Indian stocks recover sharply as global markets stabilise

Indian stocks recovered sharply in afternoon trading on Friday after tumbling earlier in the session as major global markets were lifted by hopes that a US stimulus package could help limit the economic damage from the coronavirus outbreak.

Registering the biggest ever recovery in the Indian stock markets, the Sensex and Nifty rose over 4 per cent.

The Sensex gained 1,325.34 points or 4.04 per cent higher at 34,103.48 from its previous close of 32,778.14.

The Nifty50 on the National Stock Exchange closed at 10,023.65, higher by 433.50 points or 4.52 per cent from its previous close.

According to analysts, investors are carrying on lower level buying, which has supported the stocks.

The markets have gained as the trade resumed around 10.20 a.m. after a 45 minutes halt as both the indices touched their 10 per cent lower circuit during the initial trade.

Sensex fell over 3,000 points to trade at below the 30,000 mark. It was at 29,687.52, lower by 3,090.62 points or 9.43 per cent when trade was halted.

Nifty50 touched the lower circuit of 10 per cent and was at 8,624.05 points much below the psychological mark of 9,000 points, when trade was shut temporarily.

Meanwhile, the Indian rupee depreciated to a record low of 74.50 in its initial trade on Friday following the persistent fears of the coronavirus outbreak and bear run in the global financial markets. However, the rupee has appreciated marginally from its lows and traded at 74.12 per US dollar  on Reserve Bank of India’s intervention.

Its previous low was 74.48 which it had hit in October, 2018. It had opened at 74.39, weaker by 17 paise from its previous close of 74.22.

With an aim to curb further weakness for the rupee, the Reserve Bank of India (RBI) on Thursday announced that it will undertake a six-month ‘sell/buy swap’ to provide liquidity to the foreign market.

Central banks across the world, including the US Federal Reserve have taken steps including announcement of emergency rate cuts to boost investor sentiments.

In a bid to calm nerves in stock markets, security market regulator the Securities and Exchanges Board of India (SEBI) on Friday said it is prepared to take ‘suitable’ action along with the exchanges when required.

The statement comes on the backdrop of the recent bloodbath in the Indian stock market in line with global indices. On Friday, trade was halted for 45 minutes both on the BSE and the National Stock Exchange (NSE) after the Sensex and Nifty50 touched the 10 per cent lower circuit.

SEBI also said that the fall in the Indian stock exchanges over the past one month has been lower than their global counterparts.

As per a chart released by the regulator, the stock markets in Russia, Brazil and France performed the worst by falling 30 per cent or more during January 31-March 12, 2020. Bellwether indices of the UK, US and Japan also have plunged over 20 per cent during the period, while the benchmark Indian indices of BSE Sensex and NSE Nifty50 have declined 19 per cent during the same period.

Equities in Singapore, South Korea, China and Hong Kong have, however, registered a lower decline than the Indian market, the data showed.

The market regulator said its statement: “SEBI and Stock Exchanges have a robust risk management framework in place which automatically gets triggered in response to movements in the indices (BSE Sensex and NSE Nifty) as well as individual stocks both in cash and derivatives market.”

It mentioned of the measures of risk management, including ‘Value at Risk’ (VaR) Margin with initial margin to cover 99 per cent risk of a transaction, ‘Extreme Loss Margin’ (ELM) to cover the residual risk of a transaction, additional surveillance margins based on stress tests and circuit filters at index and stock levels among others.

The positions of margin payments, margin utilisation, adequacy of collaterals - securities deposited by the brokers with the clearing corporations - and the ‘pay-in’s’ obligations being met by the clearing members or brokers are being continuously monitored, said SEBI.

Similarly, the settlement and clearance of trades are also being constantly monitored, it added.

“SEBI and Stock Exchanges are prepared to take suitable actions as may be required.”

The concerns of the coronavirus outbreak severely impairing the global economy have only risen after the World Health Organisation on Wednesday declared the disease as a global pandemic.

Indo-Asian News Service