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27 Feb 2020 by Harsh Ashar
Impact of Coronavirus on Your Portfolio

Coronavirus has been in the forefront of news these days. It started at Wuhan in China – spread to Hubei and now showing its signs in South Korea, Japan, Italy, Iran, Singapore, etc.

There’s a lot that the countries are doing in order to prevent it from spreading further.

Unfortunately, the number of deaths due to this virus has crossed 2,770.

From a financial markets perspective, the virus has taken its toll all across the globe over the past few days.

Sensex has plunged by around 3.5% over the past 4 trading days. The S&P 500 index has fallen by almost 7.5% over the past 5 days.

Let us try to dig a bit deeper into this.

And we will start with going into history. Do you remember the outbreak of SARS in 2002-2003 in China & Hong Kong? The outbreak started in southern China, spread to mainland China, then to Hong Kong, Taiwan, Singapore, Canada, etc. The overall death numbers were close to 800.

Talking about the impact, the stock markets globally had taken some amount of beating back then.

China, in that phase, used to contribute only around 4% of to the global GDP.

But, because fear sells better – and as soon as there’s some negative news, we all start watching TVs, go online and search about the extreme negative possibilities and more, are we missing out on some important information? Possibly yes! Sorry, definitely YES!

  • China, which used to contribute 4% back then in 2003 when there was a SARS outbreak, now contributes around 18% to the global economy.
  • We must understand that China is now much better poised to tackle the situation. As per some reports, people have again started getting back to offices and factories.
  • We’ve all heard about the 82,000+ infected cases – but have we heard about 32,000+ recovered cases?
  • India, so far has had a few countable number of cases – all of which are quarantined to prevent it from spreading and all of them seemed to have recovered as well.
  • WHO has said that as of now it doesn’t seem to be developing into a pandemic.

What’s in store for India? What’s there for us as investors?

Do we know that there are experts predicting that India may stand a good chance to divert some business its way following the impact in China?

Ignoring that, do we know that even before coronavirus, there’s been a rise in manufacturing in India? Just take a look at the positive growth in the PMI manufacturing index:

There are even some Chinese companies that have setup plants in India. Be it MG Motors or the solar panels or even the mobile companies like Realme are getting manufactured in India. This is potentially because of the far lower labour costs in India.

Here are some more facts:

  • Growth in Net FDI – Up from $21.2 billion in April-November 2019 to $24.4 billion in April-November 2020
  • Positive growth in PMI Manufacturing index – Up from 51.2 in Nov 19 to 55.3 in Jan 20
  • Growth in Net FPI - Up from $8.7 billion in April-November 2019 to $12.6 billion in April-November 2020
  • Positive growth in GST revenue collection – Up from Rs. 1.02 lakh crore in Jan 19 to Rs. 1.10 lakh crore in Jan 20
  • Positive growth in Index of Industrial Production (IIP) – From a negative growth of -4.3% in Sept 19 to a growth of 1.8% in Nov 19.

If it wasn’t for the coronavirus outbreak, with the numbers we’ve mentioned above, it doesn’t seem like the markets would have fallen down now. In our opinion, this is just a second chance provided to us for investing in fundamentally strong stocks that are available at a discount.

Think about it, the entire hulla gulla will subside over the coming few days or weeks. But if you miss out on this second chance, you may have to wait a bit too long for the next opportunity to come.

Opportunities like the one we are presented with do not come very often.

To know about how to invest during such times and create wealth, click here.

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