“Research project on

Potntial impact of
lockdown on economy
and business”

Submitted to : Dr. Mitesh Jayswal / Dr. Yogesh C Joshi

Submitted By : Rahul Pambhar

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 TABLE OF CONTENT

NO. PARTICULER PAGE N0.

1 Introduction 3

2 Cause 9

3 Impact 11

4 Impact on stack holder 18

5 Conclusion 21

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INTRODUCTION :

A lockdown is an emergency protocol that usually prevents people or information from leaving
an area. The protocol can usually only be initiated by someone in a position of authority.
Lockdowns can also be used to protect people inside a facility or, for example, a computing
system, from a threat or other external event. Of buildings, a drill lockdown usually means that
doors leading outside are locked such that no person may enter or exit. A full lockdown usually
means that people must stay where they are and may not enter or exit a building or rooms within
said building. If people are in a hallway, they should go to the nearest safe, enclosed room.

In the absence of treatment or a vaccine, ceasing most human contact is really the only way to
stop the spread of the virus. Essentially, the less contact people have with each other, the less the
virus can spread. Given the rapid spread of the virus, social lockdown is urgent to bring overall
transmission down, and see whether testing followed by isolation could be effective – this is all
in an attempt to ‘flatten the curve’ or reduce infections and spread cases out over a longer time
frame to avoid overwhelming health systems.

Since the new coronavirus can spread unnoticed so easily, many governments have felt the best
way to ensure people have minimal contact with each other is to order total lockdowns, with
people only being allowed to leave to get food or medicine, and to practise social distancing
when they do leave their houses. Countries that had epidemics first, such as China and South
Korea, have brought cases down dramatically through widespread testing and social distancing.

The rationale is to ensure that people with serious illness can seek medical care, and those who
are infectious but asymptomatic or have mild illness don’t pass it on to anyone else.

Countries around the world are implementing measures to slow the spread of the coronavirus,
from national quarantines to school closures.

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More than a third of the planet's population is under some form of restriction.

The World Health Organization, which has officially declared the outbreak a pandemic, has
called on "all countries to continue efforts that have been effective in limiting the number of
cases and slowing the spread of the virus."

While "lockdown" isn't a technical term used by public-health officials, it can refer to anything
from mandatory geographic quarantines to non-mandatory recommendations to stay at home,
closures of certain types of businesses, or bans on events and gatherings, Lindsay Wiley, a health
law professor at the Washington College of Law, told Vox.

And coronavirus restrictions and legislation have already led to political unrest and major
governmental changes. On Monday, the Hungarian parliament gave prime minister Viktor Orban
the power to rule by decree for as long as he sees fit. The "coronavirus bill" has already faced
pushback from the European Union.

Here are the countries and territories that have implemented mandatory mass quarantines and
border closures so far.

Singapore will close schools and all nonessential businesses on Tuesday.

Previously, Singapore had stood out as a leader in controlled pandemic measures, but the number
of cases grew at a higher rate this past week, Variety reports.

"Furthermore, despite our good contact tracing, for nearly half of these cases, we do not know
where or from whom the person caught the virus," Prime Minister Lee Hsien Loong said today.
"This suggests that there are more people out there who are infected, but who have not been
identified. And they may be passing the virus unknowingly to others."

Citizens should only interact with their family members and work from home if possible. Lee
also said that the government will supply reusable masks to all households.

Panama and Peru both implemented measures restricting days citizens could outside by gender.

Panama's new President Laurentino Cortizo gestures after addressing the audience during his
inauguration ceremony,

In Peru, men can leave their houses on Mondays, Wednesdays, and Fridays; for Panama, those
are the days women can leave.

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In both countries, no one is allowed outdoors on Sundays.

Thailand will begin a 10 p.m. to 4 a.m. curfew on Friday. The country was already on a
weeklong nationwide state of emergency.

Thailand's Prime Minister Prayuth Chan-ocha arrives at a weekly cabinet meeting at the
Government House in Bangkok, Thailand, May 2, 2017. REUTERS/Chaiwat Subprasom

The only exceptions to the curfew will be for those seeking medical care or transporting goods,
according to the Nikkei Asian Review.

The state of emergency is active until April 30, but could be extended; there's no date on when
the curfew will end. Violators of curfew face up to two years in jail and/or a $1,200 fine.

Russia will have a paid 'stay at home' holiday this week. On Monday, Moscow's residents were
ordered to stay in their houses and will soon need passes for their movements.

Russia also closed its borders and canceled any international flights, except for those bringing
Russians home, CNN International reported.

On Monday, Moscow residents were ordered to stay at home — they can only leave to go to the
grocery store or pharmacy, take out the trash, or walk their pets within 100 meters of their home,
according to Bloomberg. Residents will be monitored. At least 27 other regions in Russia have
followed Moscow's lead.

