When equity as an asset class deals with uncertainties like the ones we are facing now, it is not willing to be rational. Because it does not think any price is worth buying. So, until that uncertainty settles, the market is unlikely to behave rationally. According to Dalal Street veteran Ridham Desai, this happens because investors in such situations have to deal with tail risk, and the problem with it is that one does not know exactly what would be the quantum of damage or when the damage will get over.
STREET PULSE: Where we stand Nifty futures on the Singapore Exchange traded 750 points lower at 7am (IST), signalling another major selloff ahead on Dalal Street. Elsewhere in Asia, stock markets crashed as panic gripping world financial markets deepened, and even haven assets such as gold and bonds were ditched to cover losses in the wipeout.
HERE'S WHAT TO WATCH  | Japan's Nikkei was in freefall, dropping 10% and heading for its worst week since the 2008 financial crisis. MSCI's broadest index of Asia-Pacific shares outside Japan fell 2%. Australia's benchmark fell 7.6% and is set for its worst week on record. Hong Kong's Hang Seng fell 6.8%, its steepest drop since 2008. China's Shanghai composite fell 4%. |
| Wall Street witnessed its worst crash since Black Monday in 1987 overnight. Trade was halted on the S&P500 after it hit downdraft circuit breakers. It fell further when trade resumed, eventually losing 9.5% to close 27% below February's peak. Dow and the Nasdaq too fell more than 9 per cent. |
| Oil prices fell on Friday for a third day, with Brent crude set for its biggest weekly drop since 1991. Brent crude was down 67 cents, or 2%, at $32.55 a barrel after falling more than 7% on Thursday. For the week, Brent is set to fall 28%, the biggest weekly decline since the week of Jan. 18, 1991. WTI crude was down 66 cents, or 2.1%, at $30.84 after falling more than $1 earlier. |
| The rupee lost 0.77% to close at 74.21 per dollar on Thursday, its lowest level since October 10, 2018. The currency hit an intraday low at 74.34, very close to the all-time low of 74.48 on October 11, 2018. |
| WHO'S |  |
INDIA WORKS FROM HOME… Some of India's largest corporations, a swathe of startups and technology multinationals are asking employees to work from home even as the country reported nearly a dozen new cases of Covid-19 infections on Thursday. Among those offering remote work models include ecommerce majors Flipkart, Snapdeal, transport aggregators Uber and Ola, food delivery company Swiggy, payments provider Paytm as well as IT services companies Wipro and Tech Mahindra. At stock broking startup Zerodha, the entire team of 1,200 has been asked to work from home, founder Nithin Kamath tweeted.
Read More EXPORTERS BRACE FOR IMPACT… Exporters are bracing for at least a $1 billion decline in outward shipments in February as countries close borders and order cancellations increase due to the spread of Covid-19. With labour-intensive sectors like gems and jewellery, lifestyle goods, carpets and handicrafts expected to get impacted the most, traders expect the impact to come with a lead time of around three months, said Ajay Sahai, director general of the Federation of Indian Export Organisation.
Read More IT SET TO TAKE BIG HIT… The IT services sector's growth has been revised downward to 3-8% for the next financial year following the Covid-19 virus outbreak, according to Kotak Institutional Equities. The brokerage firm has cut revenue growth estimates of some large and mid-cap tech services companies by 2-4% as the spread of the virus intensifies in developed markets, pushing clients to issue travel restrictions and work-from-home measures.
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YES BANK SUITORS… State Bank of India will be joined by private lenders ICICI Bank, HDFC Bank, Axis Bank and Kotak Mahindra Bank as well as investors Radhakishan Damani, Rakesh Jhunjhunwala and the Azim Premji Trust in the rescue plan for Yes Bank to invest more than Rs 12,000 crore, said three people aware of the development. As per the proposal sent to RBI, these investors will together hold more than 49%, with SBI holding the largest share at 45%, they said. SBI has also recommended appointing Yes Bank administrator Prashant Kumar as the bank's new CEO.
Read More IIP LOOKS UP… Factory output growth improved in January after a mild decline in December while retail inflation eased in February, offering the RBI the option of an immediate rate cut to counter the disruption caused by the Covid-19 pandemic. Data released by the statistics office on Thursday showed industrial output grew 2% in January against an upwardly revised 0.07% rise in December. The simultaneously released CPI showed retail inflation slowing to 6.58% in February from 7.59% in January due to softer food inflation.
Read More RBI STEPS IN… RBI moved to quell currency market volatility by opening a $2 billion dollar-rupee swap window and widen this if required with foreign exchange reserves at a record level. The central bank is set to auction the $2 billion on Monday in order to alleviate dollar shortages as overseas investors exit India, marking its first move to combat the severe effects of the coronavirus outbreak. The rupee is down 4.07% this year as FIIs have sold domestic securities aggregating Rs 23,237 crore with the markets having crashed around the world because of the Covid-19 pandemic.
Read More Meanwhile... SPRING-CLEANING TIME… Financial planners are borrowing the phraseology of fashion designers, with an equities rout globally making it easier to spot long-term stock winners. So, they are advising investors to take advantage of the 21% Nifty decline by spring-cleaning portfolios, dumping underperforming funds, and buying more stocks. Instead of rushing to the safety of competing asset classes such as gold, or bonds or property, they are advising investors to increase their tactical allocation to equity by 10%.
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