Market crash: There is more to it than just coronavirus

On Friday, market indices observed one of its worst falls in history tracking their global peers terrified by a rapid spread of Novel Coronavirus across the globe.

At 9.50 am, the BSE Sensex was trading 1,145.29 points or 2.88 per cent lower at 38,600. NSE barometer Nifty fell 347.90 points or 2.99 per cent to 11,285.40. The BSE NSE -2.09% m-cap fell ₹3.77 lakh crore to ₹148 lakh crore. India VIX, the barometer of fear in the markets, spiked nearly 20 per cent to top 21-mark, according to Economic Times. It wiped out nearly 5 lakh crores in just five minutes!

Though the main reason behind this massive crash is the rapid spread of coronavirus in all the six habitable continents, there are other factors too. Have a look at the factors that dropped the indices this low:

Spread of Novel Coronavirus in six continents

COVID-19 has outstretched in six continents of the world which is the major reason the scared investors on Dalal Street. Countries across the globe are observing a rapid growth in infections as well as deaths.

Novel Coronavirus is becoming the worst nightmare with10 countries reporting their first virus cases in the last 24 hours, including Nigeria, the most populous country in Africa and the first case in sub-Saharan Africa, according to a report in Economic Times.

Crash in US markets

US indices witnessed an overnight fall leading to a visible affect on streets. The S&P 500 finished 12 per cent below its February 19 record close, marking its fastest correction ever in just six trading days.

Japan's Nikkei slumped 4 per cent. MSCI all country world index fell 0.5 per cent after 3.3 per cent drop on Thursday. So far this week, it has lost 9.3 per cent, on course for its biggest weekly decline since a 9.8 per cent plunge in November 2008.

The Dow, down with 1,190 points recorded its fourth 1,000-point decline in history and the second this week.

GDP growth likely to flatline

Economic Times quoted ICICI Bank’s report as saying that the GDP growth is expected to print around 4.7 per cent year-on-year.

The State Bank of India said the growth will likely stay flat at 4.5 per cent in the October-December 2019

Some economists have warned that the Gross Domestic Product (GDP) growth rate is likely to be flat in the third quarter. The government will release GDP data later.

FPIs offload ₹10,000 crores in four days

Foreign portfolio investors offloaded ₹10,000 crores in the past four days. Money managers believe that domestic stocks will continue to see outflows if the global market rout doesn’t end.

Technical outlook weak

Bulls and Nifty formed a ‘Hammer’ candle pattern closing at 11,633.

Analysts expected that level to provide some support, they also warned the index could slide if it fails to hold the level, the report stated.

Economic Times quoted analysts from YES Securities as saying, “We expect Indian indices to continue correction with Bank Nifty on the receiving end. The ratio of Bank Nifty versus Nifty is hovering near important resistance of 2.60-2.61; hence, follow-up action in the Bank Nifty needs to be closely watched as sustenance below 30,000 could drag Bank Nifty towards month’s lowest level (i.e. 29,613).”