Impact Of Covid 19 On Stock Market

Topic: Impact of coronavirus on Stock Market It is difficult to predict how the stock market will move. The coronavirus crisis, one day curfew and the national lockdown triggered the crash of Indian stock market. All sectorial indexes showed signs of weakness as investors’ sentiments remain jittery due to subdued business activity due to the lockdown.

Indices Situation:-

The above graph shows the changes in the value of Nifty due to coronavirus. Nifty was high on 20 Jan 2020 at 12,430.5 but after that the index started falling and marked its low on 24 Mar 2020 at 7,511.1 due to the lockdown news. Industries like Banking/finance, Automotive, Cement/Construction, Chemicals, etc are showing negative value whereas Telecom, Tobacco, Media, Pharmaceuticals, etc showed a different trend.

When it comes to Sensex, it also marked its low on 24 Mar 2020 at 25,638.9 due to same reason. Industries like Oil & Gas, Tobacco, Engineering, Pharmaceuticals, and Telecom are showing gains amid market turmoil.

Global and country situation:Not just India but global stocks also showed signs of weakness as stimulus packages announced by central banks and governments around the world failed to cheer up markets. India, too, faces a much higher risk rate as the daily increase in confirmed cases has been on the rise for the past week. The sentiment seems to be reflected in the country’s stock market as anxiety grows over the outcome. When WHO declared COVID-19 a pandemic, the financial markets, as well as other asset categories such as real estate, commodities, crude oil, and bullion, it is the rare, completely unexpected, Black Swan event, whose impact may be deeper and longer than what was estimated earlier.

Investors Situation:When there is panic, investors tend to make their decisions emotionally, rather than rationally. In the universe of stocks, there is a high level of dispersion between quality and unsustainable names. Avoiding mistakes of investing in traps has been, and should remain, the bedrock for investors to sustain and survive in the long term. Hence, the brave investors can look at investing steadily, but carefully, over the next three to six months. They can take cool and calculated investment risks, but avoid timing risks at all costs. This implies that no buyer, howsoever sharp and smart she may be, can expect to buy stocks at the lowest levels. One needs to buy, and hold, even if the stock goes down further. And then wait for a few months to a few years for it to rebound. The strong quality players can then be in a perfect spot to take advantage of the future opportunities. Great Swan Events like the current one are reminders of the need to have a diversified portfolio. Hence, buyers should seek to have a basket of assets that can mitigate the impact of such events in the future.

Conclusion:Although the stock indices fall sharply during such crises, they tend to go up faster during the turnaround. Consider, for instance, the financial crisis of 2008. The sub-prime scandal, and the fall of global financial giants like Lehman Brothers in September 2008, led to global madness in the financial markets (including stocks), real estate, commodities, and other assets. The economies of several nations, including the US, seemed decimated. Experts talked about the coming of the Second Great Depression. During the first in the 1930s, stock markets and national economies did not recover for a decade. However, after September 2008, in an unexpected fashion, stock markets across the globe recovered over the next four months. Since then, most markets, including the Indian one, saw a frenzied, unstoppable, and sustained bull runs, despite few hiccups. The coronavirus disrupted it, and led to massive confusion and chaos among the investors. So, the same turnaround may happen this time. And investors need to be prepared for it.

There is a difference, though. The 2008 crisis was system-driven, i.e. it was caused by the faults within. The regulators, central banks, and policy- makers had to react with speed to correct it. While it took months for the stocks to recover, nations took years to fix their economies. In 2020, the crisis is an external one. After a slow start, the stakeholders have come together to pro-actively contain the spread of the virus. Like 12 years ago, the market may turn northwards within 1-3 quarters. The economies may take more time.