How Coronavirus Affected Share Market

The novel Coronavirus epidemic has been described as a worldwide health emergency. It has wide-ranging economic and ecological consequences. Since December 2019, the first case was reported in China, more than 80 countries have recorded over 90,000.

The global market is feeling the effects of the Coronavirus epidemic, which has one of the largest economies in the world. The Indian stock market is also affected by its proximity to China, both economically and geographically.

What has the virus epidemic done to China?

Due to China's status as the largest exporter of material to many countries, the outbreak could cause disruptions in the supply chains. Consumer spending could be affected by the outbreak, as well as factories closing down. The stock market and industries are affected when supply and demand are severely disrupted.

Impacts of Coronavirus in Indo-China Trade

India is a major importer of electronics, mobiles and pharmaceuticals from China. China exports almost 14% to India alone. India exports 5% of its products, including chemicals, mineral fuels, chemical, cotton, plastic items and fish to China. The Indian government is issuing travel warnings to China and putting China under lockdown, these have implications for the Indian economy and the Indian stock exchange.

The prices of goods will rise as China imports are decreasing. This will increase the already low demand for goods in the country. Supply-side, key inputs such as electricity from China can have an impact on the availability of goods. It will be difficult to find alternatives to cheap China products. This could lead to a drop in supply.

Investors may be more cautious if there is not enough supply or demand.

Coronavirus's impact on the stock exchange

At the end of February, the virus's effects in India were felt for the first time. The Indian share market crashed by more than Rs. The Coronavirus scare caused the loss of 5 lakh crores of investor wealth. The Sensex's second-largest fall in history was a 3.5% decline in Indian indices. The Indian stock market recovered its losses after 2 March. However, recent coronavirus cases in India meant that the markets ended up with a negative. The Sensex plunged by more than 1900 points in just one day as of 9 March 2020. This is the largest intra-day drop since August 2015.

Fear psychoses have been a problem for the stock market in the past. This is an example. There are legitimate reasons to be concerned about the Indian stock exchange. One reason is China's involvement in the supply-demand chain, both in India and globally.

Share market impact due to shortage

As we have already mentioned, India imports parts and raw material from China. Automobile companies that rely on China to supply their raw materials stock up during the Chinese Lunar New Year holiday season, when Chinese plants are closed. Indian companies were not affected by the uproar because the holidays fell during the same time as the uproar. If the trade restrictions are not lifted, vital raw materials may be scarce. Major companies such as Tata Motors and Eicher Motors, Bajaj Autos, M&M Hero Motocorp and TVS Motors could feel the heat if they do not lift their self-imposed trade restrictions.

The Indian pharmaceutical industry could also be affected. These companies can import as much as 67% of active pharmaceutical ingredients required for the manufacture of their products. Pharmaceutical companies often stockpile at least two months worth of raw materials to ensure they don't have to face immediate difficulties. These companies may have to import raw material from other countries if China's supply disruption continues into the next quarter. This could either lead to a rise in production costs or a decrease in supply. It has implications for the stock market standing of the pharmaceutical industry.

India's stock market is a key stakeholder for the automobile and healthcare industries. Investor confidence in the Indian stock market could be affected if their production and operations are disrupted by the Coronavirus epidemic and China's lockdown.

Another side sees the potential in this uncertainty. Fearing a global recession, short-term players sell shares to make more stock affordable. Opportunists might choose to "buy and hold" shares, assuming that the market will soon recover and correct itself.

An oily silver liner for India

China's economic turmoil has resulted in a reduction in its crude oil consumption. A global drop in crude oil prices is due to China's drastically decreased oil demand. India has seen a 25% drop in oil prices since January. It has been a relief to India's already troubled economy which relies on oil imports for 80% of its oil requirements. This also affected the stock markets. The drop in crude oil prices will be a benefit to listed companies that depend on crude oil for transportation and production. This will result in a rise in stock market standing.

Optimism in the next quarter

The coronavirus could die naturally as summer approaches. Government and pharmaceutical companies will have made some advances in the development of a vaccine. This will increase confidence in the economy and may lead to a gradual rise in market prices. If past outbreaks like Ebola, SARS, and Swine Flu are anything to go by, it is likely that "this too shall pass", and India's economy and share markets will weather the slowdown caused by the coronavirus.

All investors, large and small, must keep an eye on the global indexes, the increasing number of Coronavirus cases and government intervention to understand their role.