There’s no doubt when we say that in a matter of just 14 days, the Coronavirus pandemic has cut down around a third of the worldwide market cap. On Friday, the Indian equity market rebound valiantly but if you take into account the Sensex, it closed down 20% below the peak level that was attained 2 months back. The investors breathed a sigh of relief knowing that there are several other markets have fallen as well. The rapid spread of the Coronavirus has wreaked havoc in the stock market and has hampered the confidence of the investors.
Things have turned out to be worse due to the war between Russia and Saudi Arabia on crude oil and this has brought in volatility among the other investment assets. Previously, the COVID-19 scare had only had its impact on the debt and equity markets but now the currency and commodity market are also bearing the brunt, more because of the crude oil war. Expert investors are of the opinion that it is much better to wait for the crisis to end before anyone takes worthwhile investment decisions.
The new pandemic – COVID-19
Till 12th March, it was just 30% of the active cases that belonged to China and the remaining 70% belonged to other countries of the world. When we say active cases, we mean the ones who have started receiving treatment but who haven’t yet recovered. As the situation is gradually improving in China, COVID-19 is leading to lockdowns all over the country, especially in the hard-hit countries like Iran, Italy and South Korea.
The impact of this pandemic is undoubtedly going to be huge on the already sluggish economic growth. The OECD or the Organisation for Economic Co-operation and Development has halved the projection of GDP growth for this financial year due to Coronavirus. This disease has also had a huge impact on the Indian economy. The present restrictions will have an impact on several other economic activities like consumption and traveling. Goods manufacturing will also have its impact on disruptions on supply chain and this delays capex spending.
The ongoing war on crude oil
To add fuel to the fire during this global financial fiasco, the crude oil war has also started between Russia and Saudi Arabia. The request of OPEC to halt the production from the month of April was denied by Russia, thereby leading to discarding of the current restrictions. Boosting production during a time when there is low demand due to COVID-19 is not good for the overall crude oil market.
Equity market turns bearish Yes, amidst the Coronavirus pandemic, the equity markets cut down by 20% in benchmark indices and hence have stepped into the territory of bear market. Financial experts are of the opinion that the investors require remaining alert and that they shouldn’t take a blind plunge into anything now. In spite of the cut, the broader market isn’t still going cheap as according to the valuation zone. Risk is pretty low due to lower leverage in India as against other world markets.