Stocks Up Despite Economy Taking A Toll

Ever since the CoronaVirus Pandemic struck the lives of people, the economy has taken a huge blow. About a month ago, India’s cases grew at 3000 per day but the current numbers have increased to over 9000 a day. 

Except for a handful of sectors, the majority of them have been impacted gravely. As a result, thousands of people are expected to lose their jobs. As per CMIE’s report, up until April, close to 3 crore people lost their jobs following a nationwide lockdown.

But despite the economic chaos, the stock market hasn’t shown any signs of sluggishness. The Sensex as on 1st January stood at 41945 but fell to 25981 on 31st March 2020. Since this slump, the recovery has been swift and as of today, it stands at 33,780.

Reasons behind this surge

Information available.

Currently the available information pertains to the last quarter of FY19 that is January to March. But the pandemic impacted India during the second half of March 2020. This is the reason why the financial reports of the companies didn’t reflect the effect of the pandemic.

The real impacted month is apparently April. And thus, this is the quarter to be worried about. This quarter will depict the true picture of how things stand currently.

Despite the pandemic having no real impact on businesses in the March quarter, the GDP stood at 3.1 percent as compared to 5.8 percent during March of previous year. The GDP fell by 46 percent year on year during this quarter. 

As per a report, an estimate of 80 percent of the businesses have been impacted by this pandemic. The true image of the market will only be portrayed during July when the quarterly reports arrive.

Influence of Dow Jones or Nasdaq (US)

Generally, Indian markets are compared to US markets and hence we find the US markets influencing Indian stocks. If the US indices record high momentum, the impact can be witnessed in Indian markets too. 

Comparing US markets to Indian could be wrong as the two markets are completely distinct and possess their own attributes. This too can blindfold the real picture of the stocks ofttimes.

To survive this inevitable scenario.

As an investor, it could be quite daunting at times to encounter such situations, severe corrections and bear markets. The way to survive this unprecedented time is to possess high quality business stocks or fundamentally strong stocks in your portfolio. Such stocks eventually will recover again and make fortunes to investors. These circumstances test most of the companies and only the best of the lot survive the storm.

Disclaimer: The above content is for informational purposes only and should not be relied up as a basis for investment decisions. While we may talk about strategies or positions in the market, our intent is solely to showcase effective risk-management in dealing with financial instruments.