CORONAVIRUS MAY DEVOUR OUR SICK ECONOMY

I have been, like all, following the global outbreak of coronavirus disease which has now thus been  declared pandemic (a disease that spreads over a whole world) by the World Health Organization (WHO) on March 12, 2020. 

My reactions are to 1) accept coronavirus as a fatal disease and 2) analyse its impact on our economy.

First and foremost, we must trust our experts and professionals who have expressed in their best possible ways not to take the disease lightly. It is a very dangerous disease. Each one of us needs to understand the benefits of precautions to stay indoors, observe self imposed isolation, go out the bare minimum to purchase medicines, groceries, vegetables and fruits. It is best to relieve our domestic help (with paid leave), discourage visitors and maintain conscious efforts at cleanliness and following the health department advisories in a true letter and spirit. It is better to feel terrorised by this killing disease and take precautions than be destroyed due to our unconcerted carelessness towards this fatal outbreak of coronavirus : COVID-19. 

Well we, the well off and privileged ones gifted with education and resources, can avail media and social media facilities to update ourselves. How about those unlettered, poor and marginalized lots living in temporary clusters and night shelters? The administration has yet to announce advisories, benefits of hand cleaning and personal hygiene through loud speakers and public address systems on mobile vehicles and free distribution of soaps.

Let us not wait for Sunday the 22nd. Better lock ourselves today and make it a practice for self isolation.

The economy, already battling headwinds, has to now contend with the spread of the coronavirus (Covid-19), which has caused disruption in the supply chain of manufacturing, exports and imports.

There are four major industries of India dependant on China for heavy  imports namely electronics, dye stuff, pharmaceuticals and some chemical industries. Situation is so grim that industries in China have shut down, ceased production and supplies have been stapyed. The containers are stuck up at container depots and ports causing shortages of raw material and also increase in prices. On the other hand India is a big exporter of cotton yarn to China. The export is also affected due to shut downs of manufacturing and production units.. These are the supply side challenges India is facing due to coronavirus pandemic.

In the local equity market, stock market in India today consists of few limited players of companies. Normally there are 6 to 8 companies which have been giving surge to the index due to selective growth of only limited number of companies earlier before the coronavirus attack. The broad-based rally we saw surge during 2014 to 2018 from small value stocks, small caps, mid caps, mutual funds -- but now due to coronavirus threat the stock market has come out of the surge phase to a rapid lag phase.

Therefore a deep sag in sensex today is due to the effects of coronavirus. A share market is never considered healthy till majority of company stocks do not move up together. As the growth rate in India is expected to stay at around 5% it is likely that very few companies having monopoly in the market are likely to achieve their profit growth in double digits this FY. Other companies will suffer growth due to lack of demand undermined by the monopoly players.