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Last Updated : Mar 10, 2020 09:12 AM IST | Source: Moneycontrol.com

Virus, oil fear impact: FIIs sell biggest exposure in single day since Nov 2017

The sharp correction in short period of time along with fall in US bond yields could be indicating the recession fears going ahead as the supply chain disrupted.

Sunil Shankar Matkar

Foreign institutional investors preferred to stay away from risky assets like equities as they cash out heavily from emerging markets including India when the fear of oil price war and fast-spreading novel coronavirus outside of China increasing.

FIIs on March 9 net sold Rs 6,595.56 crore worth of shares, the biggest single day outflow since November 3, 2017.

They sold Rs 17,316 crore worth of shares so far in March, in addition to Rs 18,000 crore of selling in previous two months.

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On the contrary, domestic institutional investors seem to have tried to support the market but could not match the selling figure of FIIs. They bought net around Rs 33,000 crore of shares in 2020 so far.

The desperate selling by FIIs clearly indicated the turmoil expected to face by the global economy due to the wide-spreading case of novel coronavirus outside of China, from where the virus began its journey.

In addition, Saudi Arabia, the world's largest oil producer, exploded oil price war with Russia by slashing its selling prices by $6-8 a barrel after OPEC and its allies failed to agree on production cuts. As a result, crude oil prices fell more than 30 percent on March 9, the biggest single day correction since Gulf war in 1991.

Hence, on the first day of week, equities across the globe caught into bear trap with India falling 5 percent and its Asian counterparts losing 3-7 percent while European markets ended the day with 8 percent loss.

In fact, after initial 7 percent fall, the trading in S&P 500 halted for first 15 minutes on March 9.

The Indian market lost more than 13 percent from February 20 and investors lost more than Rs 21 lakh crore of wealth since. Indian rupee also breached 74 a dollar mark, weakening by more than 252 paise since February 27.

The sharp correction in a short period of time along with fall in US bond yields could be indicating the recession fears going ahead as the supply chain disrupted.

"The risk of recession increased fuelled by crash in crude oil prices and increasing virus cases outside China. Even though fall in crude oil prices is positive for India in the long term, short term concerns weighed with FII outflow in emerging markets," Vinod Nair, Head of Research at Geojit Financial Services, told Moneycontrol.

He feels the coronavirus fear is intensifying and fresh travel bans seem to hurt the global economic sentiments more than feared. Lots of countries banned air travel from most virus affected countries like Iran, China, South Korea, Hong Kong, Italy etc.

More than 100 countries are affected by the virus, taking the total infected cases over 1.11 lakh globally with around 3,900 deaths. Italy, Iran, South Korea etc hit the hardest by the virus.

"The threat of a global pandemic is rising as the new coronavirus rapidly spreads across the world from Asia, to Europe, the Middle East, and now parts of the United States," reported CNBC quoting World Health Organization officials.

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First Published on Mar 10, 2020 09:12 am
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