FUTURE OF INVESTING POST CORONA
Corona virus crisis entering its sixth month and the lockdown in India continuing for four months straight, it is now obvious that the state of economic growth in India has taken a big hit.
The Indian stock market had reached its life time high levels in January when it hit 12200 on the back of high growth from top businesses. But then in a matter of few weeks, everything changed. The news of a new Corona virus affecting entire population in Wuhan, China affected millions and the worlds biggest manufacturing nation went into a state of a massive lockdown. Everything from daily shops to big manufacturing units shut down creating a big supply problem of goods manufactured and no demand of raw materials. This had a cascading effect on other economies dependant on China for its supply of raw material like components for mobile and steel to countries like India who supply a variety of metals and chemicals hurting already weak export market.
Indian economy was already going through a rough patch after the fall of IL&FS and subsequent cases like failure of big companies like DHFL and Yes Bank which created a big liquidity problem. Meaning small and medium businesses have little to no access to credit and loans.
While the previous problems were generally a upper class problems, the lockdown which was imposed by March end has affected the lower and middle classes directly.
People who depended on daily income like labourers and vendors are out of work and have no other option. The people who had jobs now are at home for which companies have decided to work from home. But it is a matter of time when companies will run out of money and either cut salaries or lay off people altogether.
Furthermore, it can’t be said that this problem will be over soon. The lockdown has been extended twice already, and it can be said that it will be extended more. Now even after the end of lockdown, it cannot be said with absolute guarantee that things will go back to normal very soon. People will still be scared of moving out in groups and crowds. It will be difficult to say that there will still be the same crowds in malls or hotels or in markets.
What this means that the consumption of the population which is a major driver of Indian economy is and will stay very low. The prices of low crude oil haven’t helped oil companies since there is no demand of petrol and diesel from people and transporters. Banking and financial companies have been seeing very low footfall and transactions have more than halved for the lack of purchase and selling. The only businesses doing well now seem to be Telecom and IT companies which form the backbone of the work from home practice we are following right now. It can be said that most companies will prefer this in future too. Auto companies have already been struggling for last few years will struggle more since there is very low demand as people will think ten times before buying another vehicle.
All said the economy and overall business environment looks very bleak for the next 1 to 2 years.
But that said we have already faced pandemic related problems before too. SARS spread in 2003, Swine flu in 2009 and Ebola in 2014 have been a thing of the past. But we recovered and now they are not even in our memories. We will surpass this too. So, the economy and market look difficult in short term but if you think long term, the stock market is the best way to create long term wealth. As they say be fearful when others are greedy and be greedy when others are fearful, make use of this opportunity and invest in the markets to reap rewards in future.