World’s Biggest Lockdown Triggers Record Stocks Crash in India
India will suspend all domestic flights from midnight Tuesday, the final piece of a nationwide lockdown that threatens Prime Minister Narendra Modi’s attempts to revive an economy already expanding at the slowest pace in more than a decade.
The open-ended flight ban compliments a nationwide cancellation of all passenger trains, as authorities try to halt the spread of the coronavirus in the world’s second-most populous nation, and one which has poorly equipped hospitals and inadequate social security. Stocks fell by a record and the rupee sank to an all-time low, while government bonds also declined.
Over the past three days, state after state has declared curfews and India’s international borders have been shut for most visitors since March 11. India so far has 433 virus cases, including seven deaths. But experts say the country could be on the same trajectory as Italy, where the outbreak quickly escalated, causing hospitals to overflow.
“This is the biggest lockdown in world history,” said Raghu Raman, a former soldier with the Indian army and founder of the National Intelligence Grid, an umbrella database aimed at countering terrorism. “This strategic pause gives decision makers more time to arrest the exponential spread of the virus and evaluate trade offs.”
Controlling the outbreak is crucial for Modi, who remains India’s most popular political leader currently though his economic management has faced criticism. Foreign investors are selling Indian assets at an unprecedented pace and failure to contain deaths and infections could erode some of the prime minister’s personal appeal at home.
India set for biggest foreign outflow from stocks since 2000
Oxford Economics slashed India’s January-April growth forecast to 3%, a number not seen even during the worst of the global financial crisis. The main equity gauge slumped by a record 13.2% Monday and the rupee weakened past 76 a dollar for the first time ever. The benchmark 10-year sovereign bond plunged the most in almost four months.
“A part of the cerebral cortex that senses fear and survival seems to have activated in the minds of investors,” said Umesh Mehta, Mumbai-based head of research at Samco Securities Ltd. “The only relief in this market can come from either policy makers and regulators, or from some positive news that a cure for the pandemic is near.”
