Republic Day saves India from market crash

New Delhi: The Republic Day might have saved Indian stock markets from a severe crash as world markets led by China plunged on Tuesday.

Shanghai’s stock market slumped more than six per cent the declined as oil prices slipped back below $30 a barrel. Tokyo’s Nikkei lost 2.4 per cent, while Hong Kong slumped 2.5 per cent.

European stocks, which opened in red, recovered in later in the day. This reversed a brief global rally on hopes of fresh central bank stimulus.

China’s stocks tumbled to the lowest levels in 14 months amid concern that capital outflows may accelerate as the economy slows.

Russia’s stock exchange tumbled by 3.5 per cent and the rouble plunged deeper as oil’s fresh drop continued to hit one of the world’s biggest energy producers.

However, Indian markets were closed on Tuesday due to the Republic Day isolating them from global fall.

“If Indian markets were opened today, it would have definitely reacted negatively to what is happening around especially in China and Europe. Hopefully, due to holiday here, investors will get time to calm their frayed nerves and don’t react too negatively when markets open here,” said a analyst with a stock brokerage firm.

Recently investors have been concerned over weakness in oil prices and its knock-on effects. Oil prices have been declining since mid-2015, creating more pain for companies in the energy sector and their shareholders. Shares and crude prices now are most correlated since 2013.

“Crude oil supply has stayed at levels ample enough to keep visible OECD inventory in surplus. Incremental oil demand growth remains relatively robust, estimated at over one million barrels per day in 2015 and in 2016, but not robust enough to drain the surplus,” said HSBC in its research note.