On Tuesday, bills with harsh punishments for quarantine rulebreakers were pushed through
parliament, according to Yahoo News; those who break quarantine and infect others — or spread
misinformation about the coronavirus — will face up to five years in jail.

South Africa went into a 21-day lockdown on March 26.

Only essential businesses remain open, and soldiers and police are monitoring the streets, Al
Jazeera reported.

"While this measure will have a considerable impact on people's livelihoods, on the life of our
society and on our economy, the human cost of delaying this action would be far, far greater,"
President Cyril Ramaphosa said, according to Al Jazeera.

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New Zealand enacted a mandatory 14-day quarantine for all individuals entering the country.
The country went on full lockdown on March 25.

New Zealand went into a month-long national lockdown on March 25 as the number of cases in
the country rose by almost 50%, the Guardian reported.

The lockdown will only be partially eased after a month if case trends slow.

"I say to all New Zealanders: the government will do all it can to protect you. Now I'm asking
you to do everything you can to protect all of us. Kiwis — go home," New Zealand Prime
Minister Jacinda Ardern said, according to the Guardian.

Saudi Arabia locked down its capital and two holy cities on March 25. On Sunday, it locked
down the city of Jeddah

Bloomberg reports that Ridayh, and the Islamic holy cities Mecca and Medina, are under
lockdown. On Thursday, Mecca and Medina were put on 24 hour curfew, according to Al
Jazeera.

Saudi Arabia already suspended international flights and closed mosques, schools, and
restaurants; it also imposed a curfew.

Colombia began a nationwide quarantine on March 24, with people over the age of 70 told to
remain indoors until May.

The quarantine was expected to last 19 days, the BBC reported, but could be extended three
more months.

One mass breakout attempt in a Colombian prison led to the deaths of 23 inmates, as prisoners
held protests over crowding and health concerns.

India went into full coronavirus lockdown for 21 days on March 24.

The lockdown will be the largest stay at home order yet, with 1.3 billion told to social distance,
CNBC reported.

"To save India and every Indian, there will be a total ban on venturing out of your homes,"
Indian Prime Minister Narendra Modi said, according to CNBC.

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The UK went into full coronavirus lockdown on March 23.

Prime Minister Boris Johnson said that citizens will only be allowed to leave their homes for
essential work, exercise, and purchasing food or medicine. Citizens will only be allowed one
form of outdoor exercise a day.

Gatherings of more than two people — excluding people who live together — will be banned, as
will most ceremonies other than funerals.

Australia closed non-essential businesses on March 23. On Tuesday, the most populous state in
the country was put into a stricter lockdown.

On Tuesday New South Wales — the epicenter of Australia's outbreak — was locked down,
Reuters reports. Anyone who leaves their house "without a good reason" faces fines or jail.

On March 24, new restrictions for the whole country were imposed after a national cabinet
meeting, according to the BBC.

Prime Minister Scott Morrison said that he wanted to keep Australian schools open, but parents
could keep children at home if they wanted.

Indigenous communities and isolated towns are enacting their own lockdowns and restricting
entry to outsiders, Bloomberg reports.

China implemented what was then the largest quarantine in human history to try to contain the
coronavirus, locking down at least 16 cities at the end of January.

At its peak, China's quarantine spanned at least 20 provinces and regions, according to The Wall
Street Journal.

Wuhan, where the virus first appeared, was locked down on January 23. For almost six weeks,
the streets have been virtually deserted as Wuhan residents self-quarantine in their homes.

Soon after imposing restrictions on Wuhan, China locked down 15 other cities, including
Huanggang, a city of 7.5 million people, and Suizhou, which is home to almost 11 million.

Earlier in the quarantine, some Wuhan residents faced food shortages, and grocery stores
struggled to meet increased demand for home delivery.

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"There's no question that China's bold approach to the rapid spread of this new respiratory
pathogen has changed the course of what was a rapidly escalating and continues to be a deadly
epidemic," Bruce Aylward, a Canadian doctor and epidemiologist who was recently sent to
China as part of a delegation to inspect its containment efforts, told The New York Times on
February 24.

Jordan has been under a strict indefinite lockdown since March 21, although the government
eased some restrictions on March 25.

The announcement was made on Friday night and the curfew began at with air-raid sirens at 7
a.m, on Saturday, The Guardian reported.

Residents were not allowed to leave their homes, and the government was piloting a system for
getting basics to citizens — like food and pharmaceuticals — according to The Guardian.

However, following four days of total lockdown, the government eased restrictions; citizens are
now allowed to leave their homes for essential trips, according to CNN International. Previously,
an emergency hotline was reportedly overwhelmed by calls, leaving some citizens without food.

Argentina went into a "preventative and compulsory" lockdown on March 21.

