Indian and Global Stock

market response to Covid 19

(January 2020 to April 2020)
CMA (Dr.) Latha S Chari
Faculty, NISM
ICAI – Webint Impact of COVID-19 on Financial Services and Strategies for Investors: Series 1
Date: 12th June, 2020.

Disclaimer
The views and opinions expressed in this presentation and webinar are personal
Agenda
• Response of Global stock Markets to Covid 19
• China
• Japan
• USA

• Indian stock market reactions to Covid 19

 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 China - Active Covid Cases
 On 16 February, lending rates were cut by 10 bps and 5 70000
60000
bps 50000
40000
 On 13 March, banks reserve requirements were cut to the 30000 China
20000
tune of $80 billion Announcement of increase spends on 10000
0
epidemic prevention, medical equipment and subsidy for 20 2 0 20 20 2 0 20 20 2 0 20 20 20 20 20 20 20 2 0 20 20 20 20
/20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20
auto spends. 24 18 12 /6 31 25 19 13 /7 /1 24 18 12 /6 31 25 19 13 /7 /1
4 / 4 / 4/ 4 3 / 3/ 3 / 3 / 3 3 2/ 2/ 2 / 2 1/ 1 / 1/ 1/ 1 1
 Current status of recovery – only 3% short of precovid
levels ie 31 Dec, 2019
 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
Japan Active Covid Cases
billion were announced
12000
 On 16 March 2020, QE of $112 billion was announced 10000
 On 7 April 2020, increase in spending, tax waivers to the 8000
6000 Japan
tune of $989 billion were announced 4000
2000
0
Current status of recovery – only 4% short of precovid levels 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
02 202 202 2 02 202 202 202 202 202 202 202 202 202 202 202 202 202
ie 31 Dec, 2019 2
/ / / / / / / / / / / / / / / / /
24 17 10 /3 27 20 13 /6 28 21 14 /7 31 24 17 10 /3
4/ 4/ 4 / 4 3 / 3 / 3/ 3 2/ 2/ 2 / 2 1 / 1 / 1/ 1 / 1
 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
US - Active Covid Cases
Government response 800000
 On 6, 13 and 17 March 2020, policy measures like rate 700000
600000
cuts, enhancing liquidity among banks and financial 500000
400000 US
300000
services sector were announced 200000
100000
 On 20 March 2020, $ 2 trillion stimulus package was 0

announced. 20 20 20 20 20 20 20 20 20 20 2 0 20 20 20 2 0 20 20 20 20 20
/20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20
24 18 12 /6 31 25 19 13 /7 /1 24 18 12 /6 31 25 19 13 /7 /1
Current status of recovery – 9 % short of precovid levels ie 4 / 4/ 4/ 4 3 / 3/ 3/ 3 / 3 3 2 / 2 / 2/ 2 1 / 1 / 1/ 1 / 1 1

31 Dec, 2019
 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: India - Active Covid Cases
On March 26 – Increased government spending to the tune of 20000

$22.6 billion was announced on cash payments to senior citizens, 10000

0
farmers, free grains and staples to dislocated families, medical

4/9/2020
4/4/2020

3/5/2020

2/9/2020
2/4/2020

1/5/2020
4/24/2020
4/19/2020

3/30/2020
3/25/2020
3/20/2020
3/15/2020
3/10/2020

2/29/2020
2/24/2020
2/19/2020
2/14/2020

1/30/2020

1/20/2020

1/10/2020

12/31/2019
4/14/2020

1/25/2020

1/15/2020
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
 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.