How is the Indian Stock Market Reacting to the Coronavirus Impact?

[VSRK CAPITAL]

Impact of Covid 19 on the global markets

In the past few weeks, the stock prices have fallen drastically and the market saw a downfall of nearly a third of the global market cap. The whole world has been badly affected by the spread of the virus forcing companies to shut down, heavy unemployment and huge downfall in the economy. Almost all major most economic activities have impacted by the disease. The markets have been heavily damaged by the Covid 19 and the effects are visible on the global economic growth. The global gross domestic product (GDP) growth projection for 2020 has halved by the Organization for Economic Co-operation and Development (OECD).

Current Situation in Indian Markets

Although, the market has slightly started to rise slowly such sudden fall in stock valuations and other instabilities have triggered panic across the world and shaken the confidence of investors. The past Friday turned out to be in favour of the investors. In the end, Sensex stood at closed 20% below the peak achieved two months ago whilst other markets which have fallen more.

When the equity and debt instruments were already hit badly, the crude oil war between Saudi Arabia and Russia has only worsened the economic conditions injecting volatility into other assets. Now, the economic tension has extended to currency and commodities market.

Suggested Measures for Ensuring Financial Safety of Investments

Investment professional prefers investment in high performing- financially strong stocks with relatively higher earnings & profitability, solid balance sheets, bigger cash flows, and more effective management should be preferred. At the same time, professional advisers also suggest equity investors alter their portfolio allocation towards large-cap and multi-cap stocks as the market correction might be a little prevalent in the short term.

It might be suggested this is a good time for long term investors to buy high valuation stocks at low levels. For making a profitable investment and subsequent appreciation in the investments value few conditions shall be seen such as high-profit margin stock, low debt and innate capability & financial soundness to sustain even if the share prices touch the rock bottom due to instabilities.

The more-safe investment options might also be suggestible like Corporate Bond funds / Banking & PSU Debt Fund which provide more reliability and trustworthiness in future which seems highly dynamic due to the highly volatile markets.