Coronavirus fears across the globe have eroded investors' wealth by Rs 11.63 lakh crore in Indian market this week. Market capitalisation which stood at Rs 158.50 lakh crore on February 20 fell to Rs 146.87 lakh crore in trade today. Sensex too has lost 2,873 points during the same period. From 41,170 on February 20, Sensex closed 1,448 points lower at 38,297 today.
Similarly, Nifty which stood at 12,080 on February 20 has lost 905 points falling to intra day low of 11,175 today.
Umesh Mehta, Head of Research at Samco Securities said, "From extreme calmness to extreme pessimism, D-Street is also a victim of the virus outbreak in other countries. This pandemic led to indices across the globe to witness a sharp fall this week. However, when the entire world is blaming coronavirus for the fall, we feel that valuations have a big part to play in this bearishness. Back in 1918, during the outbreak of Spanish flu, Dow Jones didn't correct instead it steadily moved up. This was only because before the epidemic broke out, World War I had already led to a massive decline in the markets. Due to the valuations being at reasonable levels, despite the epidemic, markets improved.
India is currently experiencing a similar yet opposite scenario. Indian bourses have been trading around higher valuations and hence a correction was needed to align the markets as per the mean reversion theory. Hence, this week's fall is a valuation play with coronavirus as the scapegoat. Investors should not burn their hands by selling in this fall. Rather, they should slowly and steadily pick reasonably valued quality stocks in a SIP format as every dip becomes a good buying opportunity."
Another primary cause of market crash this week has been that foreign investors are seeking investment in safe haven assets such as gold and government securities amid global market crash. They have been net sellers in Indian market since February 20.
Foreign institutional investors (FIIs) continued to be sellers for the fourth straight day. FIIs remained net sellers in the capital market, as they sold shares worth Rs 3,127.36 crore on Thursday, according to provisional exchange data.
FIIs sold shares worth Rs 3,336.60 crore on Wednesday, Rs 2,315.07 crore on Tuesday and Rs 1,160.90 crore on Monday in the capital market.
This comes on the back of cases of Coronavirus spreading fast to other parts of the world after originating in China. Coronavirus has claimed 2,788 lives in China with 78,824 cases of infections. Globally, 83,000 are infected with 2,800 deaths reported till date.