Global Markets Plagued By Coronavirus

With the deadly Coronavirus, which originated in China and is now spreading globally, creating waves of fear, the markets have begun to feel an increasing weakness 

At the beginning of the fortnight, the markets were seen to be trading as usual but the 15-day period ended with the Coronavirus infecting the stock markets around the globe. Coronavirus is considered to be a deadly virus with its origins in China and has started to spread globally, taking many lives. As a reactive measure, the Chinese government has undertaken various measures to control the rapid spread of the disease. It extended its Lunar New Year holiday till February 2, 2020 nationally and February 9, 2020 for Shanghai region. In an effort to further stop the spread of the virus, many cities in China, including Tangshan which is the country’s largest steel-making city located in the Hebei province, were in lockdown with all public transport being suspended.

This led to fears among investors, resulting in the Shanghai index registering a fall of 4.19 per cent followed by Hang Seng and Nikkei which were down by 3.38 per cent and 2.84 per cent respectively. Even though market experts consider this unexpected risk factor as a regional more than a global shock, European markets such as CAC 40, FTSE 100 and DAX sank by 2.94 per cent, 2.76 per cent and 1.87 per cent respectively. After the health officials confirmed Coronavirus cases in the US, fears rapidly spread across the markets with companies belonging to the travel and tourism industry worst hit. Subsequently, DJIA fell by 1.40 per cent and S & P 500 dropped by 1.20 per cent, closely followed by NASDAQ which slipped down by 1.21 per cent.

As India serves trade ties with China, domestic market indices such as Nifty and Sensex declined by 1.97 per cent and 1.90 per cent respectively responding to the potential economic impact of the virus. The small-cap and mid-cap indices were up by 3.24 per cent and 2.30 per cent, respectively. Majority of the domestic sectoral indices registered a fall during the fortnight. Metal saw a drastic decline of 6.89 per cent. Bankex was down by 3.53 per cent followed by Power, Auto and IT indices down by 1.90 per cent, 0.28 per cent and 0.17 per cent. The FMCG index witnessed a muted performance of 0.01 per cent during the fortnight. Realty index was up by 3.22 per cent with positive budget expectations as the day draws to a close. China being the largest importer of Brent Crude, the virus breakout has brought about high demand implication with decrease of 7.13 per cent in Brent Crude price from USD 64.49 per barrel to USD 59.89 during the fortnight and by 9.25 per cent from USD 66 per barrel since the beginning of 2020. Gold price increased by 2.86 per cent to Rs.41,950 for 10 grams of 24 carat in the last 15 days and by 4.21 per cent since the beginning of the month of January. On January 27, 2020, rupee ended at the lowest level against USD since January 8, 2020 ending at 71.44 per USD. The trading data for the FIIs and DIIs showed that for the fortnight under review, FIIs were net buyers to the tune of Rs.13,283.58 crore and DIIs were net sellers to the tune of Rs.4,585.6 crore.