Impact of Coronavirus

on Global Stock Markets

Fundamentals of Investment
Assignment
 What did the year 2020 look like for the markets before coronavirus?

1. Analysts expected an average 11 per cent growth in Sensex and 8 per cent expansion in Nifty.

2. Cause for this expected growth was a likely recovery in the economy.

3. Analysts had an average 2020 year end target of 13,209 for Nifty and 46,050 for Sensex.
How did the coronavirus outbreak changed the entire global scenario?

Uncertainty

The coronavirus has brought along with it a exceptionally

uncertain economic environment. Even the professionals
are clueless as to what the future holds for us all. The
virus spread like wild fire and has affected 210 countries
worldwide.

Forced Selling

With the investors unsure what the impact of coronavirus

will be, markets around the world saw an unprecedented
selloffs as investors were looking to park their funds in
safe havens (such as gold bonds)
 How did the coronavirus outbreak changed the entire global scenario?

Policy fumbles

The travel measures won’t impact as much aggressive

domestic measures to stem the spread of the
coronavirus. Economists and analysts have argued that
monetary policy will have limited ability to counteract
a supply shock resulting from the outbreak.

Public Fear

The pandemic is altering everyday life across the world

as people deal with reduced social interaction, closed
schools, restrictions on crowd sizes. The fear is
widespread among the people regarding the havoc
which the coronavirus will cause.
Brief infographic showing the impact on global indices

-31.14%
DAX
GERMANY
-25.8%
-22.03%
S&P 500 -8.32%
USA NIKKEI 225
SHCOMP JAPAN
CHINA
-23.07%
SENSEX
Asia INDIA

-28.72%
ASX 200
AUSTRALIA

The data shows % change in prices from Feb, 1 to Mar, 15

Statistics showing the extent of the impact on Sensex

Previous
1. The current fall of nearly 32% has been the
fastest—from 14,953 on 14 January to 6
28,288 on 19 March.

2. On March 23, it posted its biggest single day

loss-ever as it tumbled 3935 points.

3. This mayhem wiped off Rs.14.22 lakh crore

of the market capitalisation.

Next
 Impact on the Chinese stock market: the epicenter

Previous
1. China’s benchmark SHCOMP Index reached the high
point of 3,115 on Jan 13. It saw a major fall on Feb 3 when it
SHCOMP opened after holidays were extended in the wake of novel
coronavirus outbreak. Trading was closed before time at
2,746 point.
2. China had announced infusing liquidity worth of $173
billion into its markets. This kept the sentiments in Chinese
markets in good spirit despite increasing cases of novel 7
coronavirus in China through February.
3. There is another explanation, however, for less volatility
seen in China’s share markets. Of the tradable share market
capitalization in China, foreign capital accounts for less than
four per cent. The rest is in the hands of the Chinese
government, directly or indirectly.

Next
 Perspective: 2008 Great Financial Crisis vs Covid-19 Shock

• The 2008 crash lasted around 300 days

and the Nifty50 fell a total of 60 percent.
But the fall was not unidirectional, and
the market fell in three steps. After each
fall, the market saw a small (sharp)
rebound only to fall lower in the next
crash.

• The current crash has seen only the first

step of the crash, though the correction
has been much sharper. Experts feel that
another down move is possible.
Perspective: 2008 Great Financial Crisis vs Covid-19 Shock

• The Cboe Volatility Index US:VIX, or VIX,

hit its highest intraday level since 2008 on
Monday.

• The VIX so far this year is on pace for a

280% surge, compared against a 108%
return for the fear index in 2008.

• India VIX, touched 86.63 on Tuesday,

higher than its historic closing peak of
85.13 it reached during the global financial
crisis in November 2008.
 Worst hit NSE Sectoral Indices

Hospitality / Real
Aviation Estate
Banking Auto

-63.18% QTD -55.05% QTD

Travel restrictions Slump in demand
Closure of hotels, -43.12% QTD Rentals foregone -54.26% QTD
restaurants etc. Weak loan growth Construction activities Slowdown in demand
Flight cancelations and Rising NPAs at a standstill Shift to BS-VI
grounding of aircrafts Yes Bank crisis / Lockdown. shutting of
ILFS lending dry up factories
Global Oil Crisis

• Of all the wild, unprecedented swings in

financial markets since the coronavirus
pandemic broke out, none has been more
jaw-dropping than collapse in a key
segment of U.S. oil trading.

• The price on the futures contract for West

Texas crude that is due to expire Tuesday
fell into negative territory -- minus $37.63
a barrel.

• Since the start of the year, oil prices have

plunged after the compounding impacts of
the coronavirus and a breakdown in the
original OPEC+ agreement.
 Global Oil Crisis

• The reason: with the pandemic bringing the

economy to a standstill, there is so much unused oil
sloshing around that American energy companies
have run out of room to store it.

• There are signs of weakness everywhere. Even

before the plunge, buyers in Texas were offering as
little as $2 a barrel last week for some oil streams.

• This was preceded by the Saudi Arabia – Russia

price war which showed no signs of abating. The
countries could not reach a mutual agreement to cut
the productions as both went on to up the production
further.
 Sectors which gained due to the pandemic

Pharma & Medical Supplies Entertainment

The demand for certain types of
medicines and medical devices have
soared in the past few weeks. Ventilator
Pharma &
machines, drugs like HCQ, test kits, face
masks, and disinfectants are in huge Medical
demand. supplies
The mobile gaming industry has been
experiencing an explosion in terms of
downloads. The number of subscribers
Entertain- has grown exponentially for streaming
ment services such as – Netflix, Amazon Prime.

Remote Online
Work Shopping
Remote Work & Education Online Shopping
Nowadays, the enterprise software Due to fear of quarantines or product
industry is picking up faster than ever shortages, retailers are racing to keep
before with remote work apps witnessing food and hygienic items in stock.
a boom as millions resort to working from Amazon said it would recruit 100,000
home. warehouse and delivery workers in the
United States to deal with a surge in
online orders.
 The stock that surged the most amid the crash: Zoom

• As governments across the world have

placed their citizens on lockdown,
downloads of video conferencing apps
have soared to record highs.

• Zoom Video Communication’s share

price soared from under $70 a share in
January to $150 in March.

• That gives the company a market value

of $42bn – more than eight times the
market capitalisation of British Airways.
What lies ahead for the global markets: the future

• Once the crisis comes under control

and the world economies start to come
out of lockdowns, the markets will
recover gradually.

• Though it's impossible to predict

when the market will recover, history
shows it always does.

• Biggest crashes in the past have been

followed by a robust recovery within
two-three years.
Thank you