Sensex Collapses Over 1,700 Points; Nifty Slips Below 10,000

Thu, 12 Mar 09:30 am

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Asian stock markets are lower today as Japanese and Hong Kong shares fall. The Nikkei 225 is off 5.2% while the Hang Seng is down 3.6%. The Shanghai Composite is trading down by 1.3%. In overnight trade, the Dow Jones Industrial Average on Wednesday shed 1,465 points. The 30-stock index fell into a bear market, down more than 20% from last month's record close.

Back home, India share markets plunged in the opening session in line with global markets which were rattled after the World Health Organisation declared the novel coronavirus outbreak a "pandemic".

The BSE Sensex is trading down by 1,743 points while the NSE Nifty is trading down by 528 points. The BSE Mid Cap index opened down by 5.5%, while BSE Small Cap index opened down by 6%.

All sectoral indices are trading down between 3-7% with realty stocks and metal stocks witnessing maximum selling pressure.

The rupee is currently trading at 74.17 against the US$.

Note that, it was certainly a black Monday for the Indian stock market. In absolute terms, Sensex saw its biggest single day fall on 9 March 2020.

In fact, this year has seen two of the biggest single day falls in the Indian stock market history. The only time we had seen such a fall was in 2008. Back then, the BSE Sensex had fallen by more than 50% in a year.

Will we see something similar in 2020?

Is It 2008 All Over Again in the Stock Markets?

Well, co-head of research, Tanushree Banerjee is of the opinion that trying to predict the direction in such cases is a futile exercise.

Here's Tanushree:

• "As I always say, retail investors would do well to focus on the fundamentals of individual stocks. In fact, such uncertain times gives the best opportunity to look at quality stocks.
  
  Always remember, what has changed is the price of the business but not the value."

Moving on... oil prices fell, adding to steep losses in the previous session after the US banned travel from Europe following a declaration that the coronavirus outbreak is now a pandemic.

The threat of a flood of cheap supply compounded market concerns.

Brent crude was trading down US$1, or 2.9%, at US$34.8 having switched in and out of positive territory before the US announcement.

Crude oil prices crashed more than 30% on Monday.

In fact, this was the worst price dip since the 1991 Gulf War as Brent prices plunged to US$ 31 per barrel.

In the article titled: All About the 30% Crash in Crude Oil - 10 Points, we have written the entire timeline showing the economics of falling crude oil prices.

Going ahead, market participants are expecting crude oil prices to remain low until OPEC+ resets oil production again.

Vijay Bhambwani, editor of Weekly Cash Alerts at Equitymaster, states that at this point in time, short selling natural gas & crude oil at significantly higher levels for the coming summer are high conviction trades. To know more about his view and positions, you can check out his recent article here: Energy Markets Get Muddy (requires subscription).

He's also shared his views on the ongoing "coronavirus" situation where he talks what's around the corner for crude oil, and how one should position oneself for potential gains. You can check this special podcast episode from Investor Hour here:

Moving on to the news from banking sector. State Bank of India (SBI) has cut Marginal Cost of Funds Based Lending Rate (MCLR). The rates have been slashed by 15 bps across a few tenors. The new rates came into effect from March 10.

As per SBI, the interest rate for the 1-year tenor is now 7.75% as against the earlier 7.85%.

For the two-year tenor, the MCLR has been dropped to 7.95% from 8.05% and for the three-year tenor the rates have been dropped to 8.05% from 8.15%.

As for the overnight and 1-month tenors, the revised MCLR is 7.45% as against the earlier 7.6%. For the three-month tenor, the rate has been reduced to 7.5% from 7.65%, while the rates have been reduced to 7.7% from 7.8%.

Banks are required to change the external benchmark-based rate at least once in three months. This change depends on underlying external rate like repo rate. SBI's external benchmark lending rate is linked to RBI's repo rate.

Meanwhile, the SBI has also slashed fixed deposit rates for general customers as well as senior citizens.

SBI share price opened the day down by 7.7%.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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