Indian Stock Markets Continue to Collapse; Nifty Hits 10% Lower Circuit

Fri, 13 Mar 09:30 am

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Asian stock markets are lower today as panic gripping world financial markets deepened. The Shanghai Composite is off 2.4% while the Hang Seng is down 4.9%. The Nikkei 225 is trading down by 8%. Meanwhile, trade was halted on the S&P 500 after it hit downdraft circuit breakers. It fell further when trade resumed, eventually losing 9.5% to close 27% below February's peak.

Back home, India share markets plunged again in the opening session. The BSE Sensex is trading down by 2,842 points while the NSE Nifty is trading down by 966 points. The BSE Mid Cap index opened down by 3.9%, while BSE Small Cap index opened down by 2.9%.

All sectoral indices are trading down with metal stocks and IT stocks witnessing maximum selling pressure.

Note that yesterday was the biggest ever fall for the Sensex in absolute terms in last two decades... And the second biggest fall for the Smallcap index.

Our smallcap analyst at Equitymaster, Richa Agarwal, believes that recent crash could be once in a decade opportunity to invest in quality smallcaps. It's also a time to not panic and remain invested in the good quality stocks, irrespective of the volatility.

She further adds...

• At the same time, it is critical that one sticks to a solid risk management framework (asset allocation) and ensures enough liquidity in case the crisis prolongs. Amid the volatility, I believe the best approach is to consider investing in stocks that are fundamentally strong and promise steady income along with strong upside in the long term.

Richa's latest webinar - Smallcap Rebound Opportunity in the Times of Coronavirus shares a list of of open positions where the rebound potential is strong... And until the rebound, one can enjoy regular income from the dividend stocks with yields up to 9%.

Also, speaking of coronavirus and its impact on the Indian stock markets, in one of the recent podcast, we had shared a special episode from Investor Hour...

In this emergency episode of the Investor Hour, Rahul Goel talks to Vijay Bhambwani, who he calls India's #1 trader.

Vijay dives deep in this "coronavirus" situation and presents a picture which we believe would be extremely beneficial to any investor or trader.

Whatever you do, don't miss this emergency issue of the Investor Hour!

Listen in here...

Moving on, the rupee is currently trading at 74.41 against the US$.

The rupee slid by 56 paise to a fresh 17-month low of 74.24 against the US currency on Thursday due to strong dollar demand as investors pruned riskier bets amid coronavirus pandemic fanning recession fears.

Indian equity markets suffering their worst single-day losses and stock indices slipping into bear territory also hit the rupee sentiment.

At the interbank foreign exchange market, the rupee was trading down by 56 paise at 74.24 in the closing session.

The local unit opened lower at 74.25 against the last close of 73.68 and fell further by 82 paise to 74.50 after the World Health Organization declared the new coronavirus (COVID-19) a pandemic.

Moving on to the news from banking sector. According to the latest Reserve Bank data, banks credit grew at 6.1% to Rs 101 trillion while deposits expanded by 9% to Rs 133.3 trillion in the fortnight to February 28.

In the year-ago fortnight ended March 2019, banks' advances were at Rs 95.2 trillion while deposits stood at Rs 122.3 trillion.

In the previous fortnight which ended on 14 February 2020, bank credit had grown by 6.4% to Rs 100.4 trillion, while deposits rose by 9.2% to Rs 132.4 trillion.

In January 2020, bank credit growth declined to 8.5% as against a growth of 13.5% year-ago, led by a sharp slowdown in loans to the services sector.

Note that, if there is one sector that has been under fire for most since 2018, it is financial services.

Since the IL&FS crisis, the domino effect has affected all lenders in the Indian economy.

NBFCs have struggled after the IL&FS crisis and are wary to lend.

There has been a silver lining in this mess. i.e. the increased market share of private sector banks. This is evident in the chart below:

India's Credit Shift Megatrend

Since 2014, private banks have consistently gained market share mainly at the expense of PSU banks.

With PSU banks still struggling to get out of their NPA mess, this trend is set to continue.

One such good quality private bank makes it to Tanushree's top 7 stocks to buy list.

These 7 stocks will be a part of many such megatrends that will play out over the next decade in India.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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