Mumbai: Indian stocks sank further on Friday as Covid-19 deaths and cases of infection mounted across the world, heightening uncertainty among investors about the eventual economic costs.
It was the seventh consecutive week of losses for the key Indian equity indices, which have declined about 7% during the period. With the pandemic showing no signs of slowing, analysts are bracing for the Nifty to fall below 7,500 — the level from which the stock market recently rebounded.
The Nifty and Sensex could fall 13-15% if the level is breached, analysts said. The Nifty ended 2.1% down at 8,083.80 points.
The Sensex dropped 2.4% to 27,590.95 points.
Financials led the decline with the Nifty Private Bank index ending 5.4% down as the biggest laggard among sectors on worries the lockdown, which has halted business activity and hit jobs, will lead to an explosion in bad loans.
But for gains in pharmaceutical shares, losses would have been sharper. The pharma index surged 5% led by Lupin, Sun Pharmaceutical and Cipla, which gained 8-14%. Morgan Stanley expects the global economy to contract by 1.9% in 2020. “As Covid-19 is more akin to a natural disaster than a financial shock and policy response has been more aggressive than in the GFC (global financial crisis), we expect the Great Covid-19 Recession to be a deep V-shaped recession,” said Morgan Stanley’s economists led by Chetan Ahya in its latest note. “The number of cases in India is rising,” said Rahul Arora, CEO, institutional equities at Nirmal Bang.
“The Nifty could retest its recent low of 7,500 and even at that level, it would be hard to say if the index has reached its bottom.” After touching 7,511 on March 24, the stock market had rallied 14% until early this week, raising hopes that the worst was over for now.
Since then, the market has see-sawed between gains and losses. “Market may test or go below the recent lows,” said Piyush Garg, CIO at ICICI Securities.
“The market is pricing in that the financial sector may see rise in NPAs if there are job losses and heavy supply chain disruptions because of the shutdown.” All eyes now will be on the OPEC group meeting on Monday.