From a historical perspective, we pretty much hope that this impact of CORONA virus will get smooth within 3 months as,
During ZICA, IBOLA, SARS which was deadlier than Coronavirus, the markets have corrected in short term due to panic, but from those levels, the market is tenfold now.
The Hang Seng and shanghai have delivered positive returns, which shows that things are getting normalized in China
Apple has mentioned that they have started 85% of its stores in china
Number of people infected have started coming down in china
Thus for medium to long term, if you invest in this correction, you will tend to do well.
There are a couple of benefits of coronavirus to India :
1. Crude oil prices have corrected from 68$ to 50$ levels
2. We are running a large trade deficit with China (50$ bn officially) which will come down as the imports have come down. Additionally, we were importing certain unnecessary items from china which we could manufacture in India. That will beneficial to the local manufacturers of India.
India is the 2nd most preferred country to outsource the goods by 65% of American companies (from 3000 surveyed companies), which showcases the growth opportunity for India.
Thus real benefit to India can be, we can capture the supply chain disruption arisen from china due to Coronavirus.
Overall yields are softening across the globe for short, medium and long term which will have a positive impact.
Reserve Bank is pumping money and cutting interest rates.
ECB, Bank of Japan and FED together will pump-in liquidity and cut interest rates
Last week, FIIs have taken out 12,000cr from Indian equity markets, once this will be stable that money will come back to the market.
Inflation: As per our view, Inflation is not a big worry.
Due to Coronavirus, there will be an increase in the price of certain items like consumer electronics, mobiles phone, pharmaceuticals, etc.
· In India, For CPI calculation, half of the inflation is from food prices, on which coronavirus has no impact.
· Additionally, about 15% of consumption weightage in the basket is coming on fuel and related products, lower oil prices have benefited from the same.
· Therefore the price increase due to coronavirus is far lesser than the benefits we are getting in terms of lower oil prices
Overall we see CORONA virus will have a positive impact on India as long as the world and we are able to contain it
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