Black Friday, again: Here are three key reasons why market crashed today

Mirroring global peers, the Indian stock market, too, crashed on Friday as a double whammy of jitters and a sharp sell-off in banking space owing to developments around State Bank of India (SBI) and Life Insurance Corporation of India (LIC) picking stake in the troubled private sector lender YES Bank, compelled investors to pull out money from the equities and rush to safe havens.

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The S&P BSE Sensex tanked over 1,450 points or 3.8 per cent at open to 37,000 levels. NSE’s Nifty50 slipped below 11,000 levels and hit a low of 10,827. However, both indices recovered partially as trade progressed. In the currency market, rupee tumbled to 74 a dollar for the first time since October 31, 2018. On Thursday it ended at 73.33.

Here’s a look at the top factors that triggered panic selling in the on Friday.

Global cues: Asian shares and US stock futures plunged following another Wall Street rout as disruptions to global business from the beyond China worsened, stoking fears of a prolonged world economic slowdown. In the overnight trade, the Dow Jones Industrial Average fell 970 points, or 3.6 per cent, to 26,121.28, the S&P 500 lost 106 points, or 3.4 per cent, to 3,024 and the Nasdaq Composite dropped 279.49 points, or 3 per cent, to 8,738.60.

In Asia, shares in China fell 0.96 per cent, while stocks in Hong Kong, another city hard hit by the virus, fell 1.89 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan was down 1.3 per cent. Australian shares were down 1.64 per cent, while Japan’s Nikkei stock index slid 2.29 per cent, as per a Reuters report.

Coronavirus: Fears of global economic slowdown owing to fast spreading (Covid-19) have soured business sentiment across the globe. The coronavirus outbreak has now spread to more than 78 countries — from South Korea to Italy, Iran, Japan and the United States. A total of 97,873 cases have been reported worldwide and 3,382 people have died of the virus. READ MORE

Given its global and India spread accelerating, analysts at Edelweiss Securities believe that the virus and its scare is going to linger rather than disappear, thereby furthering dislocations, uncertainties and demand. “While the first-order impact on India is contained (virus spread, supply chains, limited exports), its second-derivative effect could be greater: particularly given India is already at a low: growth, risk appetite and policy flexibility. India is getting hit with the virus when its immunity is low,” they wrote in a note dated March 4, 2020. The brokerage has also trimmed December Nifty target to 12,000 from 12,300 earlier.

YES Bank, SBI plunge: Banking stocks took a beating on Friday following developments around YES Bank. The private lender’s board was superseded by the Reserve Bank of India (RBI). Further, the central bank imposed a moratorium on the capital-starved bank and capped withdrawals at Rs 50,000 per account till further orders. While YES Bank tanked nearly 30 per cent following the development, SBI tumbled around 10 per cent in intra-day deals.

Additionally, SBI in an exchange filing last night, informed that it was exploring investment opportunity in YES Bank. SBI, however, said no decision had yet been taken to pick stake in the bank. Meanwhile, highly-placed sources indicated a rescue plan involving SBI and Life Insurance Corporation of India (LIC) was being discussed and an announcement in this regard might be made soon. READ MORE