Indian establishments are planning a total shutdown as the death toll touched 7 in India with the global death toll crossing the 13,000 mark. With the pandemic under control in China, it is Italy, Spain and France that are actually leading the death toll numbers now. On Sunday, most Indian cities observed a voluntary curfew. Most establishments have been asked to shut till March 31st and that is likely to take its toll on output and also on income levels. Already, most automakers have shut production as this also gives them the chance to match supply to demand. However, financial markets will remain open.
India has laid out a massive $6.3 billion roadmap for manufacture of electronics in India. The Rs.48,000 crore plans will entail boosting electronics manufacturing in India and wooing large investments into the country. India has already become the second largest mobile manufacturer in the world and the government is looking to give a boost to “Make in India” once again. During the Coronavirus pandemic, China shut its factories and the Indian electronics industry suffered as it sourced most of its inputs from China. Government also wants to build an India base to avoid such a situation in the future.
There may be some good news for airlines as the price of Jet Fuel was slashed by the oil market companies to the tune of 12%. The OMCs also shifted to fortnightly review of prices and this cut in jet fuel prices was in sync with the falling crude prices globally. However, airline companies are grappling with a different set of problems at this point of time. With the domestic travel ban, curbs on tourism and cancellations of business seminars and conferences, airlines are facing demand crunch after a very long time. Any jet fuel price cut may not really be effective for airlines in the short run.
In what could be the biggest FII withdrawal from India, the FIIs have already taken out Rs.108,697 crore from Indian markets in the first 3 weeks of March 2020. FIIs have withdrawn Rs.56,248 crore from equities and Rs.52,449 crore from debt in the first 3 months. This outflow is much higher than the outflow seen even in the peak of the Lehman crisis. The spread of the Coronavirus has led to a general risk-off sentiment among global investors leading to heavy selling across emerging markets. The debt selling is more on the back of concerns that the currency could weaken from current levels.
The Food and Agricultural Organization (FAO) has warned that the series of shutdowns across the world could lead to a spike in food prices and trigger food inflation across the world in a big way. The problem may not be visible in the short term, according to the FAO, due to the ample supplies of staple grains and oil seeds in exporting nations. The FAO has pointed out that all that was needed to trigger a food crisis was some panic buying from large procurers like millers and governments and the global food equations could just go off the line. Such panic buying typically comes from bulk buyers, especially when they estimate that supplies may dry up in the next few months. FAO has been worried that people are queuing up at supermarkets across the world to stock supplies, which is a dangerous sign of food panic.
The rapid fall in the markets has taken its toll on the equity mutual funds with most of them giving negative returns to the tune of 25% in the first quarter. The second round of selling in March has not spared even the traditional favourites like private banks and IT companies. In the case of mid cap and small cap funds, the situation is a lot worse. Of course, these returns will actually impact those who bought lump sum in the last quarter. Investors who have adopted the SIP route; the damage would be much lower as rupee cost averaging would work in their favour. Long term goals may not be impacted.
