Markets crash as COVID-19 reality hits global markets hard

Indian equities, along with other major global equity markets, crashed on Friday as the markets woke up to the harsh realisation that novel coronavirus pandemic and its impact may be far from over.

The 30-share benchmark index, BSE Sensex, opened 1,102 points down (3.3%) at 32,436. However, it quickly parred part of its losses and was trading at 32,765.76, down 772.61 points (2.30%).

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Similarly, the broader index 50-share NSE Nifty opened down 357 points (3.6%) at 9,544.95. At the time of filing this copy, Nifty50 was trading at 9,628.00, down 274.00 points (2.77%).

The overall market sentiment, until now, has been on the negative side, with 1,271 declines, against 192 advances.

In just a few minutes of trade, the equity investors lost Rs 3 lakh crore of their wealth.

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In a classic case of irrational exuberance, the Indian markets rallied 32% from its March 23 low, which led many analysts to question the fundamentals in the rally.

"With cumulative effects of US protests and worldwide reopening and global slowdown becoming apparent, we’re likely to see saner financial markets over the next few sessions. Next US stimulus notwithstanding," says Anubhav Shrivastava of Infinity Alternatives.

While market experts may not be explicit, but a global recession, that too a worst seen since World War 2, is a harsh reality now.

The Indian markets followed the trend of global equity markets, which started trading in red after Dow 30 crashed on Thursday night, putting plugs to about two months of irrational exuberance.

Also read — Dow sinks 1,800 as coronavirus cases rise, deflating optimism

After the Dow 30 meltdown, a few hours back, all major far eastern indices are in the red. Australian, Korean, Vietnamese and Singapore indices are the worst hit, crashing by over 3%. Japanese indices, on the other hand, are trading with losses in the range of 2% to 3%.

On Thursday, the Dow 30 crashed by 1,861.82 (6.90%) on fears of coronavirus's second wave and a bleaker than expected commentary by Fed. Ironically, Dow 30 had rallied by 45% from its March 23 lows till now.

Even as many states in the US have been reporting fewer cases, the seven-day average of new cases over the past two weeks is still rising in more than 20 states, making investors jittery over the second wave of the COVID-19 pandemic.

Also, Federal Reserve updated its policy statement and projections, indicating that it expects a 6.5% annual contraction in the US economy, with the unemployment rate ending at 9.3% — more than double of Fed’s estimate of the long-run rate forecast of 4.1%.