COVID-19 Crashing Markets

There is a constant uneasiness among the investors now, since the markets are breaking their own records of their lowest points. There are too many factors contributing to the crashing markets. One is, of course, the COVID-19 virus that has brought Wuhan, the place where the virus originated, worldwide recognition.  Secondly, the oil prices tanked from about $60 to $20 a barrel. Thirdly, Indian markets affected by the RBI taking control over Yes Bank.

As of now, let’s focus on how the virus has affected the markets and if anybody has benefited from it. The COVID-19 aka Coronavirus started in Wuhan, China and did not take much time to spread over Italy, Korea, Japan, Iran, parts of America and now India, too.

COVID-19 is not only fatal to humans, but also to businesses. Many sectors like Travel, Automobile, FMCG, Pharmaceuticals, etc. have all been affected by the virus. People worldwide, are advised to stay at home as their immunity might be strong enough to fight the virus, but they can easily pass on the virus to someone who is not as immune as they are. Countries like Spain and Germany also sealed their borders to combat the spread of the virus. Travel and tourism are main reasons contributing to the spread of the virus. Due to this, the struggling aviation industry has come to a standstill. The flights that are not canceled are operating only with 10% of its capacity. Due to this, the Indian government is planning Rs. 11,900 Cr bailout for the airlines hit by the virus.

 Secondly, as people are advised to stay home, the manufacturing industry, supply chain, etc. have all come to a halt. Talking about the automobile sector, some important parts of automobiles are imported from China. Now, since the virus stemmed from China itself, it momentarily spread to the whole of China, bringing all of its services to a suspension.

India is a leading supplier of generic drugs. Indian Pharmaceutical sectors supply over 40% of the global generic drugs in the world. Indians have to rely on China for many components of these generic drugs. But coronavirus has played havoc with the supply chains of China. The Indian government soon realized that there might be a shortage of the medicines for domestic consumption, leading to the ban on the export of these drugs. The government has banned the export of 26 pharmaceutical ingredients that include medication for skin infections, pregnancy and also certain vitamins. This can not only affect the imports and exports, but also the reliability and goodwill of the Indian markets in the world.

The only companies that are likely benefitted are some pharmaceutical companies who do not have their imports from China. Also, home entertainment companies, like Netflix and amazon prime, who are always there for those who are home-quarantined.

But looking at the larger aspect, the coronavirus has in it, to make the world take a break and shave about one-third of the major stock markets or even suspending their trading. The American stock exchanges halted for 15 minutes on 12^th March fearing the plunges and major stake sell-offs caused by the virus. The Federal Reserve announced rate cuts on loans to nearly zero, to pump in funds into the economy. Indian stock exchanges, on 13^th March, halted for about 45 minutes after dipping 10% due to the pandemic fears.

Let’s just all wait for the hard working people in the medical field to fight the virus, while we rest and take care of ourselves and those around us.

Thank you,

Regards,

Nishi Sanghvi,

Kautilya,

IBS Mumbai.