Biggest Ever Fall for Sensex, Coronavirus Pandemic and Financial Markets, and Top Cues in Focus Today

Fri, 13 Mar Pre-Open

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It was mayhem on Dalal Street yesterday. Indian share markets plummeted 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 yesterday, 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 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 huge selling pressure.

The Biggest Ever Fall for the Sensex

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%.

Also, speaking of coronavirus and its impact on the Indian stock markets, in one of the recent podcast, we had shared a special episode from Investor Hour...

In this emergency episode of the Investor Hour, Rahul Goel talks to Vijay Bhambwani, who he calls India's #1 trader.

Vijay dives deep in this "coronavirus" situation and presents a picture which we believe would be extremely beneficial to any investor or trader.

They talk stocks, commodities, bullion and currency.

For each of these assets, they talk what's around the corner, and how one should position oneself for potential gains.

Whatever you do, don't miss this emergency issue of the Investor Hour!

Listen in here...

Towards the end, Vijay shares a very unique perspective on how to allocate assets. Don't miss that!

Crude Oil Continues Fall

Crude oil prices witnessed selling pressure yesterday, 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 economics of falling crude oil prices. You can check the same here: All About the 30% Crash in Crude Oil - 10 Points

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).

YES Bank Crisis Having Contagion Impact on Private Banks

In news from the banking space, the Yes Bank crisis is having a contagion impact on other private banks, forcing these lenders to clarify their position and address depositor concerns on their capital base and liquidity.

RBL Bank, Karnataka Bank and South Indian Bank, in separate communications to their customers, have clarified that rumors around their financial health and stability are untrue and not based on facts.

This also follows an RBI clarification about the safety of banking deposits on Sunday.

Yes Bank has been put under a moratorium by the Reserve Bank till April 3, and customers are not allowed to withdraw more than Rs 50,000 from their accounts.

In one of the articles, we have written about the entire timeline of how YES Bank went from a stock market darling to a pariah. Read the article here: How the YES Bank Collapse Unfolded - 10 Points.

GOLD ETFs Turn Attractive Amid Ongoing Volatility

The spike in market volatility has prompted mutual fund (MF) investors to lap up units of gold exchange-traded funds (ETFs), with the category seeing highest flows since 2008.

In February, net flows into the schemes stood at Rs 14.8 billion, which was seven-times of flows ETFs received in previous month.

In 2019-2020, gold prices are up 37% in domestic markets. Since August 2018 lows, the prices are up 48%.

The government recently launched tenth series of sovereign gold bonds to tap investor appetite for gold-linked products.

However, industry experts say that entering gold-linked products at current levels may lead to muted returns, as the prices have already run-up with significant gains.

Meanwhile, systematic investment flows (SIPs) in the MF industry saw a marginal dip in February at Rs 85.1 billion.

Equity flows coming into the industry have so far been holding up, with February tally coming in at 11-month high. The flows were at Rs 108 billion, 37% higher than previous month's tally.

Over the last one-month period, large-cap funds have given negative return of 12.8%. The mid and small-cap funds have given negative returns of 11% apiece.

Speaking of mutual funds, Tanushree Banerjee wrote to you about an irreversible megatrend in the mutual funds space. It is the growth in the assets under management (AUM) of the Indian mutual fund industry.

This is evident in the chart below...

New High for Mutual Fund AUM

Here's what Tanushree wrote about it in a recent edition of The 5 Minute WrapUp...

• After a few hiccups in the first half of this fiscal, strong inflows into mutual funds have taken the industry's AUM to a new high.
  
  Can we call it a saturation point?
  
  Far from it!
  
  The total AUM of India's mutual fund industry is just about 13% of India's GDP.
  
  This megatrend of financialisation of savings has a long runway ahead of it.

This is one of the megatrends that will help what Tanushree calls the Rebirth of India.

She has identified the 7 best stocks that will profit from the Rebirth of India. You can read about these top 7 stocks here.

IPO Buzz: No Listing Gain Expectations for SBI Cards IPO?

In 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).

And 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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