Indices at Dalal Street staged witness of most unprecedented roller coaster rides, as the stocks at Bombay Stock Exchange (BSE) ended 1325 higher at 34,103 against the previous day close of 32,728. Notably, in the early hours of trading on Friday, the BSE Sensex tanked more than 10 percent and registered an intra-day low of 29,388 in afternoon trade. Nifty, also hit the circuit breaker of 10 percent plunged 966 points to 8,625 in early trade. Soon after the indices registered a 10 percent fall, the trade at both BSE and NSE was suspended for 45 minutes. Fears of Coronavirus spread like a wildfire across the stock market globally and it also knocked off almost 10 percent of values in US stock markets, its worst performance since black Monday, 19th October 1987.
Biggest ever one-day recovery
Soon after the trading session was resumed, the indices at both BSE and NSE Sensex and Nifty shot up as much as 5,381 points and 1,604 points, respectively, from their early morning lows. The volatility index also jumped over 24 percent during the session. Experts at Dalal Street were shocked to witnesses such huge volatility. Here are the reasons which may have helped the stocks stages a historic recovery.
Assurance from SEBI
Soon after hitting the lower circuit for the first time in the last 12 years, market regulator, Securities, and Exchange Board of India (SEBI) moved swiftly to calm down the nerves of the investors. As per the statement issued by SEBI, "SEBI and Stock Exchanges have a robust risk management framework in place which automatically gets triggered in response to movements in the indices (BSE Sensex and NSE Nifty) as well as individual stocks both in cash and derivatives market."
Short Covering in Bank Stock
As per a report in the Economic Times, Chandan Taparia of Motilal Oswal Securities argued after the initial sell-off in the market, long build-up was witnessed in Nifty. What ensured sudden recovery was the short coverings in Nifty Bank.
Further drop in Crude oil prices
Investors' nerves were settled as the oil prices headed for the biggest weekly loss since 1991. A major fall in the oil prices would mean India saving billions of dollar on its oil imports since its 86% of oil need is met through imports.