Sensex Posts Biggest One-Day Fall; Nifty Ends Below 9,600 Mark

Thu, 12 Mar Closing

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It was mayhem on Dalal Street today. Indian share markets traded deep in the red as Sensex and Nifty posted their biggest one-day fall ever in absolute terms.

The total market capitalisation of companies listed on the BSE hit an over 32-month low as the benchmark indices crashed over 8% after the World Health Organization declared the coronavirus outbreak as pandemic.

At the closing bell, the BSE Sensex stood lower by 2,919 points (down 8.2%) and the NSE Nifty stood down by 868 points (down 8.3%).

The BSE Mid Cap index ended the day down 7.5%, while the BSE Small Cap index stood down by 8.6%.

All sectoral indices ended deep in the red with stocks in the oil & gas sector, metal sector and banking sector witnessing maximum selling pressure.

Asian stock markets finished on a negative note. As of the most recent closing prices, the Hang Seng was down by 3.7% and the Shanghai Composite was down by 1.5%. The Nikkei 225 was down 4.4%.

The rupee was trading at 74.21 against the US$.

Note that this is the biggest ever fall for the Sensex in absolute terms in last two decades.... And the second biggest fall for the Smallcap index.

Our smallcap analyst at Equitymaster, Richa Agarwal, believes that recent crash could be once in a decade opportunity to invest in quality smallcaps. It's also a time to not panic and remain invested in the good quality stocks, irrespective of the volatility.

She further adds:

• At the same time, it is critical that one sticks to a solid risk management framework (asset allocation) and ensures enough liquidity in case the crisis prolongs. Amid the volatility, I believe the best approach is to consider investing in stocks that are fundamentally strong and promise steady income along with strong upside in the long term.

Richa's latest webinar - Smallcap Rebound Opportunity in the Times of Coronavirus shares a list of of open positions where the rebound potential is strong... And until the rebound, one can enjoy regular income from the dividend stocks with yields up to 9%.

In news from the commodity space, crude oil prices fell today, 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.

Note that, crude oil prices had 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 a recent article, we have written the entire timeline showing the economics of falling crude oil prices. You can check the same here: All About the 30% Crash in Crude Oil - 10 Points

In news from the aviation space, airline stocks witnessed selling pressure today after the Indian government moved to restrict travel into the country in an effort to stem the spread of coronavirus, prompting massive ticket discounting in an already slumping air travel market.

Shares of SpiceJet slipped nearly 19% even as it launched a sale offering tickets for as little as Rs 987 one way, along with free meals and seats.

The Ministry of Health and Family Welfare issued a revised travel advisory that will put India under lockdown starting March 13.

Any travel plans up to April 15 will have to be put on hold as India will suspend all movement along its borders.

Meanwhile, InterGlobe Aviation (IndiGo), the largest domestic airline by market share, has issued a profit warning following a dip in bookings because of the spread of COVID-19 in the country.

The company expects the coronavirus crisis and depreciation of the rupee to hit profit in the fourth quarter (Q4FY20).

In a stock exchange notification, the airline said that "we cancelled our flights to China and Hong Kong and reduced frequency to certain other Southeast Asian markets. This capacity was redeployed in other markets without having a material impact on our revenues. We expect our quarterly earnings to be materially impacted because of these factors."

It added that sharp depreciation in rupee, too, would have an adverse impact on its dollar-denominated liabilities, primarily on account of capitalized operating leases.

Flight occupancy dropped on domestic routes as individuals and companies canceled events and postponed travel.

Last-minute fares have also declined 20-25% on key metro routes over a dip in demand.

IndiGo had reported a threefold increase in its pre-tax profit to Rs 5.6 billion in Q3FY20 on strong revenue growth.

Coronavirus has spread across the globe, forcing airlines to suspend flights and ground aircraft.

SpiceJet share price and IndiGo share price ended the day down by 19.5% and 11.5%, respectively.

Moving on to the news from IPO space, the recent steep fall in the secondary market has tampered expectations of strong listing gains for the stock of SBI Cards and Payments.

As per an article in The Economic Times, SBI Cards and Payments is most likely to disappoint investors as the grey market premium has dropped to zero level, signaling a tepid listing ahead.

Here's an excerpt from the article:

• The major reason for the drop in premium is the prevailing fear in the secondary market over coronavirus pandemic and its possible impact on consumer spending. This, in turn, will hit the topline of the companies.
  
  If SBI Card lists at the premium that the unofficial market is demanding, it could pose a real challenge for IPO investors, who betted under the high networth individuals (HNI) quota with money borrowed at high interest rates. Those investors were expecting the listing to be at a 30-50% premium.

In the unofficial market for unlisted stocks, shares of the company traded in the Rs 755-775 range on Thursday compared with the IPO price of Rs 750-755.

The stock will list on March 16, Monday, on the BSE and NSE.

The IPO was subscribed over 26 times. The quota reserved for non-institutional investors, which include HNIs was subscribed over 45 times.

The company had set aside 1,83,34,795 shares for this category of investors, expecting to raise Rs 13.8 billion.

To know more the SBI Cards' IPO, the credit card industry, you can read one of Ankit's latest notes here: SBI Cards IPO: Apply or Avoid? (requires subscription).

Speaking of IPOs, in one of the editions of The 5 Minute WrapUp, Ankit Shah shared how IPOs offer insights into the mood of the stock markets.

He picked the six most successful IPOs of 2019 and checked the retail investor enthusiasm for them.

Obviously, all these IPOs were oversubscribed across investor categories. But the level of retail investor enthusiasm differed widely, depending on the overall market sentiments.

This can be seen in the chart below:

Are Retail Investors Back in the IPO Game?

Here's what Ankit wrote about it...

• Clearly, IRCTC witnessed the highest number of bids for the retail category. Factoring in the discount of Rs 10 per share for the retail category, the total bids were worth a whopping Rs 3,242 crore. Over five times the entire IPO size!
  
  Polycab India and the recent IPO of CSB Bank also received a strong thumbs-up from retail investors.

Does this hint that retail investors are coming back to the markets? Could we witness of flurry of IPOs in the coming months?

It would be interesting to see how this trend pans out in 2020.

We will keep you updated on all the developments from this space. Stay tuned!

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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