation over the last five days has been nearly ₹9 lakh crore (about $124 billion), according to broking firm Reliance Securities.

Indian benchmark stock indices, Sensex and Nifty50, dropped over a percent and hit a six-week low in trade today (March 18) as the second wave of COVID-19 infection dents sentiment in the world’s fifth-largest economy. While the sell-off in Indian shares hit nearly all sectors, tech stocks led by HCL Tech and Infosys and pharma stocks led by Dr Reddy’s Laboratories and Divi’s Laboratories were the worst hit.

Nifty50 stockMarch 18
HCL Tech-3.79%
Infosys-3.37%
Dr Reddy’s Lab-3.05%
Divi’s Lab-3%
Hero Moto-2.68%

“A sharp rise in daily Covid-19 cases in India has raised apprehensions about sustainability of ongoing rebound in corporate earnings,” Binod Modi, head of strategy at Reliance Securities said. However, he believes that “stringent measures by the administration” can control the current wave of COVID-19 infections and the sell-off, in the meantime, may pull down shares to bargain prices.
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The day started on a positive note as the Federal Reserve seemed less worried about inflation in the US. A rise in inflation in the US would force the American central bank to increase interest rates, making it more attractive for global investors to pull money out of emerging markets like India and invest it in the US. This was the overwhelming fear in the run up to the Fed meet and it had come undone at the end of it.

As the Fed Chairperson Jerome Powell downplayed the inflation risk in the US, the dollar weakened against all major currencies. A weaker dollar hurts Indian exporters. That would explain the sharp fall in marquee stocks like Infosys and HCL Tech (where the earnings expectations are still strong) as well as drug exporters like Dr Reddy’s Labs.

But the confidence among the bulls wasn’t strong enough to overcome the fear of a resurgent pandemic. ITC was the top gainer among large-cap stocks today followed by Bajaj Auto, Hindalco and Bharti Airtel.
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The sell-off in the mid and small-cap segments was equally brutal as the large-cap indices Sensex and Nifty50.

While the market seems to be fearing another crash in economic activity, the most recent data does not seem to indicate that. The Nomura India Business Resumption Index (NIBRI) picked up to 95.7 for the week ending 14 March. That’s a 4.3 percentage point short of the pre-pandemic normal.

Essentially, the report dated March 15 showed that Indians are going about their business as usual, not bothered by the latest wave of infections. And that economic activity is nearly as good as it was before the pandemic. But as far as the share market goes, the bears seem to be in charge of the narrative.
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