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Ever since COVID 19 strike, markets loom under fear as uncertainty prevails. lt has sent markets around the world crashing to levels not witnessed since the Global Financial Crisis of 2008. Following the strong correlation with the trends and indices of the global market as BSE Sensex and Nifty 50 fell by 38 per cent. The total market cap lost a staggering 27.31% from the start of the year. The stock market has reflected the sentiments this pandemic unleashed upon investors, foreign and domestic alike. Companies have scaled back; layoffs have multiplied and employee compensations have been affected resulting in negligible growth in the last couple of months. Certain sector such as hospitality, tourism and entertainment have been impacted adversely and stocks of such companies have plummeted by more than 40%.
Want to Invest in Shares ? Head on to www.MoneyEstate.in While the world has witnessed many financial crises in the past, the last one being the global recession of 2008, the current coronavirus crisis is different from the past fallouts. In response to current turmoil, RBI and the Government of India has come up with a slew of reforms such as reductions of repo rate, regulatory relaxation by extending moratorium and several measures to boost liquidity in the system howsoever the pandemic has impacted the premise of the corporate sector. Payments deferrals, subdued loan growth, rising cases of bad loans and sluggish business conditions have impaired the growth and the health of the economic activity. Deceleration of GDP growth, demand-supply chain, cut in discretionary expenses and CAPEX has been the observed during the lockdown, which has led to falling in household incomes, marketing spends, reduced travel cost and hiring freeze. Companies with innovative products, increasing distribution reach, technology-driven processes and healthy balance sheet would revive the growth momentum post lockdown. Lower oil prices and high capital expenditure by the government in turn creating capital which will provide a platform to flourish when we overcome COVID 19 pandemic. Want to Invest in Shares ? Head on to www.MoneyEstate.in As for the outlook for the market, we only need to look back at its history. Drops in BSE sensitive index is temporary, and each dip provides investors with the opportunity to enter the market and earn a higher return especially for those with long term horizon. Moreover, the higher the fluctuations, the higher chances of getting better returns. While these crises are real and it impacts the world economy, but historically, such crisis has not lasted long, as the world is competent enough to come up with answers to combat these challenges. Despite the fact that it’s hard to predict the magnitude and impact of Coronavirus on the economy, but it is certain that the markets will bounce back soon the crisis gets over. With an average annual return (CAGR) of around 15 per cent, by growing from 100 points in 1979 to over 41,000 points in 2019, Sensex has proven time and again that corrections are temporary, but growth is permanent Read more at : http://www.businessworld.in/article/Impact-Of-COVID-19-On-The-Indian-Stock-Markets/11-05-2020-191755/ Investor sentiment in India is so low that despite relatively lower cases, Indian market has fared worst among global peers. Indian stock market has lost 26 per cent in dollar terms between February 1 and April 9, compared with a fall of 20 per cent and 14 per cent in the European and US markets. Emerging markets, reflected by the MSCI EM index, declined 15 per cent during the same period. China, where the coronavirus originated, has been least affected, with just 3 per cent fall in the stock market between February 1 and April 9. “We do recognise equity market is dynamic, often distorted and is perennially mispriced (and that’s the reason for the existence of market and stock analysts), but nonetheless is perhaps the best measure (to estimate the cost of COVID-19) currently. And, for now, while the US and other EMs have lost around 15% since February 1, India has eroded around 25%. That’s a lot of pain,” says Edelweiss Securities in a research note dated April 12. Want to Invest in Shares ? Head on to www.MoneyEstate.in Market’s value erosion – Highest in India so far Cost of the lockdown The lockdown in India has been the most stringent to contain the pandemic. While the three-week nationwide lockdown that started on March 24 is coming to an end on Tuesday, in all likelihood, it will be extended for another two weeks or more. “India’s economic cost are likely to be more in sync with the cost of shutting down the economy rather than its COVID-19 numbers. It’s also going to be a moving level given how it opens up and the impact of the shutdown,” the note says. The brokerage defines three components of economic cost — the government, corporates and consumers. “There will be different components of economic cost. Some of these could be absolute meaures: GDP value erosion over the year possibly the most dominant one, the fiscal expansion that offsetting would take over the year. But, its impact is well likely to extend over many years. Or it could be measured in terms of corporate sector profitability in terms of profitability lost, albeit the likely expansion in leverage / balance sheets or the leverage increase in the system could well be another measure,” Edelweiss Security says. “The cost to the consumer could well be another. The erosion in income over the year, on job losses, lower wages and man days lost,” it adds. Socialisation of COVID-19 costs Edelweiss sees additional burden in terms of socialisation of COVID-19 costs with the government and regulators asking the corporates to pitch in. “This could be in the form of forbearance / waivers (banks), public policy (PSUs), pricing regulations and caps (hospitals, airlines, telecom), inclusions (insurers), quantitative restrictions – supply prioritisation (pharmaceuticals, exporters), amongst others,” it says. For example, the RBI has told banks to offer moratorium on loans, the Supreme Court has asked private labs to provide free COVID-19 testing and hospitals have been taken over for coronavirus patients. Want to Invest in Shares ? Head on to www.MoneyEstate.in Given uncertainty around these sectors, the brokerage has downgraded banks to ‘underweight’ and keeping away from utilities and all government companies, while raising weightages on sectors that are not exposed such. For instance, it has upgraded consumer staples, pharma and IT to ‘overweight’. Read more at : https://www.businesstoday.in/markets/stocks/coronavirus-impact-india-worst-hit-stock-market-china-least-affected/story/400890.html
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