An Argentinian official wears a face mask as he stands guard at the Horcones border crossing in
Mendoza, Argentina, after the two countries restricted control at their borders coronavirus on
March 18, 2020.

An Argentinian official wears a face mask as he stands guard at the Horcones border crossing in
Mendoza, Argentina, after the two countries restricted control at their borders as a precaution
against the spread of the new coronavirus, on March 18, 2020.

are only allowed to leave their homes for essential services while police monitor the streets, the
Buenos Aires Times reported.

The lockdown was set to end on March 31 but was extended to April 13 on Sunday night.

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Causes :

The UK, US, EU and many other countries are currently in some degree of “lockdown,” with
restaurants and bars, shops, schools and gyms closed, and citizens required, or at least strongly
encouraged, to stay home to avoid catching or spreading COVID-19, the respiratory illness
caused by the novel coronavirus.

Researchers are well on their way to discovering vaccines and treatments for the virus, but even
in a best-case scenario, these are likely to be 12-18 months away.

Until then, extreme social distancing is pretty much the only intervention available to help
individuals stay healthy, and to break the chain of transmission - giving more vulnerable
populations a fighting chance of surviving this pandemic.

But how exactly does a lockdown work? And why is it important for even younger and healthier
people, who face a lower risk of severe illness, to remain in their homes as much as possible?

The goal: R<1

The purpose of a lockdown, explains a new study from the Imperial College London COVID-19
Response Team, is to reduce reproduction – in other words, to reduce the number of people each
confirmed case infects.

The goal is to keep reproduction, or “R,” below one (R<1) – with each case infecting fewer than
one other person, on average.

The authors of the study say there are two routes to try to get there:

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  Mitigation, “slowing but not necessarily stopping epidemic spread – reducing peak
healthcare demand while protecting those most at risk of severe disease from infection.”
This is done by isolating suspected cases and their households, and social distancing the
elderly and people at highest risk of serious illness.

 Suppression, or basically, lockdown, which “aims to reverse epidemic growth, reducing

case numbers to low levels” by social distancing the entire population “indefinitely” and
closing schools and universities.

A lockdown is an emergency protocol that usually prevents people or information from leaving
an area. The protocol can usually only be initiated by someone in a position of authority.
Lockdowns can also be used to protect people inside a facility or, for example, a computing
system, from a threat or other external event. Of buildings, a drill lockdown usually means that
doors leading outside are locked such that no person may enter or exit. A full lockdown usually
means that people must stay where they are and may not enter or exit a building or rooms within
said building. If people are in a hallway, they should go to the nearest safe, enclosed room

Countries around the world are implementing measures to slow the spread of the coronavirus,
from national quarantines to school closures.

More than a third of the planet's population is under some form of restriction.

The World Health Organization, which has officially declared the outbreak a pandemic, has
called on "all countries to continue efforts that have been effective in limiting the number of
cases and slowing the spread of the virus."

minister Viktor Orban the power to rule by decree for as long as he sees fit. The "coronavirus
bill" has already faced pushback from the European Union.

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IMPACT :

Where a stringent policy response is deemed necessary, business will inevitably be impacted,
with both near-term effects and less-expected longer-run consequences.

 Travel restrictions and quarantines affecting hundreds of millions of people have left

Chinese factories short of labour and parts, disrupting just-in-time supply chains and
triggering sales warnings across technology, automotive, consumer
goods, pharmaceutical and other industries.

 Commodity prices have declined in response to a fall in China’s consumption of raw

materials, and producers are considering cutting output.

 The mobility and work disruptions have led to marked declines in Chinese consumption,
squeezing multinational companies in several sectors including aviation, education
abroad, infrastructure, tourism, entertainment, hospitality, electronics, consumer and
luxury goods.

Overall, China’s GDP growth may slow by 0.5 percentage points this year, taking at least 0.1
percentage point off global GDP growth. This will ripple through developed and emerging
markets with high dependencies on China – be that in the form of trade, tourism or investment.
Some of these countries exhibit pre-existing economic fragilities, others (acknowledging
an overlap) have weak health systems and thus lower resilience to pandemics. Many Asian and
African countries lack surveillance, diagnostic, and hospital capacities to identify, isolate, and
treat patients during an outbreak. Weak systems anywhere are a risk to health security

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everywhere, increasing the possibility of contagion and the resulting social and economic
consequences.

Image: COVID-19 impact/Statista

Why business should invest in pandemic-resilience

Epidemics and pandemics are hence both a standalone business risk as well as an amplifier of
existing trends and vulnerabilities. In the longer run, COVID-19 may serve as another reason –
besides protectionist regulations and energy efficiency needs – for companies to reassess their
supply chain exposure to outbreak-prone regions, and to reconfigure regionally.

