COVID-19 pandemic has a severe impact on financial markets, including stock, bond, stock market, and commodity (including crude oil and gold) markets. Major events included a described Russia–Saudi Arabia oil price war, which after failing to reach an OPEC+ agreement resulted in a collapse of crude oil prices and a stock market crash in March 2020. The effects upon markets are part of the coronavirus recession and are among the many economic impacts of the pandemic.
Impact of COVID-19 on the stock market
The sentiment within the stock exchange across the planet is gloomy. This is reflected within the frequent crashes within the share markets altogether parts of the planet . Financial markets in India are witnessing sharp volatility as a results of the fallout in global markets. The fall is in line with the worldwide benchmark indices because the domestic market usually tracks the main global indices and therefore the high volatility is probably going to continue in the near future.
Further, overseas investors (FPIs) flying to the security of dollar-backed assets from emerging markets has led to a pointy downfall within the Indian stock exchange
Indian Stock Market Crash of 2020
On 9 March 2020, the Sensex fell by 1,941.67 points, while Nifty-50 broke down by 538 points. The fear of the COVID-19 outbreak has created havoc all over the globe and India is no exception. Further, the recent Yes Bank crisis also made the markets fell. The markets led to end in red with Sensex closing on 35,634.95 and Nifty-50 on 10,451.45.
On 12 March 2020, the Sensex fell by 2919.26 points (-8.18% ), the worst continuation of the week in history while Nifty-50 broke down by 868.25 points (-8.30% ) amid World Health Organisation (WHO) declaring Coronavirus outbreak as “pandemic”. Sensex ended at a 33-month low of 32778.14.
On 16 March 2020, Sensex plunged by 2,713.41 points (around 8%), the second-worst fall in its history. On the other hand, Nifty ended below the 9200–mark at 9,197.40 due to the global economic recession.
However, the Sensex continued to fall straight for 4–continuous days till 19 March 2020, losing 5815 points during that time.
On 23 March 2020, Sensex lost 3,934.72 points (13.15%) and Nifty plunges 1,135 points (12.98%) at 7610.25 as coronavirus-led lockdowns across the world triggered fears of a recession. These are now the lowest levels since 2016. It’s witnessing the biggest weekly loss since October 2008, as the increasing number of coronavirus cases in India as well as globally.
The Price Earnings Ratio of Sensex is less than 18 (P/e is 17.81 on 31 March 2020) which is way less than the historical range between 20-24. Markets across large, mid, and small caps have corrected sharply from their peaks. In the FY20 the mid-cap index fell by 26 percent while the Sensex fell by 22 percent.
Stock Market Recovery
It would be foolish to expect a quick economic rebound from the current COVID-19 effect. Though the financial crisis is inevitable, considering all-out efforts by central banks and fiscal authorities, to soften the blow, a deep economic slump might be avoided. The problem in the current scenario is that until we know how quickly and thoroughly the public-health challenge will be met, economists cannot predict the endgame of this crisis.
However, it would depend on how quickly the pandemic is brought under control and the policy choices which the governments took to support their economies. Once this pandemic is over with normalcy returning to business and economy, the stock market will start moving in a positive direction, and as witnessed in the past, recovery would be faster than expected. It is true about the market that whether it is the correction or growth, both phases make equity or stock market interesting and worth taking exposures.
Investment during COVID-19
It may be tempting to make portfolio changes during stock market selloffs, but if you’re an investor focused on companies with sustainable competitive advantages and long-term secular trends and those companies continue to maintain strong balance sheets even in a crisis it’s important to prioritize that far-horizon investment outlook. It is highly advisable that don’t jump into the market or don’t attempt to catch the falling knife. If you invest within the stock exchange in India and hold it for extended times, such a function of the stock markets will assist you in future goals like retirement.
Fund managers feel that while there are some concerns on account of NPAs, the banking sector is undervalued and presents a chance for investors. While the CEO of a number one fund house said that smart investors have started taking an edge in banking stocks and sector-specific schemes, several fund houses are advising their investors to take a position in sectoral funds that specialize in banks.