Coronavirus being the most devastating crisis in today’s time seen as a pandemic for the whole world. Its spread across the world has led to a major turn in the markets all around the globe. It has shaved nearly a third of the market cap hindering the major industries such as travelling and consumption.Global economy is facing an inevitable risk of contraction in 2020 due to COVID-19 pandemic.
Being active in many countries has led the whole economy to a standstill; while the majority of the countries seem to be put in the lockdown situation as inferring for the best of public interest around the globe. The Coronavirus has led to a huge impact on the global growth of the economy where the major industries are not able to perform well in the current times. These industries are far affected from able to conduct their business where there is a cash cut problem for the businesses to be properly functioning. Moody’s in its Global Macro Outlook 2020-21 (April 2020 Update) projected that all G-20 advanced economies would contract by 5.8 per cent in 2020 resulting from the lockdown induced by COVID-19 pandemic.
Recently , IMF chief Kristalina Georgieva has warned , “The world economy, already “sluggish” before the coronavirus outbreak, is now bound to suffer a “severe recession” in 2020. And the current crisis posed “daunting challenges” for policymakers in many emerging markets and developing economies.”
There is a crisis related to the public facing fear of security of their job in the industry as one is not even sure of the after effects of Coronavirus. The industries that are surviving at this time are the pharmaceutical and agriculture-based industries. The hampering of industries thus has created an effect on the volatility of the stock market. Thus, it becomes more important for an investor to shift between sectors to make most of it. The stock market being a place of transparency and full disclosure provides every investor a chance to look at the variation taking place in the stock held by the exchanges.
The FMCG stocks are doing a very good job as their market is in a huge demand at this point of time. FMCG stocks Hindustan Unilever, Nestle made new high at a time when whole market was witnessing steep correction. Similarly, pharmaceutical stocks led by Sun Pharma, Dr Reddy’s have outperformed other sectors in last couple of days. Sectoral rotation helped Index Nifty to close above crucial resistant level of 9800; Thursday’s rally was predominantly led by automobile and metal stocks.Automobiles, metals and financials are among the worst hit in the 2020 Bear market.
It can be seen that the market is unpredictable as what is going to happen later? Therefore, it would be wise for one to look into the market where the sector is actually benefiting from the coronavirus and gain in the long term. Since we know that the economy is at a crisis stage where every industry is surviving to keep its business from going and earning revenue because of the cash crunch in the economy.
The industries which run on cash are best in surviving at this point of time, while industries which majority depended on bank loans is in hell of a situation as the banks are not doing well at this period of time. Financial and banking stocks have experienced significant corrections in the 2020 bear market.Investor’s favourite financial stock, Bajaj Finance has corrected nearly 47 per cent in the last three months. Bank Nifty which is a basket of top banks from private and public sectors in India have witnessed more than 30 per cent correction over same time period. Yes bank, IndusInd and RBL banks are few banking stocks which are worst hit in this crisis. According to rating agency Moody’s, measures such as the loan moratorium to provide temporary relief to borrowers, will constrain banks from taking proactive recovery actions and could lead to an even greater build-up of credit losses once the loan moratoriums are lifted.
Another major rating agency S & P said the economic recovery will be U-shaped, the risks for the banking sector remain on the downside and also warned of some rating downgrades because of the pandemic
But it can be said that the situation cannot be changed around. Just have to wait and see what happens next.
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