Coronavirus Outbreak: COVID-19 And Its Impact On the Financial Market
The continuing spread of the new coronavirus has become one of the biggest menaces to the world-wide economy and financial markets.
The virus, first detected in the Chinese city of Wuhan last December, has infected more than 9 lakhs people in more than 200 countries and territories globally, as of the moment.
While China was battling with the fast-spreading virus and the Chinese markets started tanking, other markets (including India) initially distanced themselves from the problem, considering it topical and restricted to China and a few other Asian countries.
Markets in the US as well as India were quite resilient for some time. Some experts anticipated that in a few weeks, India too would need to contend with the virus.
And the scenario changed, however, when, totally unanticipated, the virus engulfed the world and WHO declared the COVID-19 as a pandemic, followed by various countries issuing travel bans, emergencies, lockdowns, and other restrictions. Capital markets across the world tanked miserably.
The market fall has been a financial tsunami that has washed away faith and stability from the financial market.
March 2020 will be recorded in Capital Market history as an unforgettable month.
The trade impact of the COVID-19 epidemic for India is estimated to be about $348 million and the country figures amongst the top 15 economies most affected as slowdown of manufacturing in China disrupts world trade, according to a UN report.
The most affected sectors include aviation industry, electronics market, tourism and hotel industry and automotive amongst others, which has downgraded India’s growth.
“Besides its worrying effects on human life, the novel strain of coronavirus (COVID-19) has the potential to significantly slowdown not only the Chinese economy but also the global economy. China has become the central manufacturing hub of many global business operations. Any disruption of China’s output is expected to have repercussions elsewhere through regional and global value chains,” UNCTAD said.
Global market has been adversely impacted due to the spread of COVID-19 globally. We can get the idea by having a glance at below table which denotes the movement in the financial market globally in just a span of two months.
| Name of the Indices | Country | Value as on January 24, 2020 | Value as on March 24, 2020 | Change in the Value | Change in % |
| FTSE | UK | 7,585.98 | 5,446.01 | -2139.97 | -28% |
| Nasdaq | US | 9,402.48 | 6,860.67 | -2,541.81 | -27% |
| Nikkei 225 | Japan | 23,827.18 | 18,092.35 | -5,734.83 | -24% |
| Hang Seng | Hong Kong | 27,949.64 | 22,663.49 | -5,286.15 | -19% |
| Straits Times | Singapore | 3,240.02 | 2,362.05 | -877.97 | -27% |
(Source: The above data has been extracted from www.moneycontrol.com)
Indian stock market has also seen one of the biggest falls of its lifetime due to the pandemic crisis in the world. With the continuing increase in positive cases of COVID-19 in India and the fall of the financial markets worldwide, the Indian stock market has seen a continuous fall in its market during the period from January 2020 to March 2020.
The Nifty50 and SENSEX which were at 12,248.25 and 41,613.19 respectively as on January 24, 2020 has now fallen to 7,801.05 and 26,674.03 as on March 24, 2020 which means the Indian indices have fallen by approximately 36% during these two months.
The following table denotes the movement in the share price of few top Indian Companies during the said period:
| Name of the Company | Sector | Share price as on 24th January 2020 | Share price as on 24th March 2020 | Change in share price | Change in % |
| Bajaj Finserv Limited | Financial Services | 9,633.75 | 4,497.75 | -5,136.00 | -53% |
| UPL Limited | Chemical | 543.30 | 262.05 | -281.25 | -52% |
| InterGlobe Aviation Limited | Aviation | 1,501.50 | 916.35 | -585.15 | -39% |
| Reliance Industries Limited | Conglomerate | 1,521.55 | 943.00 | -578.55 | -38% |
| HDFC Bank Limited | Banking | 1,244.55 | 767.70 | -476.85 | -38% |
| Maruti Suzuki India Limited | Automobile | 7,128.45 | 4,486.45 | -2,642.00 | -37% |
| Sun Pharmaceutical Industries Limited | Pharma | 447.80 | 335.15 | -112.65 | -25% |
| Tata Consultancy Services Limited | Information Technology | 2,183.40 | 1,703.15 | -480.25 | -22% |
| Indian Railway Catering And Tourism Corporation Limited | Tourism | 1,002.70 | 858.30 | -144.40 | -14% |
| Nestle India Limited | FMCG | 15,755.50 | 13,478.35 | -2,277.15 | -14% |
*(The above details have been extracted from www.nseindia.com)
This pandemic has been affected not only to the Stock Market but also Mutual funds and Debt Market. Equity-oriented mutual fund schemes delivered a negative return of about 25 per cent to investors over the last one month as the broader market witnessed significant downtrend amid coronavirus-triggered recession fears.
According to data, all the equity scheme categories – equity linked saving scheme (ELSS), mid-cap, large & mid-cap, large-cap, small-cap, mid-cap and multi-cap have given negative return in the range of 25-26 per cent between February 19, 2020 and March 18, 2020.
However, we believe, investors should invest in a calibrated and staggered manner. The sharp fall has opened up good buying opportunities for investors with a long-term horizon. But nobody knows how long the pain will continue and whether it can go deeper.
In such manic markets, fundamentally strong large-cap stocks with their advantages of size, market leadership and financial muscle may be better placed than smaller stocks. Investors seeking exposure to equities but also wanting to play it relatively safe at this juncture can consider buying large-cap funds with a strong track record.
They can also make use of tools for staggered investments like Systematic Investment Plans (SIP) and Systematic Transfer Plans (STPs). Typically, SIPs allow disciplined investing that helps build an investment corpus over a long time period. Systematic Transfer Plan (STP) is yet another option which can be used in such volatile market conditions. We urge the investors to contact their financial advisors.
As ace investor Mr. Warren Buffet had rightly said “Be greedy when others are fearful”.
So, the right time to invest is right now!
