Shares of Tata Consultancy Services Ltd, usually considered a safe haven because of its steady cash flows, fell 6.4% in the selloff on Monday. Shares of Reliance Industries Ltd fell by an uncharacteristic 13%. Clearly, there were no safe places among Indian equities.

As the rout in the global markets spreads, now that falling oil prices have entered the equation, Indian stock markets are not being spared. Risk assets such as those equities that were the darlings of the capital markets in 2019 are now being dumped in a vicious sell-off as investors seek safe havens. Large and small investors all seem to be rushing out of the door at the same time. This rough weather that started with the spread of the coronavirus, has worsened after a record fall in oil prices.

While oil prices benefit consuming nations in the long run, in the short run it sets at risk the finances of oil producers. In 2016, the sharp fall in oil prices slashed budgets of West Asian and northern African countries. Now, with Saudi Arabia backing out of the Opec production arrangement, the flood gates have been opened to oil producers. That means oil prices could stay lower for longer. This heightens the risk for oil-producing countries who have strained budgets.

Besides, corporate debt has continued to rise at a sharp pace in recent years, and a global slowdown will pose a serious challenge to debt repayment capability of many companies globally.

“When the risk of delinquencies begins to surface in global markets, the first reaction of investors is to withdraw money from risk assets. They then start pulling money out of emerging markets and selling whatever can be monetized. We are seeing such a situation," notes a veteran market analyst on condition of anonymity.

Global investors bought heavily into some frontline, liquid counters in the past year. Now the risk-off mode means that these larger more liquid sales are the first to be dumped. This is taking a toll on some frontline tech companies and private banks. In 2020, foreign investors already pulled nearly ₹30000 crore from the markets, and Monday's seloff suggests they aren't done yet. The sharp fall in US treasury yields clearly shows the rush towards safe havens.

Investors, hoping that lower oil prices would bring some relief to Indian markets, may have to wait. The benefits of falling oil prices take time to trickle into the economy. Besides, oil consumption has been slipping in recent months.

On the other hand, much depends on the Central and state governments in passing on gains. The government had already announced that the new BS-VI norms that were set to come into force on April 1 would require higher-grade fuel. That means higher refining costs. “Some of the oil gains could be negated by BS VI. Sharply falling oil prices are not necessarily a good thing in the short run. It will only cause a run on other riskier assets. If oil falls further, US shale producers will start defaulting on their loans, which can cause headaches in the global credit market," noted the analyst.

To top it all, the rapid spread of the coronavirus across the globe is now spooking countries to set in place travel bans. This could shrink global growth considerably. Moody’s Analytics has already lowered growth forecasts for the global economy. “We have lowered our 2020 forecast for China's growth to 4.8%, from our previous estimate of 5.2%. For the US, we now expect real GDP to grow 1.5% in 2020, down from our previous estimate of 1.7%," noted Moody’s Analytics in a note.

OECD recently cut India’s GDP growth rates for 2020 from 6.2% earlier to 5.1%. There could be more downsides if the spread of coronavirus worsens.