Indian share market joined the global sell-off on Monday with the Sensex logging its second-biggest drop in a day even as the RBI hinted at a rate cut but stopped short of a decision, belying market expectations at a hurriedly called presser. The Central bank did announce some liquidity enhancing measures to contain the economic fallout from the coronavirus.
The market mayhem may not yet be over as the US indices tanked by nearly 10 per cent when it opened late in the evening despite the fact that the US Fed on Sunday made its second emergency rate cut in less than two weeks, slashing the benchmark borrowing rate to a range of 0-0.25 per cent, where it was during the 2008 global financial crisis.
The 30-share BSE Sensex plunged 2,713.41 points or 7.96 per cent to finish at 31,390.07. Likewise, the broader NSE Nifty gave up the 9,200 level, slumping 757.80 points or 7.61 per cent to end at 9,197.40.
It eroded Rs 7.62 lakh crore of investors’ money.
This was the second biggest drop for the benchmarks in absolute terms. The Sensex and Nifty had plummeted 2,919.26 points and 868.25 points respectively on March 12.
Asian markets nosedived after China’s factory output and retail sales data came in sharply lower, fanning fears of a coronavirus-triggered economic slump. Bourses in Shanghai dropped 3.40 per cent, Hong Kong 4.03 per cent, Seoul 3.19 per cent and Tokyo cracked 2.46 per cent. European markets too tumbled up to 8 per cent as much of the region went into shutdown mode. Brent crude oil futures melted 7.53 per cent to USD 31.30 per barrel. The rupee depreciated 55 paise to 74.31 per US dollar (intra-day).
During market hours when the news came in that RBI Governor Shakitkanta Das will address a press conference at 4 p.m, the Dalal Street buzzed with speculation of imminent rate cut by the RBI, however the Central Bank hinted at doing so at the next MPC meeting on April 3, even as it rolled out more liquidity enhancing measures.
All Sensex components ended in the red. IndusInd Bank was the top loser, skidding 17.50 per cent, followed by Tata Steel (11.02 per cent), HDFC (10.94 per cent), Axis Bank (10.38 per cent) and ICICI Bank (9.96 per cent).
All sectoral indices closed with losses, with BSE metal, bankex, finance, realty, IT and energy indices dropping up to 9.30 per cent. Broader mid-cap and small-cap indices fell up to 5.94 per cent.
To a question why the rates were left unchanged at 5.15 per cent, Das said, “According to the prevailing law, the rate cut call has to be taken through the monetary policy committee, but I don’t rule out anything. Depending on the evolving situation, we will decide on the timing of our action.”
In two liquidity enhancing measures, Das announced another round of $ 2 billion dollar-rupee swap on March 23, and in another measure he said the RBI will continue to conduct the long-term repo operations (LTROs) of up to Rs 1 lakh crore as and when the market needs it.
The RBI today conducted the first dollar-swap for USD 2 billion under which the Central bank buys rupee from the market by selling the dollars. On the LTROs, it has already conducted four rounds worth Rs 1 lakh crore operations since February 14, after announcing it at the February 6 policy review.