India’s benchmark index Sensex fell 458 points on Monday following the trend of global markets as fears of a worldwide outbreak due to Coronavirus and its financial impact over China's economy escalated.
The sell-off continued in most Asian markets on Tuesday too as nervous investors feared the outbreak could create a significant shock for markets.
So what exactly is the Coronavirus?
Coronavirus is a family of viruses present in some animals which under certain circumstances can spread to humans through contact with infected meat or animals.
It can also be transmitted from person to person. With increasing numbers of fatalities in China and suspected cases reported worldwide, governments across the globe are taking severe measures to contain the outbreak.
It was first reported in December in the city of Wuhan, in China. The virus has claimed 106 lives till now and infected more than 2700 people.
The outbreak has brought back the memories of the SARS outbreak of 2003 with across 8000 cases reported from over 26 countries and caused an estimated global economic loss amounting to over $40 billion in 2003.
Why are the stock markets in India falling?
Apart from the impact of global epidemics on human lives and medical costs associated with it, there are substantial economic costs involved too.
Due to globalization, when a disease spreads quickly across countries, the economic shock from one country is likely to also spread to other countries. Under such circumstances, it is industries like tourism, luxury retail, leisure, and airline travel which take the biggest hits.
What should you do?
This is the second time in less the current month that stock markets in India have corrected due to sudden unexpected events. Earlier this month stock markets in India were spooked and corrected when USA killed a top Iranian military commander in a drone attack, sparking off fears of a war in the Gulf region.
However, the impact of the entire episode was minimal as markets bounced back quickly as in most previous cases. Read here about it.
The Bottom Line
Pandemics like this do have the potential to trigger a broader stock market correction in stock markets worldwide. Which means stock markets in India will be affected too in such a scenario. But, the impact if any, would be minimal, resulting in few months of volatility at the most.
Rather than panicking, investors in the stock market in India should look at any correction as an opportunity to accumulate more quality stocks trading below their intrinsic value. Know more.