Why in 2020 stock market crash India happen ?
What does the single biggest fall mean in the Indian stock market on March 9, 2020 means?
Every now and then, there will be an event that will create panic or euphoria, and slowly it will fizzle out. Both rally and fall in the stock market happen. Else there will be a flat period during which the market doesn’t know where to go. This happened after the mortgage crisis of 2008-09. Slowly market recovered but as actual growth was not possible it was oscillating between a range. The biggest rally started only during the pre-election period of 2013-14.
Indian Stock market fell by nearly 5% today and in the last week, it fell by more than 13%. The biggest reason can be attributed to the global market fall caused by Corona Virus.
Corona Virus :
Corona Virus or COVID19 was just a virus until it grew and become pandemic across the world. It started in Wuhan during first week of January. Slowly it tightened it grip on China. The person who announced to the world about this coronavirus died. Then the world understood the seriousness of the effect of the virus.
As travel became common these days, it started spreading to nearby countries like Singapore, Malaysia. Korea etc. On my last post on coronavirus, I advised investing slowly and steadily. Based on the control of virus in China. Some of the manufacturing countries also started their production though not running in full capacity.
Now in the last week, this virus had spread to New York, Seattle, and most part of US. Italy and Germany are next worst affected countries. Virus had its reach among many countries.
From around 41000 points sensex had ended at 35643 on 9th March. Total fall of 1941 points in a single day. In the last 2 weeks, market fell by more than 13%. Most of the fall is in line to the fall in global market indices. As the virus spread across the world, the panic has been pressed.
US stock market fell by more than 7% in the opening trade on March 9, 2020. Trade was halted for a brief time and then it got continued. Rise of infected person has created panic among US and Government is taking measure to control as much as it can.
Crude Oil Crash :
Saudi is part of OPEC, an organisation of Oil exporting countries. It is a group of 14 countries. Saudi didn’t agree with Russia on production cut. This led to the fall of Oil price in the last week. Previous single day crude oil fall was on January 17, 1991 where it fell more than 30%. On March 9, 2020 the fall was exactly 30%. So today is the second biggest fall in the Oil market. Both the issues combined and rattled stock market across the world.
Crude oil crash will reduce the oil import bill by 10% as per the reports and this is a good sign for India.
Yes Bank crisis :
Yes, Bank crisis had taken a toll on most Indian banks. Though a controlling stake of around 49% by SBI has provided relief for Yes bank. It rose by 31% today. On the contrary, SBI has lost 7% today.
Most of the banks with NPA’s have come into focus and the liquidity crisis came into the forefront. Just like what happened during the ILFS fiasco.
What should you do now?
One after the other, negative news keeps coming which is keeping the stock market going down. This is one such Black swan event that no one expected. If you are a prudent investor, you should be waiting for a scenario like this. Markets going down by more than 13% and still not clear where is the bottom.
Only when the global panic calms down, the Indian market will also rise. Until then the volatility is going to be there. Till now in Indian bourses, only 10 stocks contributed heavily to the downfall. It is due to the heavy FII selling.
Now is the opportunity to invest in quality stocks. Don’t look at stocks like Yes Bank, ILFS, etc. As they are already going down and down. Have a plan to invest in the stock market,as it will help you in achieving your financial freedom.
Here is the article from Sundaram Fund house regarding the Coronavirus.