Last
week, Indian bourses saw their worst weekly fall in a decade with the
S&P BSE Sensex and the Nifty50 tumbling nearly 7 per cent each
during this period.
A
drop of nearly 3 per cent on Friday amid a global sell-off on
coronavirus health scare and fears that weak economic data from China
over the weekend ticked most of the checkboxes that could have sent
the markets spiraling down further as they opened for trade on
Monday. However, the over 600-point up move intra-day caught many by
surprise.
The
markets, analysts say, over-reacted to the developments and sold-off
in a panic mode on Friday. The rally on Monday, according to them,
could also be on account of short-covering. Most global markets
suffered their worst weekly fall since the 2008 global financial
crisis last week. The velocity of the fall in stocks was sharp across
markets in Asia, Europe, and America. Indian bourses, too, saw their
worst weekly fall in a decade with the S&P
BSE Sensex and the Nifty50 tumbling nearly 7 per cent each during
this period.
“The
markets now seem to have realised that coronavirus may not be as bad
a scare as it was made out to be. The only way it can spread is via
physical contact amid conducive temperature / climate. India, though
not completely insulated from the global meltdown in financial
markets, is still relatively safer as regards this health scare. I
don’t see the markets selling-off in a way they did on Friday.
There can be intermittent corrections but quality stocks will start
to perform now,” says A K Prabhakar, head of research at IDBI
Capital.
Another
reason is the hope of a fiscal stimulus by global central banks to
prop-up growth, which was already hit by US China trade spat, till
the onset of coronavirus made things worse. The developments,
according to experts, are enough reasons for central banks to cut
rates and inject liquidity into the system to aid growth. This, in
turn, will benefit most asset classes.
“The
fundamentals of the US economy remain strong. However, the
coronavirus
poses evolving risks to economic activity. The Federal Reserve is
closely monitoring developments and their implications for the
economic outlook. We will use our tools and act as appropriate to
support the economy,” Fed Chairman Jerome Powell said over the
weekend.
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