01 March, 2021

Down, Down, Down! Why Coronavirus Will Lockdown Indian Stock Market Indefinitely

It is difficult to predict how the stock market will move. When there is panic, investors tend to make their decisions emotionally, rather than rationally. This is a Black Swan event, whose impact may be deeper and longer than what was estimated a few weeks ago

Photo by AP
Down, Down, Down! Why Coronavirus Will Lockdown Indian Stock Market Indefinitely

A couple of listed stocks tell the story of the mayhem in the Indian stock market, currently in the grip of a global pandemic. Last October, the IPO of the state-owned monopoly, Indian Railway Catering and Tourism Corporation (IRCTC), listed at twice its offer price of Rs 320. By February-end 2020, it peaked to almost Rs 2,000. But by March 17, it tumbled nearly 50 per cent. Recently, investors expected SBI Cards and Payment Services to list at a premium to its offer price of Rs 750. It didn’t. On March 16, it closed its first day with a loss of 9 per cent.

This is true for most global stock markets. The average fall in each is within the 25-30 per cent range in the past few weeks. The same is the case with the Sensex, which fell from a peak of 42,000 points this January 17 to below 32,000 in three months. In the past two weeks, the New York Stock Exchange halted trading on several occasions. It witnessed the largest single-day fall during this period. A daily fall of 2,000-3,000 points in several global indices seems a routine affair. The regulators have no clue...

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