Businesses may also have to contend with intensifying political, economic, and health security
risks – for example, resumption of trade hostilities between China and the United States. A
prolonged outbreak or economic disruption could fan public discontent in Hong Kong and
mainland China, prompting repressive measures that stifle innovation and growth. Stumbling
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growth in emerging markets may fail to absorb fast-growing workforces, leading to societal
unrest, political uncertainty, and an inability to invest in health systems.

Beyond standard concerns related to business operational continuity, employee protection and

market preservation, businesses – and countries – should take a fresh look at their exposure to
complex and evolving inter-dependencies that could compound the effects of pandemics and
other crises. Given the panic and neglect cycle of pandemic preparedness, once COVID-19 is
contained, much of the world is likely to return to complacency and remain under-prepared for
the inevitable next outbreak. Businesses that invest in strategic, operational and financial
resilience to emerging global risks will be better positioned to respond and recover.

Lockdowns around the world have placed the world's economies at a standstill, slowing the virus'
spread, but enacting a heavy economic toll.

"This is a crisis like no other," said Kristalina Georgieva, Managing Director of the International
Monetary Fund (IMF) at a briefing for the World Health Organization (WHO). Georgieva noted
that the crisis was like nothing the agency had seen in 75 years and one that would be more
severe than the last global financial crisis.

At Friday's briefing, WHO officials and the IMF Director discussed the global financial
measures that will be needed to blunt the economic impact of the current coronavirus crisis,
ensuring protections for health systems and the world's most vulnerable.

mpact on Commerce: Prioritizing digital commerce,

The impact of COVID-19 on customers is profound and the full impact on the economy is still
unknown. While Direct-to-Consumer and B2B organizations scramble to meet immediate and
emergency needs, the pandemic has activated a new wave of commerce innovation. New habits
and behaviors are forming that are likely to remain after the crisis has passed – and this presents
opportunities.

Impact on Customers: Acting to maintain responsive customer service

The impact of the coronavirus outbreak requires brands to move at unprecedented speed to serve
their customers with quality while caring for their employees with compassion. That means re-
evaluating how contact centers are leveraged, how employees deliver relevant customer
experiences, where they work, and how digital channels can be used to support the increase in
contact center volume. Consider banking, for example, where social distancing restrictions will
push customers toward digital channels for service.

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Impact on Supply Chain: The need for supply chain resilience
The impact of COVID-19 on supply chain disruption was already clear when the coronavirus
outbreak was confined to parts of Asia. With the virus spreading rapidly, and several economies
and regions now in lockdown, the severity is greater still.

World on lockdown: Business activity collapses at record pace

World on lockdown: Business activity collapses at record pace

Entire regions are on lockdown and in some places soldiers are patrolling the streets to keep
people indoors.

Business activity has collapsed from Australia and Japan to Western Europe at a record pace, as
measures to contain the coronavirus hammer the world economy, with data for the United States
later on Tuesday expected to be just as dire.

"The coronavirus outbreak represents a major external shock to the macro outlook, akin to a
large-scale natural disaster," analysts at BlackRock Investment Institute said in a note.

Could the coronavirus crisis help tackle income inequality?

Asian governments warn of more economic, fiscal pain from virus

Japan, IOC agree to postpone Tokyo Olympics: Coronavirus latest

Activity in the 19 countries that use the euro has crumbled as nations lock down to curb the
spread of the disease, shuttering shops, restaurants and offices.

IHS Markit's flash composite Purchasing Managers' Index (PMI) for the eurozone, seen as a
good gauge of economic health, plummeted to a record low of 31.4 in March.

That was by far the biggest one-month fall since the survey began in mid-1998 and below all
forecasts in a Reuters News Agency poll which gave a median prediction of 38.8.

In France, services activity fell to a record low and manufacturing saw its steepest drop since the
global financial crisis more than 10 years ago.

"Taken together, these declines suggest GDP is collapsing at an annual rate approaching double
digits," IHS Markit economist Eliot Kerr said.
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A PMI for the services sector in Germany, Europe's largest economy, showed a record
contraction in activity, while sister surveys showed the United Kingdom's economy shrinking at
a record pace.

IHS Markit said the March figures suggested the eurozone economy was shrinking at a quarterly
rate of about 2 percent, and the escalation of measures to contain the virus could steepen the
downturn.

US manufacturing and services PMI surveys are also expected to come in at multi-year lows.

After an initial outbreak in China brought the world's second-largest economy to a virtual halt
last month, an ever-growing number of countries and territories have reported a spike in
infections and deaths.

Entire regions have been placed on lockdown and in some places soldiers are patrolling the
streets to keep consumers and workers indoors, halting services and production and breaking
global supply chains.

