Sensex plunges on stimulus disappointment

Finance Minister’s stimulus aimed towards reviving the gloomy Indian economy failed to cheer up Indian stock markets as Sensex plunged by 885.72 points, which is 2.77 per cent to reach the level of 31,122.89 while, Nifty dipped by 240.80 points, which is 2.57 per cent to be at the level of 9,142.75.

Market experts believe that the stimulus has more to do with supporting the supply-side issues rather than attending to the demand-side issues thus, lacking to give the much-needed economic boost for short-term. With exact funding details missing and looming risks of rating downgrades, the short-term relief remains unlikely. The nationwide lockdown in India had halted manufacturing activities and significantly lowered the consumption. This can spike up the loan default rate by various companies. Hence, with credit growth remaining sluggish, market rumours for preventing investors to stay away from small banks as well as NBFCs. Finance Minsiter mentioned measures worth Rs 5.94 trillion, which will focus largely on MSMEs, NBFCs, power discoms and real estate sector. Despite more such announcements to follow throughout the week, the overall sentiments remained negative and weak as US Federal Reserve Chairman Jerome Powell warned of extended economic weakness to be prevalent in US, caused by COVID-19 pandemic.

Globally, Shanghai index fell by 0.96 per cent over concerns of delay in China’s economic recovery. Other Asian indices such as Hang Seng, Nikkei and KOSPI also closed in red, down by 1.45 per cent, 1.74 per cent and 0.80 per cent, respectively. Fears over the return of COVID-19 as World Health Organisation (WHO) subtly warned that the virus may never go away with the new reported cases in South Korea and China, led European indices such as FTSE 100, DAX and CAC 40 to dip by 2.31 per cent, 1.80 per cent and 1.99 per cent each.

Seven stocks advanced in Sensex basket which included Hero MotoCorp-gaining by 2.28 per cent, Ultratech Cement rose by 1.65 per cent, Maruti gained by 1.48 per cent, L&T rose by 0.96 per cent, Sun Pharmaceuticals gained by 0.78 per cent, HUL rose by 0.56 per cent and Bajaj Auto gained by 0.12 per cent. Sensex draggers included Tech Mahindra closing in red, down by 5.24 per cent, Infosys fell by 5.16 per cent, HDFC fell by 4.69 per cent, IndusInd Bank decreased by 4.46 per cent and RIL fell by 4.07 per cent. Amongst the sectoral indices, Information technology was the biggest loser as it fell by 3.60 per cent while, Healthcare gained by 0.54 per cent.