Investors have become very cautious as the number of Covid-19 cases in India is rising and the United States has also warned that there could be an increase in infections, analysts said.
BSE Sensex closed at 28,265.31, a decrease of 1,203.18 points or 4.08%, while Nifty closed at 8,253.80, a decrease of 343.95 points or 4%. Other Asian markets, including Japan, China, Hong Kong and Korea, closed at 4.50%.
US President Donald Trump has warned of a very painful battle against the virus, after which the White House predicts 100,000 to 240,000 deaths in the United States. The number of infections has also risen sharply in India, with Maharashtra showing the highest number of patients.
Investor confidence is being undermined by the growing fear of a global recession, the growing cases of Covid 19 and the weak macros boosting sales on global markets, including India. Nor are there any new positive triggers that could boost investor sentiment in the near future, analysts warn.
Tuesday’s interest rate cuts for programs such as the Public Safety Fund, Kisan Vikas Patra, the National Savings Bank and small savings programs indicate that the budget deficit will rise significantly, said Manufacturer Chuhan, Executive Vice President of Technical Research for Equity, Cotac Securities.
In this scenario, the financial sector becomes vulnerable and we now see a similar development in the market. On the other hand, the increase in the number of coronavirus cases is keeping global markets in check. Technically, Nifty has broken the intraday level to 8,240, which is negative and could lead to further market weakness, Chukhan said.
Interestingly, India’s volatility index (VIX) fell by 6.76% on Wednesday. In general, the VIX and the fairs have feedback.
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Changing the MSCI to change India’s weight will cost the country a lot, as it expects a massive capital inflow of $15-16 billion by May 2020, said Ajay Bodke, PMS CEO Prabhudas Lilladher. At a time when policymakers in all countries, including the United States, have announced unprecedented monetary and fiscal measures to stabilise markets, it is imperative that the Indian government and regulators immediately call on the MSCI to make the necessary changes and persuade them to cancel the postponement. According to Bodke, many shares in companies such as Kotak Mahindra Bank and L&T, which were expecting billions in inflow as a result of the changes, have now been severely beaten by the MSCI because of the delay.
Earlier, in October 2019, the Ministry of Finance published a circular raising the legal limit for foreign portfolio investors (FPIs) for Indian companies to the sectoral limit for foreign investment, with effect from 1 January 2019. April 2020 has come into force. The circular also allowed the companies, with the approval of the Board of Directors and the General Committee of the Company, to increase their respective CPI limits until December 31, 2009. March 2020 at a lower threshold.
MSCI, a provider of research-based indices and analysis, said it would await the implementation of these changes and the systematic publication of new industry boundaries before making changes to the MSCI indices.
Meanwhile, the rupee closed at 76.28, down 0.86 pause, while 10-year government bonds ended at 6.14%, down 7 basis points.
The BofA Securities continues to expect rising exchange rates from the RBI to keep speculative attacks on the rupee at bay. It is also likely to seek to increase foreign exchange flows by encouraging exporters to repatriate their earnings, increasing the cost of financing imports and raising the rupee RNR/RCN deposit rate. In June, our monetary strategy experts visited ₹76 for the US dollar, according to the report.