Sensex records biggest intraday gain after 10Y but crisis is far from over

The Sensex moved up the most today (7th April) after almost 11 years. However, this does not mean the crisis is over! An analysis.

Published on / By M. Pattabiraman Twitter: @pattufreefincal / 1 Comment

Published: April 7, 2020 at 4:05 pm

Last Updated on December 29, 2021 at 5:25 pm

The Sensex closed today (7th April 2020) at 30,067.21 posting an intraday gain of 8.97% – the biggest since 18th May 2009! An analysis of such past gains and to find out how many occurred after (during) a crash.

First, let us look at the list of the largest intraday Sensex gains. The entries in red occurred just days or weeks before the Harshad Mehta scam. There are three entries marked with a <=. These are indicated by arrows in the image below the table.

List of largest intraday Sensex gains

DateDaily Return
18-May-0917.3%
24-Mar-9213.1%
13-May-9211.2% <=
04-Jan-8211.1%
19-Feb-9110.6%
02-Mar-9210.5%
29-Feb-929.4%
09-Oct-909.3%
25-Mar-869.1%
07-04-20208.97% <=
18-May-048.3%
31-Oct-088.2% <=
The biggest gain of 17.3% occurred when the look Sabha result was announced in May 2009, making the start of the recovery from the 2008 crisis. This is shown below.
Normalized Sensex crashes with annotations of big positive daily returns
Normalized Sensex crashes with annotations of big positive daily returns

Notice a 8.2% gain during the course of the 2008 crash. Today’s 8.97% marked in red does not mean we are out of the woods yet! All the data tabulated above are indicated along with the Sensex closing price data in log scale.

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Daily returns of the Sensex greater than 8% with closing price in log scale
Daily returns of the Sensex greater than 8% with price data in log scale

Such violent positive and negative fluctuations are quite common as we had discussed recently: Timing the market will work but not the way we imagined!

Sensex price movement along with positive and negative returns above and below a threshold value
Sensex price movement along with positive and negative returns above and below a threshold value (3%)

With lockdowns world-wide far from over, the real impact of associated losses and debt-burden will take months to unravel. Any such gain should not be taken seriously. The rain of bad news is probably getting started with pay cuts and layoffs (here is how you can prepare for this).

It would be premature to assume that the markets are on the road to recovery based on movement over the past few days. One Swallow does not make the summer.