Factors dragging markets in February 2020

The month of February turned-out to be a horrible month of trade for Indian equity benchmarks amid rising uncertainty over the economic impact of Coronavirus outbreak. Markets started the month on a pessimistic note as Budget proposals failed to lift investors’ sentiment. Traders also remained cautious on report that the government’s fiscal deficit touched 132.4 per cent of the full-year target in December-end, mainly due to the slower pace of revenue collections.

Traders paid no heed towards the report that eight core industries recovered to 1.3 per cent in December 2019 after remaining in a negative zone in the previous four months, helped by an expansion in the production of coal, fertiliser and refinery products. Also, the weak macro-economic data kept the markets’ gain in check. India's IIP contracted by 0.3 per cent in December 2019 as compared to the expansion of 2.5 per cent in December 2018, mainly on account of a decline in the manufacturing sector output. Adding more worries among traders, India’s retail inflation based on CPI jumped to 7.59 per cent in January 2020. Sentiments also got hurt after India’s WPI inflation spiked sharply to 3.1 per cent in the month of January 2020 as against 2.59 per cent for the previous month and 2.76 per cent during the corresponding month of the previous year.

Markets started moving southward as traders remained anxious with Commerce Ministry’s data showing that the country's exports contracted for the sixth month in a row by 1.66 per cent in January to $25.97 billion. Imports too declined by 0.75 per cent to $41.14 billion, leaving a trade deficit of $15.17 billion during the month under review.

A complete bloodbath was witnessed in the final week of the month which dragged frontline gauges below their crucial 11,250 (Nifty) and 38,300 (Sensex) levels, as Coronavirus pandemic fear intensified. Sentiments remain dampened as the think tank-National Council of Applied Economic Research (NCAER) pegged India’s economic growth for the current fiscal at 4.9 per cent, a tad down from five per cent estimated by National Statistical Office (NSO). Traders also remained anxious as CARE ratings in its latest report projected India’s Gross Domestic Product (GDP) growth at 4.5 per cent for the third quarter (Q3) of current fiscal year (FY20), which is lower than 6.6 per cent GDP growth recorded in the corresponding period a year ago. Final day of trade for the month proved to be a nightmare for the local markets with frontline gauges losing over three and a half per cent in a single day after the industrial body-PHDCCI said that Coronavirus outbreak may negatively impact the global growth by 30 basis points or $250 billion.

Looking at BSE SENSEX, only four companies have delivered a positive return in February 2020. The following table shows the top gainers and losers of February 2020: