{"id":390,"date":"2020-04-13T15:23:33","date_gmt":"2020-04-13T15:23:33","guid":{"rendered":"https:\/\/www.invest19.com\/blog\/?p=390"},"modified":"2020-05-09T05:01:15","modified_gmt":"2020-05-09T05:01:15","slug":"will-extension-of-the-lockdown-further-affects-the-economy-markets","status":"publish","type":"post","link":"https:\/\/www.invest19.com\/blog\/will-extension-of-the-lockdown-further-affects-the-economy-markets\/","title":{"rendered":"Will Extension of the Lockdown Further Affects the Economy & Markets?"},"content":{"rendered":"
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With the rising cases of\nCOVID-19, the respective chief ministers of different states of India have\nrequested Prime Minister Narendra Modi for extension of the 21-days lockdown to\nat least end of April. Even though the PM hasn\u2019t made any announcement in this\nregard but as per the latest resources, the PM Modi will address the nation at\n10 am on April 14 (last day of 21-days lockdown). However, further lockdown is\nnecessary to contain the spread of COVID-19 into Stage-3, it may also kickstart\nthe downward sentiment in the capital markets. It will be a thing to see that\nnow that lockdown is the need of the hour, how the Indian economy and capital\nmarkets will react to the extension of the lockdown?<\/p>\n\n\n\n

How the Extension of the Lockdown Further\nAffects the Economy & Capital Markets?<\/h2>\n\n\n\n

The Indian economy is going\nthrough a phase that even the central bank \u2018Reserve Bank of India (RBI)\u2019\nrefused to give any growth projections for the Indian economy in upcoming\nyears. Meanwhile, Moody\u2019s Investors Service slashed the projected GDP growth of\nthe Indian economy to 2.5 per cent from 5.3 per cent for the year 2020.\nHowever, Goldman Sachs has cut India\u2019s real GDP to 1.6 per cent from 3.3 per\ncent for the year 2021. <\/p>\n\n\n\n

According to the former RBI\nGovernor, Raghuram Rajan, the Indian\neconomy is going through the most difficult phase of emergency since independence.\nAs per Mr Rajan, the global financial crisis in 2008-09 was a massive demand\nshock but the employees and work still go to work contrary to the current\nsituation where India is under lockdown due to pandemic which forced businesses\nto suspend operations amid coronavirus.<\/em>  <\/p>\n\n\n\n

Besides, many companies from\ntelecom and pharmaceutical sectors facing supply-chain disruptions in inputs\nreceived from China in manufacturing mobile phones and medicines respectively.\nAs a result, the businesses in Indian are dealing with the supply shock and if\nthe companies still closed under the further extension of lockdown, there will\nbe a production slowdown which will affect the sectors and ultimately, Indian\neconomy.  <\/p>\n\n\n\n

Indian is a country where the\nAgriculture sector plays a major role in the growth of the economy. Agriculture\nsector significantly contributes to its economy nearly $265 billion to the GDP\nand employs more than 60 per cent of the country. Unfortunately, the\ncoronavirus outbreak happened to be at such time when the crops must be\nharvested and sold in time. The absence of labour force and transportation will\nhave serious implications in the growth of the rural economy in India. If the\nlockdown further extended, the government should take some necessary measures\nto ensure that the Rabi crop and other products come into the market without\nany disruption. <\/p>\n\n\n\n

The major sectors that are most\naffected by the coronavirus are \u2013 real-estate, automobile, and banking. The\nreal-estate sector is going through a tough time due to the funding crunch. On\nthe other hand, the production in the automobile industry has been put on hold.\nAs per Care Ratings, the automobile sector could see volume decline by 15-16%\nin FY20. It is a matter of time when the slow-down in the real-estate and\nauto-sector will start affecting the steel manufacturing industry in the\ncountry. <\/p>\n\n\n\n

The benchmark indices of the\nIndian stock market have fallen more than 35 per cent from its lifetime high of\n12,430 in just a couple of months. If we leave the up-rally of Wednesday, most\nof the Nifty50 stocks<\/strong><\/a> were in the tank\nnear their 52-week lows amid coronavirus pandemic which caused massive\nselling-offs in the market. Even in a single month, the Foreign investors have\nsold over Rs. 60,000 crore worth of equities. As most of the Nifty50 stocks\nwere stocks of blue-chip companies<\/strong><\/a>, many mid-cap\ncompanies become more attractive to investors with long-term investment goals. <\/p>\n\n\n\n

Though short term impact would be\nlimited as the market and investors are already expecting the likelihood of the\nextension in lockdown which has already priced in. However, if the lockdown\nfurther extends to April 30, then it would be troublesome because the panic\nselling has already caused so much damage to the market. In case, the lockdown\nextended, it may bring more volatility in the market that may destroy\ninvestors\u2019 sentiments and bring more panic-selling in the market. <\/p>\n\n\n\n

But, it would take more than\nmonths to kickstarts the economy and capital markets. In the meantime, the\ninvestors should be cautious with investment decisions and buy stocks in a\nstaggered process as we do not see any recover in 2-3 months. The only thing\ninvestors should keep in mind that fundamentals are intact of the companies\nthey are planning to invest in. While you are at it, try to avoid stocks of\ncompanies that are directly impacted by the coronavirus pandemic. <\/p>\n\n\n\n

Disclaimer:<\/strong> The views and opinions at Invest19.com are\nexpressed by the experts are for educational purposes, not to profile any\nprofessional advice to encourage users to make investments. Invest19.com\nadvises users to check with the certified experts before making any investment\ndecisions.<\/p>\n

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