Oil price war, coronavirus worries hit market; over 650 stocks at 52-week low

The week started with a big carnage on Dalal Street as the BSE Sensex crashed around 2,400 points intraday on March 9 after Saudi Arabia started a price war with Russia by reducing oil prices by $6-8 a barrel. The sentiment has been weak due to rising worries over increasing novel coronavirus-led infected cases outside of China.

The market lost more than 11 percent from its record high till last week, and today it shed more than 4 percent, taking the total loss to around 15 percent.

The BSE Sensex was down 1,628.03 points or 4.33 percent at 35,948.59, while the Nifty50 fell 450.20 points or 4.10 percent to 10,539.30 which has managed to hold the crucial support level of 10,500.

The market breadth was clearly in favour of bears as about 8 shares declined for every share rising on the BSE.

All Sensex30 stocks were in the red and the situation was so dire that more than 650 stocks were trading at 52-week low on the BSE, including biggies like ITC, Larsen & Toubro, Wipro, NTPC, Adani Ports, Vedanta, Hero Motocorp, Marico, UPL, Punjab National Bank, Tata Motors, Hindalco Industries etc.

Also read - Another 1,000-point drop in Sensex: Here are 5 factors at play

In fact out of this, more than 160 stocks traded at all-time low like Coal India, ONGC, Bandhan Bank, General Insurance Corporation, Hindustan Aeronautics, Dalmia Bharat, Corporation Bank, Oil India, Tata Power, PNB Housing Finance, BHEL, HUDCO, NBCC, IDFC, MOIL etc.

Investors lost more than Rs 5 lakh crore of their wealth today as the BSE market capitalisation dropped to Rs 1,39,03,518.24 crore, from Rs 1,44,31,224.41 crore reported on March 6.

After the Organization of the Petroleum Exporting Countries (OPEC) failed to strike a deal with its allies with respect to production cuts due to lower demand amid rising infected cases by novel coronavirus outside of China.

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Hence in an attempt to punish Russia, Saudi Arabia has opened the war by cutting its official selling prices for April for all crude grades to all destinations by between $6 to $8 a barrel, reports Reuters.

After this, international benchmark Brent crude futures fell more than 30 percent today, the biggest intraday fall since Gulf war in 1991 and the lowest level since February 2016.

China's efforts to curtail the coronavirus outbreak has disrupted the world's second-largest economy and curtailed shipments to the largest oil importer.

Hence it is a double whammy for global markets. In Asia, Australia's ASX 200 fell the most with a loss of over 7 percent, followed by Japan's Nikkei (down 5 percent), South Korea's Kospi (down 4 percent), Hong Kong's Hang Seng (3.5 percent) and China's Shanghai Composite (down 2.8 percent).

Dow Jones futures were also down more than 4 percent, indicating sharp fall in the opening later today.

Novel coronavirus has already taken lives of more than 3,600 people since January with 1.07 lakh infected cases. The cases has gradually been declining in China, the starting point of virus, but it has been increasing outside of China which created more ruckus in global markets.

"Global markets are reacting negatively to the rise in Covid-19 cases outside China. The global Covid-19 situation is still fluid and hence difficult to make a strong case for aggressive investment at current levels. If China returns to normalcy then the supply side constraints could ease in the coming months," Rusmik Oza, Senior VP (Head of Fundamental Research-PCG) at Kotak Securities told Moneycontrol.

The bond yield and earnings yield have converged. This means both bond PE and equity Fw PE have come closer to each other.

"Considering the bond yields and historic average valuations of our equity markets we expect the Nifty-50 forward PE to bottom out around 16x. The Nifty-50 on Friday'ss close was trading at 17x on one year forward basis. At 16x forward PE, Nifty-50 should find support at around 10,300 levels which also happens to be the 200 WMA," Oza said.