Page Title

The country has been in complete lockdown for more than two months now. We haven’t witnessed a crisis this big since the past 100 years. If we look at the number of people affected by coronavirus in India, it’s somewhere around 4.5 – 5% of the total number of people tested for the virus. The number of deaths taking place due to corona is somewhere around 3 % of the people tested positive for the disease. The main reason behind the countrywide lockdown was to equip the nation with proper healthcare system to cater to the number of rising Covid-19 cases in the country. The upcoming one month is very crucial for our country. If the number of Covid – 19 infected people is anywhere around 2 lacs to 3 lacs, the situation can still be managed. If the number exceeds, then the situation might get out of control.

Effect of Coronavirus on the economy:

Recently the government had made 6 major announcements including the stimulus package to help revive the country’s economy that is affected by coronavirus. Even RBI had made 3 major announcements to ease the cash flow in the economy. In our view these announcements are just the first step to kick start the recovery of the economy. Many more steps must come from the government to improve the present condition of the economy. One major problem that we can see is that banks are afraid of lending the money to the industries; hence we can see that they are depositing more and more money in the RBI on daily basis but are not lending money to the industries. There is a fear of default amongst bank.

How long will it take to come back to normal?

Once, a healthcare solution of the disease is found and the lockdown is completely lifted, it will take about 1-14 days for all the sectors of the economy to start their operations. The economy will take anywhere from 6-9 months to come back to track. Considering the monsoon season is also approaching, the demand for goods and services will increase in the market by October 2020, which is the start of the festive season.

Positive news:

• Despite the lockdown, the Rabi crop harvest has been really good and the farmers have gained a lot of profits from harvesting this year. Similarly, it is anticipated that the Kharif crop harvest will turn out to be great too. Hence, the agriculture sector has not been affected, which is the backbone of the Indian economy.
• Corporate tax benefit: In September 2019, the government had announced new industry tax laws that enabled budding entrepreneurs to establish their industries in the economy. They cleared their path of starting a new business.
• Since the virus originated from a Chinese city, many multinational companies have turned their back against China. They are now looking to set up their manufacturing facilities in India. This will result in more investment and employment generation in our country.

Pressure points:

• The biggest pressure lies on the shoulders of the hospitality and tourism industry. They have incurred huge amounts of losses due to a worldwide lockdown and this will continue for some time even after the lockdown is lifted.

Effect of Coronavirus on the equity market:

Crisis always brings new opportunities and so has this crisis. Many investors from all over the world are now looking to invest in the Indian firms. The biggest example is recently Reliance Jio managed to receive around 78000 Cr rs from various foreign investor that include giant like Facebook.      

The equity market depends on three major factors:

• Events – Coronavirus coming to India was a major event that disrupted the market as a nationwide lockdown was announced owing to the spread of the disease. How this lockdown will be lifted is going to be another major event that will affect the market.
• Liquidity – Foreign Institutional Investment selling has increased in the country and domestic participation is lifted. This has brought the liquidity factor to neutral. This might become positive in the coming days if the lockdown is lifted with precautions and people’s confidence is regained.
• Valuation – Also referred to as the earnings. There is no clear view on valuation yet. Since, we do not know when the lockdown will be completely lifted, the EPS estimate of companies is also difficult.

What we need the most right now is control over our healthcare system. Once the healthcare issue is solved, everything else will start falling into place.