Blog from our Monthly Blog Contest

DISCLAIMER:

  1. This blog is only written from an Economic point of view
  2. Investments are subject to market risks.

Oppurtunities:

“Every adversity comes with an opportunity”

  1. Pharmaceutical and Chemical Industry is in boom. The sales of drugs, masks, gloves, surgical spirits, sanitizers, soaps and disinfectants have seen a sharp spike. Due to the demand- supply nature of economics, rates for the same have also soared.
  2. Stock Markets: It is one of the very few markets which are fully operational during the lockdown.

The big fishes are heavily investing in the stock market.  In the short term, stock markets rally and crash on sentiments. This very nature of market is exploited to benefit. Investors are buying quality shares at low prices and are planning to sell them at an obvious higher price when fear subsides from market.

It’s easier to look back than to look into the future. Let’s see how SENSEX has behaved during prior outbreaks : For starters, “SENSEX”  is the index which broadly represents Bombay Stock Exchange and the market sentiment. The movement in this index indicates the generic movement of share prices of individual stocks.

SARS outbreak:
Duration of epidemic (Jan-Mar 2003): -10.1%
Next six months (Apr-Sep 2003): +44.5%

Zika outbreak:
Duration of epidemic (Nov 2015-Feb 2016): -13.4%
Next six months (Mar-Aug 2016): +19.7%

Avian influenza:

Duration of epidemic (Jan-Aug 2004): -12.3%
Next six months (Sep 2004-Feb 2005): +28.8%

The only difference between the above outbreaks and Coronavirus outbreak is that:

  1. Coronavirus has infected more number of people. It has affected the economy in a much more drastic manner.
  2. Media and social networking sites have a deeper reach nowadays, resulting in a higher degree of panic in the markets.   

The Dons of the Dalal Street are proactively investing with hopes of good returns. This arises from the fact that shares are available at low prices because of the market correction.  

“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

Warren Buffet, one of the richest man on the planet

Medical Device Industry:  Ventilator is a device which aids patients who are physically unable to breathe by mechanically moving breathable air into and out of their lungs. The Association of  Indian Medical Device Industry (AiMeD), an umbrella association of various Indian medical devices manufacturers has planned to ramp up the production of ventilators. Leading domestic ventilator manufacturers have already doubled their production capacity within a month’s time. Many tie-ups are in place with automobile makers like Maruti, Mahindra & Mahindra, Tata Motors, Hyundai India and Pune-based Kalyani Group to increase the production. Skanray Technologies, the leading ventilator manufacturer in the country, has created a consortium with Bharat Electronics (BEL), Bharat Heavy Electricals Limited (BHEL) and Mahindra and Mahindra group to ramp up production from its usual 2,000 units per month to the current capacity of 5,000 units per month, and to 30,000 units per month by end-May.

Adversities

  1. The day to day socio-economic activities have come to a stand still. Majority of the businesses, shopping malls, cinema halls and markets are temporarily closed. In short, the movement of capital among people has slowed down.
  2. There is a probability of decrease in the overall productivity due to “Work from Home” safety guard.
  3. Startups require high productivity to survive. They are loosing capital. There is a probability that startups might lack fresh investments even after the pandemic subsides.
  4. Thousands of daily wage workers are unemployed and in a deadlock kind of situation.
  5. Private and Government recruitments have halted. Various recruitment drives such as SSC-CGL, Armed Forces recruitment drives, SBI PO, Bank jobs, competitive exams etc are postponed. This will result in a delay in providing employment to the youth of the nation.
  6. India’s GDP forecast has declined to 3.6% from 5,5% for FY21.

Conclusion:

The government has announced various relief packages. Government has also made changes in repo rate, reserve repo rate, cash reserve ratio, bank rate and statutory liquidity ratio to combat the current economic situation. The PM CARES( Citizen Assistance and Relief in Emergency Situations) Fund was created on 28 March 2020. The collected funds will be used to combat coronavirus outbreak and similar pandemic like situations in the future. Why is the government dependent on donations to combat such situations ? A gullible question which might arise into a common man’s mind is that: If money is printed, then why can’t the government print it and distribute among people in such tough times? This can’t be implemented practically because, it will cause inflation and prices of common goods will spike up.

Recession: A widespread economic decline that lasts for at least six months.

Depression: A more severe decline that lasts for years.

While the probability of India facing a recession is quite possible. Let’s hope and pray that our great nation, India neither faces recession nor depression in the days to come. Coronavirus might have slowed down the Indian economy but it has not broken the spirit of Indians. Let us collectively work together and set up an example of how resilient Indian economy is.

“Storms don’t last forever!”

Jai Hind!

Categories: Economics

Colonel M.M Nehru

Col. MM Nehru, Director at NFA, is a Personality Developer. He is an experienced trainer and has orchestrated numerous sessions around leadership, time management and personal effectiveness for corporate clientele. He holds a master’s degree (PGDM) in Defence Studies and Business Administration and was an Arts Graduate. If you want to know more about Colonel Nehru Click Here

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