Pandemic are diseases that manifest in the worst possible forms and spread across the world. Last time, when homo sapiens faced this challenge and mayhem was in the year 1918, when almost 1 percent (50 million) of the world’s population was wiped out due to Spanish flu caused by a similar strain of virus.
The origin of the Covid-19 is still not clear, while some blame it on the seafood market of China whereas others blame it to some other unknown reasons. Globalized World gives rise to diseases which are also global in nature and has currently impacted more than 190 countries of the world with China, Italy, Iran and Spain worst effected. Countries like US are also caught unaware and can become epicenter of epidemic. New York, the city which doesn’t sleep is facing complete shut down.
Stock Markets are secondary markets for already existing securities. Stock prices are impacted by global factors, country specific factors and firm specific factor. Virus which by definition is a protein wall and some genetic material has created such a havoc and disruption in the Global Stock Market and also our Indian financial markets. Global stock markets around the world are coupled and hence witnessed contagion effect or spillover effect. Pandemic has impacted businesses causing shutdowns of assembly lines and manufacturing units, airlines routes restricted, fleets grounded, electronics and mobile industries dependent on Chinese raw materials are impacted. Similarly, hotel industry, entertainment industry have slowed down and so is the mobility industry such as Ola and Uber. Consumers are ignoring those purchases which can be postponed from consumer durable to automobiles. The silver lining is some of the industries such a e-pharma, food and delivery portals are seeing improvement in sales. Dow Jones witnessed its greatest fall by 2000 points-with companies like Boeing, Apple, Goldman Sachs and Caterpillar falling by 100 points. Indian benchmark indices BSE Sensex and Nifty also lost nearly 37 percent which experts suggest is 40 percent of India’s GDP. Also, US businesses both manufacturing and services are adversely impacted. It has been predicted that world may witness a severe recession since 2008 financial crisis. In this globalized scenario the spillover effect is difficult to avoid, any development taking place at global and country level creates ripples which reverberates across the stock markets of the world. Also, the fear and uncertainty has resulted in Foreign Institutional Investors leaving the stock market which has caused the downfall of markets further.
Things may improve either through breaking the chain of virus spread through complete lock-down or huge number of testing done on suspected cases (as South Korea has done) or a vaccine which can be a preventive can be developed on a fast track mode to further cease the spread at a bullet speed.
Some of the points to mull over-Will the world economy be able to recover and thrive again? Will the markets see corrections again after such a huge downfall and erosion of wealth?