Name- RAJAN BAA

College- Department of Financial Studies, Delhi University

Course- MBA (Financial Management)
Year- 2nd
Contact no - 9791062937

Coronavirus- A cause of worry for the Global Financial Markets?

About Covid-19 - “Corona” in Latin means “halo” or “crown” .Three particularly dangerous
diseases that have spread due to coronaviruses: COVID-19, SARS, and MERS. First identified
case of COVID-19 was found in Wuhan, China. Presently no vaccine is available. Common
symptoms include: fever, cough, breathiness etc.
It can spread in the following ways:
 Touching or shaking hands with a person who has the virus and it can pass the virus
between individuals.
 Contact with a surface or object that has the virus and then touching the nose, eyes or
mouth.
 Coughing and sneezing without covering the mouth can disperse droplets into the air.
WHO recommended basic hygiene such as regularly washing hands with soap and water, and
covering mouth with our elbow when sneezing or coughing.
It mainly effects following categories of people:
 young children
 women who are pregnant
 people aged 65 years or older
Recently WHO had declared the new coronavirus outbreak, a global Pandemic. Around 4,600
people have died from the diseases and there have been more than 126,00 confirmed cases
worldwide, according to the WHO and it has spread at least 118 countries.
Impact on Economy: Its spread has left businesses around the globe with huge losses
 Global shares at low – All categories of investors are worried about the impact of
coronavirus. Big shifts in stock markets, can affect investments in some types of pension or
individual savings accounts.

 Growth could stagnate If the economy is growing, that generally means more wealth and
more new jobs. It's measured by looking at the percentage change in gross domestic product,
or the value of goods and services produced, typically over three months or a year.

 Travel among hardest hit - The travel industry has been massively effected, with airlines
cutting flights and tourists cancelling business trips and holidays.

 Factories slowing down- China makes up a third of manufacturing globally, and is the
world's largest exporter of goods. But activity has decreased in the so-called "workshop of
the world" as factories pause their operations to try to contain the spread of Covid-19.
 Customers buying less- Fear of the coronavirus outbreak means that people are choosing
to avoid activities that might expose them to the risk of infection, such as going out
shopping. Restaurants, car dealerships and shops have all reported a fall in customer
demand.

Nobody Knows that for how many days or months will it take overcome this disease. But
following steps taken at different level can reduce the impact on the market.
Interest rate cut: It help to establish how much consumers pay to borrow. When interest rates
are low, consumers tend to purchase a higher volume of goods. Recently US Federal reserve
has cut the interest day .It was the Fed’s first emergency rate cut since 2008 financial crisis.
This rate cut is done due to the economic risks and in support of achieving its maximum
employment and price stability goals. Similarly other central banks must take appropriate
action to achieve its goal.
Decrease in taxes: Reducing taxes increases the amount of available cash that consumers can
use to purchase goods and services. The more cash consumers have, the more purchases they
are likely make. As consumers in a country increase spending, it directly increases aggregate
demand. Tax cuts could decrease individual income taxes, sales taxes or property taxes.
Government Expenditure: Recently President Donald Trump signed an $8.3 billion spending
bill to fight the coronavirus on March 6. An increase in government spending on goods and
services can increase overall economic demand. The infusion of capital into the economy
through government spending leads to increased financial resources in the private sector that
injects financial resources into the hands of consumers.
Improvement in Health care and medicine facilities: It’s the responsibility of the central and
state government to improve the conditions of the hospital and medical facilities. A few days
back a new hospital ward is opened in Wuhan, China which is completely run by robots. And
this will protect medical staffs from contracting the coronavirus. This robots deliver foods,
drinks and drugs to the patients and keep the ward clean. Works 24/7 measuring heart rates and
blood oxygen levels via smart bracelets and rings worn by patients.
Regulatory role : On the global front, world share markets witnessed their worst scenario since
the global financial crisis, wiping out about trillion of money. SEBI assured that the regulator
and stock exchanges are prepared to “take any action” as required to deal with market volatility,
hours after trading was halted for 45 minutes on 13th March. This kind of steps give a positive
sentiments to the investors towards stock market.
Diversify the Portfolio: If the investor has diversified portfolio of stocks and bonds, the bond
portion would have risen, cushioning stock losses and underlining the power of asset allocation
and diversification. That’s why it’s so important for investors to focus on their long-term goals
and plans, not the short-term gyrations of the stock market.
Self-Depended - It’s time for the countries to release that how much they are dependent on
China and America. Countries must focus on improving their manufacturing, Automobile,
services and Health care sector.
See as Opportunity for investors –
I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be
greedy when others are fearful. - Warren Buffett
There is gloom and doom in the market, and there is a possibility that the selling pressure will
continue for some more time. But, these Black Swan events have happened in the past as well.
One thing which stands out is the fact that markets have bounced back aggressively once the
overhang is over which has created opportunities for long-term wealth creation.
Putting money in markets at current levels would be very difficult because no one is aware
where the bottom is? Hence, quality stocks that have come off from high should ideally be
considered for investment. However, we see it as buying opportunities for the investors who
should utilise the declines to lap up the good businesses
Tech, Research and Innovation: Drones can be used to deliver medical supplies, AI to
identify, track and forecast outbreaks. Video conferencing can be used for meeting rather than
personal meeting.
China is one of the best example where it is trying to recover: Real estate, manufacturing,
Energy demand has turned up.
Due to the shutting down or running in limited basis of schools, sports leagues, workplaces,
cultural sites, -the economy could shrink as much as 4% to 5% in the second quarter and trigger
a sharp increase in unemployment.
Opinion
 Support for immediate unemployment benefits for those who are lost their jobs and lack
income to meet daily needs
 Supporting a tax benefit to help continue business
 Providing low- to no-interest business loans to cover lost revenue as a result of the
outbreak.
Name- RAJAN BAA
College- Department of Financial Studies, Delhi University
Course- MBA (Financial Management)
Year- 2nd
Contact no - 9791062937