INSUBCONTINENT EXCLUSIVE:
Mumbai: Indian stocks swung from extreme fear to guarded optimism on Friday as the firefighting efforts of governments and central banks
introduced a semblance of stability after markets were ravaged by worries about the effect of coronavirus on economic growth
Benchmark indices closed over 4 per cent higher on Friday, rallying strongly from the unusual 10 per cent plunge in early trade, which
activated the lower circuit breaker that resulted in a mandatory trading halt
The rebound follows the largest single-day drop on Wall Street since Black Friday in 1987.
BSE’s Sensex fell below 30,000 and NSE’s
Nifty breached the 9,000-mark early on Friday, resulting in the market sinking deeper into the bear territory
Brokers said aggressive purchases from LIC and other public-sector insurers along with treasuries of some state-owned firms paved the way
for the market recovery after the trading resumed, forcing traders to square off some of their bearish bets that helped the Sensex and Nifty
soar 16 per cent from the day’s lows — the highest intra-day jump ever.
The Sensex gained 1,325.34 points, or 4.04 per cent, to close at
34,103.48 off the day’s low of 29,388.97
Nifty rose 433.50 points, or 4.52 per cent, to close at 10,023.65 after falling to 8,555.15
This is the first time since January 21, 2008 and the fifth instance in the past two decades that trading in India has been frozen because
of indices hitting the lower circuit
Trading was halted for 45 minutes to ease the panic after the Sensex and Nifty plunged 10 per cent.
Soon after the indices hit circuit
breakers, the Securities and Exchange Board of India (Sebi) rushed to reassure the markets, saying it was monitoring the positions of margin
payments, margin utilisation and adequacy of collaterals.
Investors, however, remained on tenterhooks that was reflected in the elevated
levels of the Volatility Index
VIX on Friday jumped 24.43 per cent to 51.47, suggesting traders continue to see near-term risks to the market.
“The market seems to have
found a bottom for now, but it will remain on the edge,” said A Balasubramanian, CEO, Birla Sun Life Mutual Fund
“The growing disruptions due to the coronavirus and uncertainties in the global credit markets will remain worries for the
market.”
Domestic institutional investors, including insurers and mutual funds, net bought shares worth Rs 5,867.90 crore helping offset
the impact of selling by foreign portfolio investors worth Rs 6,027.58 crore.
Analysts said the rebound prompted foreign trading desks to
cut some of their bearish bets but they continued to bet on more declines.
“About 11 per cent of short positions were cut on Friday by
FIIs but they still remain net short about 1.5 lakh contracts,” said Amit Gupta derivatives head at brokerage ICICIdirect-.com The Indian
rupee bounced back from its record low levels after the Reserve Bank of India intervened to stem the slide, making it the second
best-performing currency for the day in the Asian region.
European stocks rebound sharply
The rupee hit record low at 74.50 Friday,
surpassing its erstwhile record level at 74.48 in October, 2018
The local unit recouped its early losses after the RBI intervened, selling dollars
It gained 0.42 per cent to close at 73.91 per dollar
Chinese yuan was the best performing Asian currency Friday
The RBI was said to have intervened in the spot market as some state-owned banks were seen selling dollars on behalf of the central
bank.
European stocks rebounded sharply on Friday, responding to authorities’ efforts to calm markets
Italian and Spanish securities regulators temporarily banned short selling in a number of stocks following record losses on
Thursday.
Central banks around the world also announced measures to calm the markets
Bank of Japan conducted an unscheduled bond buying, its first such action since 2018, while People’s Bank of China cut reserve
requirements for banks in a move to ease liquidity conditions
The moves helped Asian markets recover early losses though most of them ended weak.
Financial markets are reflecting the anxieties that has
erupted due to the disruptions triggered by the spreading coronavirus
Several countries in Europe have closed schools and restricted travel
In Italy, people have been living under a lockdown
The count of those affected by the pandemic is surging with at least 138,170 cases across the world
Investors have been worried that slowing economic activity would result in a global recession.
Till Thursday, the Sensex and Nifty had
fallen more than 20 per cent since February 19, officially entering the bear market, driven by foreign portfolio selling worth Rs 40,600
The rebound on Friday helped erase a portion of the losses
Indian markets are down 17.5 per cent since February 19.