Mirroring the emptying of supermarket shelves around the world, indebted corporates have
rushed into money markets to hoard dollars, with a global shortage of dollar funding threatening
to cripple firms from airlines to retailers.

PMI surveys from Japan showed the services sector shrinking at its fastest pace on record this
month and factory activity contracting at its quickest in a decade.

This was consistent with a 4 percent contraction in 2020, Capital Economics senior economist
Marcel Theliant said. The likely postponement of the Tokyo Olympic Games is expected to deal
a heavy blow to the world's third-largest economy.

Infinite Stimulus :

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With most asset markets tanking, global central banks have been rolling out extraordinary
measures on an almost daily basis to stop the rot.

In its latest drastic step, the US Federal Reserve on Monday promised bottomless dollar funding
and .

For the first time, the Fed will back purchases of corporate bonds, backstop direct loans to
companies and "soon" will roll out a programme to get credit to small and medium-sized
businesses. It will also expand its asset purchases by "as much as needed".

The Fed last week slashed borrowing costs to zero and took other emergency steps to keep the
commercial paper, US Treasury debt and foreign dollar funding markets functional.

But some analysts say infinite monetary policy easing may not be enough and fiscal steps are
crucial. The latest US effort on that front remains stalled in the Senate as Democrats said it
contained too little money for hospitals and not enough limits on funds for big business.

Negotiators made great progress on the bipartisan $2 trillion stimulus measure on Monday, but
without striking a final pact as they had hoped, Treasury Secretary Steven Mnuchin and Senate
Democratic Leader Chuck Schumer told reporters.

Mnuchin will chair a conference of G7 finance ministers and central bankers early on Tuesday,
according to a source familiar with the plans.

Eurozone finance ministers will meanwhile discuss proposals by the European Commission to
deploy the bloc's bailout fund, which has 410 billion euros ($442bn) of unused lending power.

With the International Monetary Fund predicting a global recession, the world's 20 largest
economies agreed on Monday to develop an "action plan", but without specifics.

"For the US economy to be able to come out of the current crisis and the ongoing recession
relatively unscathed, more radical policy interventions will be needed in the next few weeks,"
said Anna Stupnytska, global head of macro and investment strategy at Fidelity International.

Speculation is mounting data on Thursday will show US jobless claims rose

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Strengthening the world's economies

Economic measures must also account for the world's most vulnerable, said Georgieva, including
emerging markets and developing economies.

1. Prioritized help for emerging markets and developing economies: these countries are hard hit
by the crisis, with fewer resources, collapsing commodities export markets, lost capital and
weakened health systems.

As a result, the IMF would prioritize resources for vulnerable countries. "The same way the virus
hits vulnerable people with medical pre-conditions hardest, the economic crisis hits vulnerable
economies the hardest."

"Saving lives and protecting livelihoods ought to go hand-in-hand," Georgieva added.

2. Emergency financing. Georgieva said the IMF was mobilizing emergency funding and had
doubled the availability of those resources from $50 billion up to $100 billion, funds that could
also help emerging markets and developing economies.

A record number of countries, 85, had reached out to the agency for financing at the same time.
"The demand for our financing has skyrocketed," said Georgieva.

"We have a $1 trillion war chest and we are determined to use as much as necessary in protecting
the economy from the scarring of this crisis."

3. Eased debt obligations for the IMF's poorest members. Georgieva said that the IMF was
mobilizing emergency financing assistance to countries and had increased its capability to ease
debt service obligations for these members through the Catastrophe Containment Relief Trust.
With the World Bank, she said, the IMF was advocating for a standstill of debt service from the
poorest countries to official bilateral creditors.

"This is humanity’s darkest hour," said Georgieva. "It is a threat to the entire world that requires
us to stand tall and protect the most vulnerable of our fair citizens of this planet."

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Impact on stackholder :

Avoid panic selling of areca when lockdown ends, stakeholders tell growers

Arecanut growers have been asked not to resort to panic selling when the market opens after the

countrywide lockdown comes to an end.

Mahesh Puchhappady, General Secretary of the All India Areca Growers’ Association,
told BusinessLine that growers should not flood the market with the commodity after the

Government lifts the lockdown. Any panic selling may lead to a crash in prices of the

commodity.

Growers can release the commodity only to meet their immediate monetary requirements, he

said.

Sources in Central Arecanut and Cocoa Marketing and Processing Cooperative (Campco) Ltd

told BusinessLine that the cooperative had put in a massive effort to prevent prices from crashing

before the imposition of the lockdown. Stocks of white arecanut had closed at ₹263-₹305 a kg

and red arecanut at around ₹394 a kg at the time of lockdown.

Stating that there could be short-term panic in the market when it opens after the lockdown ends,

they said panic selling is not good for growers.

Explaining the market scenario in the arecanut consuming markets in northern India, they said

that though there is demand for the commodity in that market, traders there are not in a position

to buy now from arecanut-producing centres because of their liquidity constraints.

