Effect of COVID-19 on Finance Broking Sector

EFFECT OF COVID-19 ON FINANCE BROKING SECTOR 

Labeled as a global health emergency, the novel Coronavirus outbreak has widespread impact ranging from ecological to economic implications. Over 80 countries have collectively registered over 21,50,000 cases since the first reported case in December 2019 in China.

With one of the world's biggest economies at the epicenter of the novel Coronavirus outbreak, the impact of the virus is being felt on the global market. Closer home, the Indian stock market has seen some significant dips owing to its geographical and economic closeness to China.

How the COVID-19 affected the Stock market?

Due to the SARS-COVID 19-Coronavirus pandemic, our India economy's stock market became much volatile and the effect was first felt at the end of February. On February 28TH India's Broking share market faced a massive crash; more than Rs. 6000 Crores in investor's wealth has been wiped out due to lack of confidence arise of scare due to the pandemic.

Table 1.1 Showing the data as on February 28,2020 with February 27,2020 

The slowdown in the Indian economy

Effect of COVID-19 on Indo-China Trade-

India is a major importer of China's electronics, Mobile accessories, women cosmetics, toys, etc. and covers almost 16 % of China's export. As an exporter, India export almost 5.5 % of the total export of goods to China. Including plastic goods, coal, sugar, salts, etc. With countries on the lockdown, the trade has been reduced that directly affected the stock market.

With the reduced import and the 2 phases of lockdown announced by the government of India various industries have stopped working, as a result, it will directly affect the supply, there is the implication for the Indian economy, and consequently the Indian Stock Market.

Investor behavior towards stock market

Efficient Market Hypothesis believes that an investor takes decisions rationally, based entirely on economic fundamentals of the stocks. These fundamentals are generally the EPS. Book value, PE ratio along with the projected future cash flows of the firm and overall scope for growth in the sector. Thus theoretically, there should be no difference between the share trades of two firms with an identical fundamental profile. However, it is widely known that these classical theories do sot fully explain or account for the actual trades and movements of the stock indices. Hence comes the concept of Behavioral Finance, which believes that investors are irrational, and are driven by emotions and sentiments. It says that while selling or buying a stock, an investor generally takes the decision based on his perceptions and beliefs rather than fundamentals. Therefore he commits mistakes because of his limited awareness, overconfidence, the influence of promoter.

As an effect of the COVID-19 pandemic, India's investors who invest in having belief and perception taking the fundamentals part aside has reduced/stopped investing towards the share market.

Investors are lacking their confidence to invest not only due to COVID-19 but also for the following reasons-

• Yes Bank scam
• Shut down of IndiaNivesh Broking company
• Moratorium period announced by RBI
• The rumor of extension of the financial year

Investors in India are more concerned about the future consequences that may arrive due to pandemic and as a result, they are saving money for their livelihood along with avoiding investing due to the volatility in the market.

Bombay Stok Exchange (BSE) & National Stock Exchange (NSE) index has been plunged drastically as the index was in 2016

Sensex index showed 42060 points before the effect of SARS COVID-19 and after so many fluctuations it becomes 31,588.72 as on April 17th after many fluctuations in the month of March. Whereas, the index of Nifty 50 also got affected.

“Responses will need to support other priorities critical to public wellbeing and long-term economic strength, such as combating inequality and enabling the low-carbon transition.”
                                                                                                                                          -PRI Report

How Investors should respond to the SARS COVID-19 Crises

1.Investment towards sick companies for revival.
Investors should engage with companies that are failing to protect workers’ safety and/or their financial security, and those prioritizing executive pay and/or short-term returns to shareholders.

2.Investment towards the hidden gems companies getting affected due to pandemic only.
By looking over the Topline & Bottom line of company and P/E ratio comparison with Industry ratio.

3.Public Voice Supports & Suggestions
Investors should use their public voice to encourage governments and companies to take appropriate action
.
4.Participation in various virtual programs of the company
Investors should use virtual AGMs to allow appropriate oversight of investees to continue
.
5. Be receptive to requests for financial support
Investors should be open to supporting companies, debtors and governments with flexibility in financial arrangements and with more direct support where feasible.

Optimism for the Next Quarter

With the upcoming season of Summer, which is the big enemy of SARS (Severe Acute Respiratory Syndrome) Novel Coronavirus may find its natural death. As time passes, The Government and our pharmaceuticals sector will get some progress in terms of Vaccine and cure. With the faith in the economy and underlying the law of Karma, investors gradually will start investing in their pace.
As our global economy has gone through the most severe pandemic in 1918 (Spanish Flu) and we got over that within a short period. Today is the advance technological era believing in that we will cope with that easily "This too shall pass"
For now, all investors, big and small, are keeping an eye on the global indices, the growing count of recent Coronavirus cases, and government interventions to understand their role in the current share market volatility.

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