ASSIGNMENT

ON
IMPACT OF COVID 19 ON FINANCIAL MARKETS

SUBMITTED BY:

Aryan Arora
23136
Capital Market

SUMBITTED TO:
Nishi Ma’am

CHINA
First COVID 19 case was detected on 31 December 2019. Flattening of curve in end February,
2020
Lockdown was implemented on 23 January 2020 more restrictions were added on 2 February
2020. Restrictions were lifted on 23 March and 8 April 2020.
Market reaction
Index started falling from 20 January 2020
20 Jan – 4 Feb, 20 , 12% fall
5 Mar - 23 March 20: 18% fall (global sentiments triggered by crude oil price war)
Government response
On 4 February 2020, stimulus was announced, adding liquidity by $ 245 billion
On 16 February, lending rates were cut by 10 bps and 5 bps
On 13 March, banks reserve requirements were cut to the tune of $80 billion Announcement of
increase spends on epidemic prevention, medical equipment and subsidy for auto spends.
Current status of recovery – only 3% short of percoid levels i.e. 31 Dec, 2019

60000
40000
20000 China
0
20 20 20 20 20 20 20 20 20 20 20
/20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20
4 4 4 3 3 2 2 2 1 1 1
4 /0 3/0 2/0 2/0 1/0 9/0 8/0 7/0 7/0 6/0 5/0
2 1 0 2 1 2 1 0 2 1 0

USA
First COVID 19 case was detected on 21 January 2020 and cases have been increasing since
then.

Lockdown was implemented around Mid-March . Easing of lockdown is on the cards.

Market reaction
There was a 40% fall in the Index between 14 February 2020 and 18 March 2020.
Further steep single day fall was witnessed on 9, 12, 16 and 18 March 2020.
There was a crash in oil prices due to both demand and supply shock
Government response
On 6, 13 and 17 March 2020, policy measures like rate cuts, enhancing liquidity among banks
and financial services sector were announced
On 20 March 2020, $ 2 trillion stimulus package was announced.
Current status of recovery – 9 % short of preloved levels i.e. 31 Dec, 2019

US - Active Covid Cases

800000
600000
400000
US
200000
0
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
2 02 20 2 20 2 2 02 2 02 2 02 2 02 2 02 2 02 2 02 2 02 2 02 2 02 2 02 2 02
4 / 4/ 4/ 3 / 3 / 3 / 3 / 2 / 2 / 2 / 2 / 1 / 1 / 1 / 1 /
4 /0 6/0 8/0 1/0 3/0 5/0 7/0 8/0 0/0 2/0 4/0 7/0 9/0 1/0 3/0
2 1 0 3 2 1 0 2 2 1 0 2 1 1 0

JAPAN
First COVID 19 case was detected on 24 January 2020. There has been a fall in the total active
number of cases in the recent times i.e. around 23rd April, 2020.

Lockdown
Lockdown (In Hokkaidu ) was announced in late February and was lifted on 19 March 2020
A state of emergency has again been declared from 7 April 2020
Market reaction
Markets witnessed a 31% fall between 13 February and 19 March 2020.
Government response
On 11 March 2020, small business loans to the tune of $15 billion were announced
On 16 March 2020, QE of $112 billion was announced
On 7 April 2020, increase in spending, tax waivers to the tune of $989 billion were announced

Current status of recovery – only 4% short of precovid levels ie 31 Dec, 2019

Japan Active Covid Cases

12000
10000
8000
6000
4000 Japan
2000
0
0 0 0 0 0 0 0 0 0 0 0 0 0
2 0 2 20 2 20 2 20 2 2 02 2 02 2 02 2 02 2 02 2 02 20 2 20 2 20 2
4/ 4/ 4/ 3/ 3 / 3 / 3 / 2 / 2 / 2 / 1/ 1/ 1/
4 /0 5/0 6/0 8/0 9/0 0/0 1/0 1/0 2/0 3/0 5/0 6/0 7/0
2 1 0 2 1 1 0 2 1 0 2 1 0
India
First COVID 19 case was noted on 30 January 2020
Lockdown was implemented Mid March, restrictions may be eased out soon
Market reaction –
From 20 Feb to 23 March – 37% fall in Nifty (12080 to 7680).
Market Wide circuit breaker was activated by 10% fall in Nifty (March 13) and 10% fall in
Sensex (March 23)
Surge in trading volume in the month of March.