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There could be at least a 90-day impact on liquidity as their money has been held up in different

stages of the market chain. Their inability to pay may also impact the arecanut cooperatives who

sell them the commodity.

Expressing optimism that the market may go up again in 90 days once the corona virus outbreak

comes under control, the sources said the North Indian market is in need of the commodity now.

Both the legal and illegal import of the commodity has been controlled. Added to this, a crop

shortage of around 28 per cent is observed due to various reasons.

All these situations augur well to boost the price of the commodity, provided farmers have the

patience to keep the material for another 90 days without panic selling when the market opens.

If the growers start panic selling of the commodity, then some private traders may exploit the

situation and spoil the market, they added.

A couple of listed stocks tell the story of the mayhem in the Indian stock market, currently in the
grip of a global pandemic. Last October, the IPO of the state-owned monopoly, Indian Railway
Catering and Tourism Corporation (IRCTC), listed at twice its offer price of Rs 320. By
February-end 2020, it peaked to almost Rs 2,000. But by March 17, it tumbled nearly 50 per
cent. Recently, investors expected SBI Cards and Payment Services to list at a premium to its
offer price of Rs 750. It didn’t. On March 16, it closed its first day with a loss of 9 per cent.
This is true for most global stock markets. The average fall in each is within the 25-30 per cent
range in the past few weeks. The same is the case with the Sensex, which fell from a peak of
42,000 points this January 17 to below 32,000 in three months. In the past two weeks, the New
York Stock Exchange halted trading on several occasions. It witnessed the largest single-day fall
during this period. A daily fall of 2,000-3,000 points in several global indices seems a routine
affair. The regulators have no clue about what to do.
This spooked investors like this South Mumbai-based active trader who doesn’t wish to be
identified. In the past few years, his portfolio showed sizeable gains. But due to the current hyper
volatility, over the past 15 trading sessions (until March 16), the tide has turned for him. He is on
the verge of losing his initial capital. “The regulators failed to understand the impact of machine-
based selling, a strategy adopted by foreign portfolio investors. This proved to be the death knell
for smaller investors like me,” he explains.
When WHO declared COVID-19 a pandemic, the financial markets, as well as other asset
categories such as real estate, commodities, crude oil, and bullion, it is the rare, completely
unexpected, Black Swan event, whose impact may be deeper and longer than what was estimated
a few weeks ago. As more Western nations, and others like India, declare economic shutdowns

19 | P a g e
and travel restrictions, the worst may still be in the future. The short-term disruptions are likely
to be severe.
Conventional wisdom in stocks is that whosoever swims against the tide emerges the winner.
Given the bloodletting in the markets, no one has the courage to do this. However, one shouldn’t
forget that only the fittest survive during times of financial anarchy. The fact is that while the
stocks can be volatile in the short and medium terms, the underlying businesses, especially those
with strong balance sheets and potential, tend to be stable over the long term. The
Still it is difficult to predict how the stock market will move. When there is panic, investors tend
to make their decisions emotionally, rather than rationally. In the universe of stocks, there is a
high level of dispersion between quality and unsustainable names. Avoiding mistakes of
investing in traps has been, and should remain, the bedrock for investors to sustain and survive in
the long term. This is easier said than done. Fear and uncertainty remain.
“An intraday swing, from a fall of 10 per cent to a gain of 5 per cent, highlights that investors
still haven’t formed a view on the impact of the current threat,” says Vasanth Kamath, co-
founder and CEO, Smallcase Technologies. But this is also the time when investors need to
avoid knee-jerk reactions. The current downfall provides a great opportunity to buy, but only
with a 3-5 years horizon. As Ambani predicts, “From these (low) levels, we’re sanguine on
Indian equities from a 24-36 month perspective.” This implies that he is confident the good
stocks will gain in value in three years.
Explains Viram Shah, co-founder and CEO of the California-based Vested Finance, “Investors
who have un-invested cash are in a great position. Companies with solid business models are
available at discounts. Investors should capitalise on this opportunity. Instead of trying to time
the bottom, they should deploy funds and hold for the long-term.” Kamath agrees that in such a
scenario, it’s best for investors to stick to their plans, remain focused, and stay away from the
panicking markets.
Great Swan Events like the current one are reminders of the need to have a diversified portfolio.
Hence, buyers should seek to have a basket of assets that can mitigate the impact of such events
in the future. The way to identify quality stocks and insulate oneself, Shah advises, “If you have
done your research right, your investing methodology should not change. Believe in your
analysis and continue to hold the companies that seem strong. Once the world comes back to
normal, these businesses will continue to endure.”
Another fact that investors need to remember is that although the stock indices fall sharply
during such crises, they tend to go up faster during the turnaround. Pankaj Pandey, head of
research, ICICI Direct, explains, “Historically, market recovery is usually sharp and quick, and
precedes the economic growth rebound. Therefore, when the buying opportunity arises, it should
be utilised to lap up businesses that have comfortable leverage, strong return ratios and enjoy
leadership position.”
.

