Covid Vaccine Unleash New Momentum in The Indian Market: Impact & Recovery
Published by Sharekhan Education | October 2, 2020
Covid Vaccine Unleash New Momentum in The Indian Market: Impact & Recovery
Name the occasion when World came to a virtual standstill?
The First World War? The Second World War?
No, that’s not the right answer. Because, even during the height of both the World Wars when most countries were badly hit, economic activity was still chugging along.
The correct answer is the recent COVID19 pandemic which brought things in most industries across the world to a standstill, atleast for some time.
The last time something similar happened was a century ago when “Spanish Flu” invaded humanity. Then too, the economic output was badly hit as no one knew the reason of the outbreak and how to deal with it. Science, technology and above all, our understanding of diseases was not so developed which could have helped us not only to understand the reasons for the outbreak, but also help us develop a weapon to fight it.
However this time, the world’s reaction was very different. We were not only quick to react in terms of preventive measures to curtail the spread the virus but also find a vaccine for it too!
However, the COVID19 pandemic did disrupt national economies. The moment it became clear that the virus spreads through air, the first step was to prevent the gathering of people. Lockdown was the only way this could have been achieved.
But lockdown came at a devastatingly huge price. The Indian economy de-grew by close to 24% in the Q1 of F21. The first casualty of Lockdown was the service sector and in particular aviation and hospitality. Air travel was shut. Hotels and restaurant were closed. Leisure travellers postponed their travel plans and business travellers moved online to conduct their business. None would dare to move out of the safety of their homes.
The first signs of the Lockdown’s ill effects were visible in the stock market performance. March 2020 became the only month in the history of the Indian stock markets it dropped by 2.5% on 7 occasions! The last highest being 4 days in 2013.
Even the Sensex fell to 27,590 on 3rd April 2020, just 3 months after it had hit an all-time high of 41,613 on 24 Jan 2020! As expected, gold prices hit an all-time high of Rs. 47,929 on the MCX and Silver futures touched Rs. 48,600 per Kg around the same time.
It is estimated the private airlines in the country incurred a revenue loss of approximately Rs. 5800-6000 Crore during the lockdown alone. On the other hand the hospitality sector which usually clocks revenues of close to Rs 38,000 Cr saw massive cancellations and travel restrictions with the global lockdown. For instance, Indian Hotels, the owners of Taj Group, had clocked revenues of Rs. 1007 Cr till Sep 2019 in F20. For the same period in F21, the revenue figure was a paltry Rs. 256 Cr. Similarly on 23 March 2020, the scrip of InterGlobe (owner of Indigo Airliners) hit a 2 year low or Rs. 856.95.
It seemed things were galloping towards an impending economic collapse world over.
But then as they say, every cloud has a silver lining, within a few days, couple of positive news from across the world arrived on the early success in vaccine research. This slowly brought a sense of sanity in the insanity all around and things soon started improving for better. Soon after the Lockdown came the “Unlock”. And as the dust started settling down, sectors that were hit badly started showing signs of recovery.
Today after almost 6 months when the Unlock 1 began, Sensex has again hit an all-time high close of 44,632 on 3rd December 2020. Even Gold is back to Rs. 4345 per gram after having hit an all-time high of Rs. 4913 per gram on 5th August.
Flagships stocks in the Aviation and hospitality sectors are back on track too. For instance, on 1st December 2020, Indian Hotels was trading at Rs. 120 (3rd Dec 2019 was Rs. 148) and InterGlobe was trading at Rs. 1559 (2nd Dec 2019 was Rs. 1452)
Also, with a couple of indigenous vaccines in advanced stages of trials and the Pfizer vaccine already approved for mass vaccination in the UK, it looks like happy days are back again. Experts now believe that consumption will rise due to a variety of reasons. Some call it revenge buying, some call it pent up demand, while some call it natural.
This is the opportunity that investors should use to identify and invest in companies or sectors that are likely to experience rebound. While there is nothing called as guaranteed returns in the market, a little bit of research goes a long way in creating a winning portfolio.
What better example can one find where the great human spirit has triumphed over a puny little virus, again!
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