The benchmark indices logged their largest single-day drop since the Union Budget, amid fears that the outbreak has now become a global pandemic. With an increase in the number of cases outside China, market players said investors are worried over a prolonged economic damage to the global economy.
The Sensex closed 807 points or 1.96 per cent lower at 40,363, while the Nifty dropped 242 points or 2 per cent to close at 11,829. All the BSE sectoral indices, as well as components of the Sensex and Nifty, ended the session in the red. The last time all Nifty components had ended with losses was in November 2013.
Investors’ risk appetite took a beating after South Korea issued a high alert, given the number of cases has now risen to 833. In Italy, reports suggested the number of cases has jumped to over 150 in just three weeks. The outbreak in Europe has prompted the Italian government to impose a lockdown on an area of 50,000 people near Milan. Authorities have also cancelled the remaining days of the Venice carnival, while universities were shut.
Hong Kong’s Hang Seng fell 1.8 per cent, with Germany’s DAX shedding 3.8 per cent, the UK’s FTSE closing down 3.6 per cent, and France’s CAC losing 3.9 per cent. Investors fled to safe assets such as gold. Gold prices in India rose Rs 1,840 or 4.4 per cent per 10 grams to Rs 43,415, recording the highest ever single-day gain.
“People are worried about the virus spreading, and if this continues, it will lead to further slowdown globally,” said Jyotivardhan Jaipuria, founder of Valentis Advisors.
Metal and automobile stocks declined the most, with their sectoral indices dropping 5.71 per cent and 3.4 per cent, respectively.
Analysts said outbreak in Europe has rattled investors who, till now, had seen it as a situation confined to Asia.
"The fact it has spread to Italy, which is far from China, is worrying. If this prolongs for another three months, supply chains across the world will suffer, impacting India too. Automobile, electrical and pharma industries could suffer,” said Saurabh Mukherjea, founder of Marcellus Investments.
Deepak Jasani, head (retail research), HDFC Securities, said with little signs of the situation easing, there are concerns of a much longer-term impact on the global economy, with a number of companies having warned about their bottom lines.
Among Sensex components, Tata Steel dropped the most at 6.4 per cent. ONGC and Maruti Suzuki were the other laggards, declining 4.72 per cent and 4.24 per cent,
respectively.
On an overall basis, 1,796 stocks declined, and 726 advanced on the BSE. Foreign portfolio investors (FPIs) sold shares worth Rs 1,161 crore while domestic institutional investors bought shares worth Rs 516 crore.
Market participants said besides the virus outbreak, investors will keenly look for signs of recovery in corporate earnings. “We are grappling with the effect of lacklustre earnings growth and, other than the tax cuts, there has been no tangible sign of a revival,” said Mukherjea.