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Conclusion :

Countries worldwide are implementing lockdown measures to contain the COVID-19 pandemic.
Very soon, the question will be how to lift the lockdowns while keeping the epidemic in check.
This column uses basic economic principles to shed light on the key trade-offs. A central
message is that there is no ‘health versus economics’ dichotomy. Rather, some degree of
lockdown is typically optimal in a crisis like this, balancing economic costs against health
benefits. Moreover, the optimal level of lockdown is dynamic, changing over time and eventually
becoming more lenient.
the peak of a serious epidemic, a near-full lockdown is better than nothing in unprepared
countries. However, the lockdown should not be long-lasting, with its duration being determined
by its marginal (health) benefits and (economic) costs.

Activities to be suspended in the lockdown should be ordered from those that yield higher health
benefits and impose lower economic costs to those that have the opposite effect; in serious cases,
as with COVID-19, initially a large number of activities will need to be suspended in unprepared
countries.

The optimal extent of lockdown measures changes over time and eventually decreases, but does
not drop to zero quickly.

Better health measures to cope with the epidemic allow for more lenient lockdown policies.

Measures that ease the economic pain during the lockdown pave the way for stricter lockdown
policies.

What’s the future of  company?

V-shaped recovery
What’s your company’s future? Will it recover? A McKinsey article on safeguarding lives and
livelihood discusses different recovery cycles based on containment of virus and economic
measures taken by a country. If a country limits the growth of the disease within 2-3 months and
averts fundamental damage to the economy, a full recovery is possible in the short term. This
means a V-shaped recovery for your firm in say 6 months and your job, increment and
promotion is mostly safe.

W-shaped delay

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If the disease spreads faster than desired while the economic measures taken are not optimal, but
still manages to protect some parts and ensures a functional banking system, then the overall
economic recovery will be slower. Your employer, industry and the business environment will
limp back to normal over a period of about 2-3 years in such a W-shaped recovery. If your firm
can survive this period it will emerge stronger. If you make yourself invaluable and retain your
job, you will thrive too.

L-shaped disaster

If health and economic interventions fail then the virus may spread unabated for 12-18 months.
Conservative consumer behaviour may drag a country towards a recession. Supply chains may
collapse as small businesses and companies default on payments or go bankrupt. This will push
banking systems towards a crisis resulting in an L-shaped curve where the downturn extends
with no immediate relief in sight. Your company may shut down most parts. Don’t bet on
retaining your job. Work on reducing costs and figuring out other sources of income.

The economic and health costs of the epidemic will be much higher for developing economies
than for rich ones, even though it is generally ambiguous which should have stricter lockdown
policies.

It does not require an economist to tell that a complete social and economic lockdown of India
for 21 days would severely impact the supply side of the economy, that is, production and
distribution of goods and services, except for the essential items that are exempt.
In an economy already reeling under a demand depression, rising unemployment, and lowering
of industrial output and profits, all of which happening together for several quarters now, a
supply-side constraint would deliver a big blow, jeopardising growth prospects and social and
economic wellbeing of a large number of people.
The quarterly GDP growth has consistently fallen since Q4 of FY18. If there is a deviation in Q4
of FY19, as shown in the graph below, it is because the National Statistical Office (NSO) revised
its data on February 28, 2020, drastically cutting down growth rates in the first three quarters of
FY19 (from 8% to 7.1% for Q1; from 7% to 6.2% in Q2 and 6.6% to 5.6% in Q3).

Pronab Sen and C Rangarajan, to find out how the lockdown would impact the economy and to
what extent.
Here is how the lockdown would impact the economy.
Pronab Sen says, "At the moment, it is a supply-side problem. Both production and distribution
of non-essentials have come to a halt. This affects at least 55% of the economy for three weeks
or about Rs 2 lakh crore. It may even be larger due to previous partial lockdowns by various state
governments.
"Now, after the lockdown is lifted, there will quite possibly be an increase in sales which will be
met through existing inventories. This does not, however, add to the GDP (as these goods and
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services had already been produced and accounted for). It may take a few more months for the
final production and sales to resume.
"In the interim, between now and full production resuming, a large number of people would have
been unemployed and not earned any income. As a result, in the second round, demand-side will
become a serious constraint."
Rangarajan says, "The impact of lockdown will be felt through several channels, weakening of
domestic demand, disruption in supply chain and disruption in financial market. All of this
would result in declining production and retrenchment of employees."

