Market tanks as Nifty breaches 7,900; 5 factors that could be dragging the market

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Indian market witnessed yet another day of massive selling tracking global markets. The S&P BSE Sensex broke below 27,000 to hit a 38-month low, while the Nifty50 breached 7,900 levels for the first time since December 26, 2016.

Sectorally, selling pressure was seen in BSE Finance, Oil & Gas, Bankex, Consumer Durable, Auto as well as Energy indices.

The Indian rupee opened at record low of 74.95 per dollar on Thursday, down 69 paise against previous close 74.26.

We have collated a list of factors which could be weighing on markets: Massive selling in global markets:

Asian stocks struggled on Thursday despite the announcement of stimulus from the European Central Bank but rising cases of coronavirus across the world capped the upside.

The ECB will buy 750 billion euro ($820 billion) in bonds through 2020, with Greek debt and non-financial commercial paper eligible under the programme for the first time, said a Reuters report.

Benchmark U.S. 10-year Treasuries, usually a haven in times of turmoil, suffered their sharpest two-day selloff in nearly 20 years.

Overnight on Wall Street, the S&P 500 fell 5 percent and is down nearly 30 percent over a month. The index has erased gains since President Donald Trump’s 2017 inauguration, the Reuters report said.

Cut in earnings forecast:

Indian equity markets have corrected significantly so far in 2020 and especially in the past month in tandem with global equity markets due to headwinds from the Covid-19 outbreak across multiple countries.

The supply disruptions, as well as shrinking of demand, are a couple of factors that are likely to have bearing on the earnings for India Inc. suggest experts.

“We are assuming a 10% cut in Nifty earnings estimates for FY21 for valuation analysis. This is to factor in both global and local headwinds and disruptions owing to the outbreak of Covid-19,” Motilal Oswal said in a report.

“Global Cyclicals will see significant earnings downgrade given the sharp fall in commodity prices and expected moderation in global economic growth. The domestic economy facing sectors will also see downward revision in the earnings forecast due to restricted movements to prevent the outbreak of coronavirus,” it said.

Sombre global growth forecast — may shrink to 1% in 2020

Following the coronavirus pandemic, global growth? may shrink to 1 percent in 2020, down from 2.3 percent before the outbreak started, as four major economiesu007f- Japan, Italy, Germany, France – are likely to experience a full-year recession, says a report.

According to The Economist Intelligence Unit (EIU), the situation appears grim in most countries around the world. As per its assumption, the virus will infect around 50 percent of the world population; 20 percent of the cases will be severe, and 1-3 percent will result in deaths.

Bank of America Securities has cut its March quarter growth forecast by 30 bps to 4 percent, amid coronavirus pandemic-driven shutdowns and expects a cut in key benchmark rates on or before the April 3 monetary policy review, said a PTI report.

Brent crude was trading at $26.98 a barrel after tumbling 13 percent on Wednesday in the third day of relentless selling.

Persistent selling by FIIs: Foreign institutional investors (FIIs) sold shares worth Rs 5,085.35 crore, while domestic institutional investors (DIIs) bought shares of worth Rs 3,636.44 crore in the Indian equity market on March 18, provisional data available on the NSE showed.

So far in the month of March, FIIs have pulled out more than Rs 43000 cr from Indian equity markets in the cash segment.