Volatile Day for Indian Indices: Sensex Ends 131 Points Lower Post Rebound; Telecom and Auto Stocks Bleed

Fri, 27 Mar Closing

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It was a volatile day for India share markets today. The benchmark indices opened higher but turned volatile and erased most of the gains thereafter, even after the RBI in its MPC meet cut the repo rate by 75 bps to 4.40%.

Losses were seen as market participants turned cautious after RBI Governor Shaktikanta Das said that there's a rising probability that large parts of the global economy will slip into recession.

At the closing bell, the BSE Sensex stood lower by 131 points (down 0.4%) and the NSE Nifty stood up by 18 points (up 0.2%).

The BSE Mid Cap index ended the day down 0.3%, while the BSE Small Cap index stood up by 0.3%.

Most of the sectoral indices ended in the red with stocks in the telecom sector, auto sector and oil & gas sector witnessing maximum selling pressure.

Asian stock markets finished on a positive note. As of the most recent closing prices, the Hang Seng was up by 0.56% and the Shanghai Composite was up by 0.26%. The Nikkei 225 was up by 3.88%.

European markets were trading on a negative note. The FTSE 100 was down by 3.97%. The DAX was trading down by 2.19%, while the CAC 40 stood down 3.05%.

The rupee was trading at 75.27 against the US$.

Note that the Indian stock market has fallen 36% in just over a month. However, Vijay Bhambwani's subscribers have been saved from a lot of pain in this market.

He's had 16 out of 22 profitable trades in these difficult times and his last 11 trades, over the last six months, have been profitable. He has delivered a return on investment of 42.95% for his subscribers at a time like this when everyone is barely managing to stay afloat due to daily losses.

Vijay will be online for his upcoming event on Monday, 30 March at 5 pm.

The Weekly Cash Summit is where Vijay will share his blueprint for consistently beating the market. Register for free here.

Also, a few days ago, we asked you to participate in Equitymaster's "State of the Markets" poll.

The poll asked you to vote on what holds next for the Indian stock markets amid the gloomy economy and coronavirus fears.

Many of you voted for the same and we thank you for participating. The numbers are in and here are the results.

In news from the macroeconomic space, Moody's Investors Service has more than halved India's 2020 growth forecast to 2.5%. This is within just three weeks of its previous downgrade to 5.3%.

This growth reduction is in sharp contrast to the previous downgrade of 0.1%. Earlier this month Moody's had revised its estimate to 5.3% from 5.4% in February. It had said the country's growth could slow down to 5% if the virus was not contained in its previous update.

According to the Global Macro Outlook 2020-21 released on Friday, the 21-day lockdown announced by Prime Minister Narendra Modi would result in a sharp loss in incomes and further weigh on domestic demand and the pace of recovery.

The report said a general lack of social safety nets, weak ability to provide adequate support to businesses and households, and inherent weaknesses in many major emerging market countries will amplify the effects of the coronavirus-induced shock.

Moody's also sharply revised China's growth forecast to 3.3% this year down from 4.8%. It said that based on the latest high frequency indicators, we estimate that China's economy contracted by around 10% in the first quarter on a sequential basis.

The ratings agency saw growth going into negative territory in major western economies with estimates of contractions of 5.4% in Germany, 4.5% in Italy, 4.3% in the US, 3.9% in the UK and 3.5% in France during the first half of 2020.

In other news, the RBI today lowered the key repo rate by 75 basis points (bps) to 4.4%. The move is to help arrest the economic slowdown in the wake of the coronavirus outbreak.

Here are some of the key takeaways from today's RBI policy decision:

The RBI made a sizeable cut in repo rate. It slashed the repo rate by 75 bps. The reverse repo was also reduced by 90 bps and now stands at 4%. This has made the repo rate falling to the lowest ever. Before this, it had hit the lowest point of 4.74% in April 2009 in the wake of the global financial crisis.

Meanwhile, the cash reserve ratio (CRR) has been slashed by 100 bps to 3%.

The six-member Monetary Policy Committee (MPC) voted 4-2 in favour of the reduction of the repo rate by 75 bps, RBI Governor Shaktikanta Das said in an address to media.

The RBI also allowed banks and other lending institutions to extend the repayment schedule and moratorium by three months to avoid large NPAs and reduce risk weights.

The RBI said that the coronavirus pandemic will affect the growth of most sectors. Referring to the illness, Shaktikanta Das said that apart from continuing resilience from agriculture and allied sectors, most sectors of the economy will be adversely impacted by COVID-19, depending upon its intensity, spread and duration.

For liquidity measures, Das said that large selloffs in markets have intensified redemption pressure. The RBI will conduct auctions of long-term repo operation (LTRO) of up to three-year tenure of appropriate sizes for a total amount up to Rs 1 lakh crore at a floating rate linked to the policy repo rate

Deferment of interest on working capital facilities was also announced. As per the RBI, Lending institutions can defer by three months payment of interest outstanding as on March 1 on working capital facilities sanctioned in the form of cash-credit and overdraft and such. The accumulated interest for the period will be paid at the end of the deferment period.

Note that many other central banks have been taking similar measures to relieve their economy from the escalating global coronavirus pandemic.

Earlier this month, the US Federal Reserve lowered the interest rates, bringing it near zero, in another emergency move to help shore up the US economy. The Fed had cut interest rates by half a percentage point on March 3, too, in its first emergency cut since the financial crisis of 2008.

The Reserve Bank of New Zealand (RBA) slashed interest rates by 75 bps to a record low. The Reserve Bank of Australia poured US$ 3.6 billion in liquidity into Australia's financial system and said it was prepared to buy government bonds.

The coronavirus threat has meant sharp losses for global stock markets.

We have written a piece around how deep this impact has been felt in the global financial markets. You can check out the same here: Worst Week for Global Stock Markets: Coronavirus Impact in 10 Points

Tanushree Banerjee believes the ongoing stock market correction could, in fact, be an inflection point for what she calls the irreversible Rebirth of India megatrends.

For bluechip stocks, she believes the time is ripe to begin buying some of the safest bluechips as there is safety in valuations and the market is offering them at deeper and deeper bargains.

The profits of bluechips (BSE 200 companies) are currently at a decade low as can be seen in the chart below.

A Rebound in Profits Overdue?

Tanushree is recommending her subscribers, to buy stocks selectively, a few at a time, by taking partial exposures to begin with.

She has already recommended 4 safe bluechips in the past month and there are several more in her watchlist. You can access them here: Here's How You Could Trade the Coronavirus Crisis Safely (requires subscription)

And if you are not a StockSelect subscriber, here's where you sign up.

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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