June 22, 2024

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Volumes Dwindle in Indian Markets Snarled by Virus Lockdown

(Bloomberg) —

Trading volumes in India’s financial markets continue to thin out as thousands of traders and stock brokers work from home, and with banks curtailing operations during the three-week nationwide lockdown.

The first transaction in the nation’s sovereign debt market took place some 12 minutes after trading began on Monday, reminiscent of a similar freeze last week when no bonds were bought or sold in the first half an hour. Volumes at the close were 155.7 billion rupees, versus the daily average of 437 billion rupees this year. Activity in the NSE Nifty 50 Index of shares was 32% below the 30-day mean.

That’s posing challenges for markets already under stress as operational difficulties arising from social distancing limit traders’ ability to react quickly to market moves. The government is expected to announce details of the borrowing plan for the first half of the fiscal year starting April 1 this week, with the debt market expecting hefty sales as policy makers prepare to boost spending to cushion the impact of the coronavirus crisis.

“Everyone is working on a reduced scale because of work from home and there is no balance-sheet visibility,” said Sandeep Bagla, associate director at Trust Capital Services India in Mumbai.

Stock exchanges have temporarily permitted employees at brokerages to log on to trading systems from remote locations to execute client orders. While that has allowed markets to function despite the lockdown announced by Prime Minister Narendra Modi last week, volumes have been hit.

Equity futures and options turnover on Thursday — the day of monthly expiry — was 14.5 trillion rupees. That’s less than half the expiry day volume in January and February, data compiled by Bloomberg show. The changes in marketwide position limits and higher margins announced by the regulator to curb volatility also contributed to the drop.

‘Uncertain Environment’

In the credit market, the average yields on rupee-denominated top-rated corporate bonds maturing in up to three years climbed by as much as five basis points on Monday amid listless volumes.

“Trades in this uncertain environment are few and far between and come in spurts as people are holding on to their positions,” said Sameer Kalra, strategist at Mumbai-based Target Investing.

READ: Coronavirus Pushes India Equities Toward Worst Quarterly Drop

Cases of Covid-19 in India have ticked rapidly higher in the past week, raising the alarm over the ability of the country, with a fragile health-care system and battered economy, to handle a virus crisis of the magnitude of China or Italy’s. India’s main equity indexes are headed for their worst quarter ever, while the rupee is set for its worst three-month period in more than a year.

India’s policy makers unveiled a $22.6 billion spending plan and an emergency rate cut to cushion the economy from the emergency restriction. Adding to the market stress, the state of Maharashtra, where financial capital Mumbai is located, has the highest number of virus cases.

“Even if the lockdown is lifted, it will be some time before it is business as usual,” said Kalra.

(Updates volume data in second paragraph)

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