Sensex Opens Over 1,400 Points Down; Metal and Banking Stocks Plummet

Mon, 4 May 09:30 am

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Asian stock markets traded lower on today, with major markets regionally closed for holidays. Hang Seng index dropped 3.4% in early trade, while South Korea's Kospi fell 1.9% in morning trade. Wall Street sold off sharply on Friday after President Donald Trump revived a threat of new tariffs against China in response to the COVID-19 pandemic, which has brought global economies to a grinding halt.

Back home, India share markets plunged in the opening session. The BSE Sensex is trading down by 1,295 points while the NSE Nifty is trading down by 383 points. The BSE Mid Cap index and BSE Small Cap index opened down by 2.7% and 2.1% respectively.

All sectoral indices are trading in red with metal stocks, banking and automobiles stocks witnessing maximum selling pressure.

Note that the coronavirus impact has shaken markets worldwide. For the BSE Sensex, FY20 was the second worst year post FY08, the year of the global financial crisis.

Good Time to Start Investing Now?

Naturally, there is an atmosphere of fear all round.

Is it time to sell stocks now? Will the correction get worse?

History has shown that after years like the one we had just now, the next 3 years are good for the markets. In fact, these corrections are the rare times when you find businesses with solid fundamentals at reasonable valuations.

If you can find good businesses that can survive the current crisis, you will do well in the long run.

Moving on, gold prices are currently trading down 1.4% at Rs 45,527.

The rupee is currently trading at 75.74 against the US$.

In the news from the financial markets. Foreign portfolio investors (FPIs) continued their selling spree for the second straight month, withdrawing a net Rs 154 billion from the Indian capital markets in April amid the coronavirus crisis.

As per the reports, FPIs pulled out a net sum of Rs 68.8 billion from equities and a net Rs 85.2 billion from the debt segment between April 1-30.

The total net outflow during the month stood at Rs 154 billion.

In March, FPIs had withdrawn a record Rs 1.1 trillion on a net basis from the Indian capital markets (both equity and debt).

With selective relaxation in the lockdown and gradual opening up of economic activity in the country, foreign investors will be closely watching the developments on this front. They would also start looking at the domestic economic indicators as well to see how the country manages its deficits, the reports noted.

Moving on to the news from the economy. As per the Commerce Ministry data, output at India's core sector contracted by 6.5% in March, reflecting the early impact of the COVID-19 pandemic and the subsequent nationwide lockdown.

The index of eight core sector industries, which form 40% of the weight of items included in the broader Index of Industrial Production (IIP), reflected a contraction in key parts of the economy in March.

Its cumulative growth during the last fiscal year was 0.6%.

Leading the contraction at the core industries were a 13% decline in steel output, and a 7% fall in electricity generation.

The two sectors account for almost 40% of the index. Cement production crashed 25%, while natural gas production slid 15%. Fertiliser production also fell 12%, while crude oil production slipped 5.5%.

Coal was the only core sector which saw some growth, with output up 4%. The largest component of the index, refinery production also dipped by only 0.5%.

Note that, several of the core sector industries were given exemptions under the lockdown.

Electricity and steel are continuous processes and have not been stopped. But movement of goods faced major restrictions, so it could be that they reduced production as much as possible to deal with reduced demand.

Going forward to April, these trends are expected to worsen slightly since the demand has fallen drastically in the power sector due to the full lockdown this month, and gas-powered plants were likely to have been shut down.

Coal may also dip for April, while cement production will fall sharply as all construction activity came to a halt.

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

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