Indian indices have witnessed a drastic fall in recent months. Nifty 50 has corrected nearly 30 % from it’s high of 12340.5. In doing so NIFTY had given all the gains it had achieved in the last 3 years.Decline in the 2020 bear market is much steeper than one we experienced in the 2007- 2009 financial crisis. Is the 2020 bear market due to Corona pandemic going to be the worst we have experienced?
NIFTY hit new 52 weeks low of 7511.10 on 24 March and have rallied more than 1000 points in just 4 trading days.Nifty closed at 8,660.25 on 27 march.This kind of rally are common in bear market.These rally can be harmful if market continue its bear trend and result in Bull trap. Bear trend is more likely to continue as the underlying culprit for the start of bear market has not changed yet and is going to be worse in coming days.
What is responsible for the steep fall in Indian market?
India is fighting its own financial crisis along with Corona virus.
1. Corona Pandemic: Major global markets are trading at a huge discount to their recent high and are in bear territory. Corona infected cases have already crossed 6.5 lakh and the trend is not going to show any decline in coming days. Epicenter of corona is currently in Europe which hosts the world’s most economically rich countries having enough resources to deal with the virus.But speed with which the virus is spreading and causing severe illness these major economies also have come to standstill. Suddenly healthcare services are looking inadequate.NHS in the UK is one of the most efficient healthcare service providers in the world.
As per the latest stat India is the only country in the top 10 world’s largest GDP countries who have effectively controlled Corona virus. India has only 0.81 cases per million population.
Here comes the main problem and which is alarming.
In just 1024 cases ,Indian stock market has given approximately 28 percent negative return. If coronavirus becomes wild in India , what will happen to the stock market.Small and mid cap are going to get hammer badly along with index stocks.
NIFTY already tested its major support level around 7500 with low of 7511.1. In the short term it forms important support level.Next support levels 6962 and 6190. In the worst case scenario NIFTY can drop up to 2700 level with which it had found support in the financial crisis of 2007-09. Chances of it will increase if NIFTY breaks is 2007 high of 6190 decisively.
2. Financial crisis and increase in bankrupt companies list
India has been facing its own financial crisis since the last few years. But the stock market was doing better till the start of 2020. Number of financial companies have been reported with frauds and poor risk management.IL & FS, Yes bank, DHFL, Punjab & Maharashtra Co-operative Bank Limited (PMC bank). Anil Ambani led groups companies are having a massive pile of debt burden and are facing difficulty in repaying on time. India’s leading private player in aviation Jet Airways had to shut operation and went bankrupt.
RBI has cut key rates 5 times in last year and once in 2020 to keep India’s growth story intact and support liquidity to spur economic activity. Banking systems in India have a huge pile up of non performing assets. According to one of the leading publishers in India , non performing assets( NPA ) could be more than Rs 9.5 lakh crore.
Hope for the best in coming days! For Acche din ,we all have to get aware about Corona and support the government and local authority to mitigate it’s spread.