Indian Economy vs Corona
Happy Gudhipadwa to all ,
It will be not so good if I won’t
acknowledge Corona virus in the beginning of this post. This virus who cannot
be even seen by naked eyes has created fear in 6 Billion people and has forced
every country for compulsory lock down on this planet.
Fin-Holix authors are enjoying (?) their
exam leave since last 20 days. But, now we are actually irritated and worried
about the situation. We are sitting at our home quietly, contributing to the
nation also Watching
daily red bloodbath in the stock market. But, Corona doesn’t stop here; One
small but important Question , How will be Indian Economy after Corona Disaster
???
Let
us address this one by one
1. Disturbed Economic Cycle
In third week of March majority of the workforce is sitting at home / opted for
Work from home, since the global operations are shrunk, many manufacturing
& service industries are in trouble. Understand this with an Example -
A is
manufacturing company. For which they receive raw materials from abroad say
chemicals , due to Corona they might not have received the raw materials since
February – Then they must have used the available reserves with them to
complete the orders
Now in
March their operations must have stopped because of 2 reasons
1. Lack of Raw Materials
2. 50% or less workforce
Since
in March they won’t able to complete the orders – No Delivery of goods – No
Payments – NO Salary to employees, huh !!!
Big
organization will still survive but problems for SME will start from April –
May.
In
simple economics – If people don’t have money how will they demand – If No
Demand – then No Supply ………
Let’s
understand the consequences with Numbers
In
Q3 – 3 Industries – Mining & Quarrying , Manufacturing and Utility services
showed negative growth rate of -3.8,-0.9,-1.1 % respectively . Around 56.79% of
total workforce work under Secondary & Service sector, even if we assume
that 50% of this will be directly affected by this, we can understand the
consequences
We
always proudly say that our economy is consumer driven as more that 2/3rd
of consumption is Domestic Household consumption, but this can be proven as
double edge sword.
2. Red Rampant (Stock Markets )
Where
is the economic slowdown?
Our
stock markets are doing pretty well!
If
economic is in trouble then main economic indicator should give us some
signals!!!
These
were some arguments in Sept – Dec 2019
The
reality was we were actually heading to cyclical slowdown in 2nd
half of the 2019. It was a cyclical slowdown same like 2008. Then why were the
indices were still up?
Ans. There
were few companies / sectors who helped to boost Nifty , but Only FEW !
Automobile
, Bank , Real Estate Sectors were the first one to get hit . Let’s look into
some numbers
|
Index
|
Returns (Jan – Dec 2019)
|
|
Nifty 50
|
11.5%
|
|
Nifty Small Cap 50
|
-13.2%
|
|
Nifty MidCap 50
|
-4.6%
|
|
Nifty Auto
|
-10.2%
|
|
Nifty PSU Bank
|
-19.2%
|
The
Data clearly shows that Blue Chip stocks, representing Nifty was growing in at
constant pace. Small Cap, Mid cap and few sectors had serious issues along with
GDP data was actually an alarming the slowdown.
Even If
the corona wasn’t there we were expecting 15 – 20 % correction in the market so
Nifty could have easily landed up around 10k, extra 2k fall is because of
Corona outbreak.
Next 21
days are going to be crucial , we all need to defeat this Corona . I know there
is huge money loss but losing such human capital is still bigger loss .
That’s
it for Today ! see u all soon
- Prathamesh (25/03/2020)
Sources
-
## For stock market daily updates follow – Dalal Street Monarch
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