Trading volume changes during the lockdown period:

Cash market NSE – Increase by 63% during lock down
Derivative market NSE – Fall in trading volume by 45%.
Government response:
On March 26 – Increased government spending to the tune of $22.6 billion was announced on
cash payments to senior citizens, farmers, free grains and staples to dislocated families, medical
and insurance facilities for the poor and homeless
Current status of recovery – only 19% short of precovid levels ie 31 Dec, 2019 – Mid way after
39% fall

India - Active Covid Cases

20000
10000
0
24/04/2020
18/04/2020
12/04/2020
06/04/2020
31/03/2020
25/03/2020
19/03/2020
13/03/2020
07/03/2020
01/03/2020
24/02/2020
18/02/2020
12/02/2020
06/02/2020
31/01/2020
25/01/2020
19/01/2020
13/01/2020
07/01/2020
01/01/2020

India

ENGLAND
The price index remained pretty steady in the early weeks of the crisis but saw a sharp decline in
the weeks following the announcement of a lockdown in Northern Italy and fell to its lowest
point in the week following the announcement of social distancing in the UK (down 35% from
the start of January). As lockdowns have steadily been eased across the world and in the UK,
some of this decline has been reversed, taking the overall decline in the FTSE All-share index
over the period to 21%.

Percentage change in share prices of firms in different sectors listed on the London Stock
Exchange relative to the FTSE-All Share Index, 2 January – 20 May 2020
The industries that have been hardest hit include tourism and leisure (which includes air travel),
fossil fuels production and distribution, insurance, retailers (excluding food and drug retailers)
and some large manufacturing industries. At the other end of the spectrum some industries have
outperformed the market, including food and drug manufacturers and retailers, utilities, high tech
manufacturing and tobacco. Unsurprisingly, firms in medical and biotech research have also
outperformed the market (increasing by 6% compared to the overall decline of 21%).
Percentage change in share prices of firms listed on the London Stock Exchange in sectors with
the largest share price movements relative to the FTSE-All Share Index, from 2 January 2020

For most of these sectors, changes in share prices did not take place steadily over the period.
Instead, big changes in share prices occurred from the end of February, in the days following
Italy’s introduction of a lockdown in Lombardy, with very little change in prices in the period
before. The exceptions to this are the gas and water, automotive and parts, and fossil fuel
production sectors, where changes in share prices took place steadily over the three-month
period, possibly driven by other factors. On 17 March the government announced a raft of
measures aimed at protecting workers and businesses affected by measures taken to contain the
spread of COVID-19. These included a 12-month business rates holiday for firms in the retail,
leisure and hospitality industries and a Coronavirus Job Retention Scheme (JRS) that would pay
80% of employee wages for furloughed workers up to a maximum of £2,500 per month for each
employee. This package is aimed, at least in part, at preventing otherwise viable businesses from
shutting down. The value of these measures will vary greatly across sectors.
Conclusions

Stock Markets both in India and Globally have fallen with a lag of 3 weeks after the first case of
Covid 19 in the respective country
Globally all markets have fallen significantly in the period between 5th March, 2020 and 25th
March 2020
The immediate trigger for fall in markets is fall in crude oil consumption which led to fears of
steep fall in economic activity across the globe resulting in market melt down
All markets have responded positively to large stimulus package offered by the respective
governments.
Most global developed markets have come off their lows closer to pre covid levels. Indian
markets have also come off their lows. We fell about 38% and recovered 19% out of the same.
MID WAY Mark.