With fresh coronavirus cases on the rise in India, the nation has started witnessing second-round
effects of the virus spread: a complete halt to economic activity.

The government, analysts said, must consider more measures to tackle the situation, if third
round of effects – job losses, stretched balance sheets, lower capex and weak consumer demand
– are to be tamed.

first two rounds of coronavirus outbreak have already wiped off Rs 52 lakh crore worth of equity
investor wealth, with benchmarks Sensex and Nifty languishing at multi-year lows after falling
35 per cent from their January peaks.

January was the month when the virus was spreading in China at a rapid pace. It brought about
the first round of impact on India, where companies saw supply-side disruptions, owning to their
over-dependence on Chinese imports.

Sectors like autos and pharmaceuticals were impacted severely due to shortage of imported
components.
As the virus began spreading in India, it paved way for the second-round effect, where economic
activity came to a halt due to lockdowns.

A host of companies from cement (India Cements) to heavy engineering (BHEL) and from
automakers (Maruti Suzuki, M&M and Hero MotoCorpNSE 11.83 %) to ancillaries (Amtek
Auto) CastrolNSE 4.35 % India), have announced temporary shutdowns.

FMCG firms such as Hindustan UnileverNSE 13.50 %, ITC and Dabur India also shut
manufacturing facilities, except for plants producing essentials, after the government announced
partial lockdowns in some parts of the country.

On Tuesday, the government announced a nationwide lockdown for 21 days, which is likely to
bring all economic activity to a grinding halt.

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“The third round effect will likely materialize, as these shocks transmit to the rest of the
economy, i.e. corporates facing a hit on bottom lines. Weaker firms will face cash flow shortages
and workers will face pay cuts or retrenchments. This, in turn, can create a vicious cycle of lower
corporate capex and weaker consumer demand,” Nomura India warned.
Foreign brokerage Morgan Stanley has cut India Inc’s earnings for a third time since the virus
outbreak.

"Our F2021 BSE Sensex EPS growth estimate is now 10 per cent, down 20 per cent from mid-
February," it said in a note on March 23.

Barclays said the cumulative shutdown cost will be around $120 billion, or 4 per cent of GDP.
Of this $120 billion, the new shutdown assumptions account for roughly $90 billion of additional
impact.

This would roughly translate to around 2 percentage points of a loss in output, and as a result, we
are shaving down our CY2020 GDP forecast from 4.5 per cent to 2.5 per cent and FY20-21
forecast to 3.5 per cent from 5.2 per cent earlier,” it said.

Data showed the worst virus-hit states account for Rs 130 lakh crore in terms of nominal GDP,
or nearly 64 per cent of national GDP. Maharashtra, with the largest number of cases, alone
accounts for 14 per cent of national GDP.

PhillipCapital expects income losses of varied degree for individuals, corporates and
government, and sees need for stimulus for the economy.

Here is how the situation might evolve from here on for the domestic economy and markets in
different scenarios.

SCENARIO-1
In case the situation worsens in India and globally, there would be further selling in domestic
stocks, and India’s GDP growth may drop to 3.5-4 per cent levels even as the global economy
slips into recession, it said.

SCENARIO-2
In a rosy situation, the virus will be contained in India, and the shutdown would not extend
beyond April 15.

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In such a case, “we would be gradual buyers in equities. Indian economic impact will be limited
and FY21 GDP target will be 4.5-5 per cent. But the March quarter impact will be severe,”
Phillip Capital said.

SCENARIO-3
In the third scenario, the virus will be contained in India, but the crisis would worsen globally. In
such a case, Indian equities will outperform and India’s GDP would grow at 4-4.5 per cent amid
a global recession.

SCENARIO-4
Lastly, if the situation is contained in India and globally, Indian markets may outperform. “We
will be aggressive buyers in such a scenario at current levels. There would be manageable
economic impact on India and the global economic slowdown will last 3-5 months,” Phillip
Capital said.

Finance Minister Nirmala Sitharaman on Tuesday said the government was preparing a stimulus
package and the same was awaiting a few procedural clearances. The government has so far
requested India Inc to play salaries on time during the lockdown.

JM Financial expects focused measures for sectors such as aviation, retail and small businesses
in the coming days.

“There is also a case for RBI to intervene to alleviate the pain of borrowers and lenders either by
allowing forbearance of loans or for changes to the bad loan recognition norms from 90 days to
higher, in addition to some form of backstop financing for NBFCs,” JM Financial said.

Barclays , meanwhile, expects RBI to deliver a 65 basis points rate cut at the April policy
meeting, and believes an additional 100 bp cut will be needed to stabilise market sentiment
between the June and August policy meetings.

This would be accompanied by outright bond purchases through OMOs, possible forbearance for
bank loans and targeted liquidity windows for banks and NBFCs, Barclays said.

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