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Sensex Tumbles Over 1700 Points: Factors Behind The Decline

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After recovery seen on Friday the 13th March 2020, the markets have again crashed to the extent of 2000 points on the Sensex in early trade on Monday, though at a later part there was seen some paring in early losses. At around 11:15 am, Nifty was 4.5% while Sensex was down 1480 points at 32,623.

 
Sensex Tumbles Over 1700 Points: Factors Behind The Decline

So, what has spooked markets in trade on March 16, 2020 are listed below:

1. Coronavirus Scare Deepening:

PM Narendra Modi in view of the deepening threat of coronavirus which has resulted in 2 causalities and the number of cases has now reached 110 so far in India has announced an emergency SAARC fund. Maharashtra has been the worst hit by the pandemic followed by Kerala.

2. Fed rate cut to 0% and QE:

The move highlights the distress in the overall economic system due to the pandemic which led the US central bank to cut short-term rates to a target range of 0% to 0.25% for boosting growth. Also, at the same time has announced quantitative easing of $700 billion for ensuring liquidity.

"The Fed also said it would support U.S. banks that began to tap the capital and liquidity buffers they built up in the aftermath of the 2008 financial crisis and would reduce reserve requirement ratios to 0% effective on March 26," said the report.

3. Global Markets Continue to Trade Weak:

Also, as we write the losses have again deepened in Asian markets, with Hang Seng down 3.46%, Nikkei down as much as 2.76%, South Korea's Kospi down 2.86%.

As per a Reuters report, the US stock futures declined as much as 4.8% to hit their down limit before day break in Singapore.

4. FPI Selling Continues:

Amid the ongoing coronavirus scare, FPIs which until September were buyers into the Indian market have pulled out a massive Rs. 37,976 crore from the Indian markets.

 

5. India Inc Sentiment Turns Grim:

Amid the coronavirus scare, credit pressure on India Inc. has increased immensely and the slowdown is expected until April 15. Also, on Friday, CRISIL said business including aviation, multiplexes, hotels, malls will be the worst hit.

So, given the current sentiment, investors are advised to keep away from the markets until the market stabilizes.

Story first published: Monday, March 16, 2020, 11:58 [IST]
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