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Investors in panic mode as pandemic fear spreads

February 27, 2020 05:51 AM


Investors in panic mode as pandemic fear spreads
IN TANDEM : The Sensex falls 392 points, mirroring declines across Asian markets

Nasrin Sultana

Mumbai : Fears of the coronavirus epidemic spreading rapidly beyond mainland China battered India’s stock markets on Wednesday as businesses grappled with concerns that supplies from alternative sources in countries such as South Korea may also be disrupted.

In tandem with global peers, the benchmark BSE Sensex fell 0.97% to end at 39,888.96 while the Nifty declined 1.01% to 11,678.50. The losses mirrored similar declines across major Asian stock markets of Japan, China, Hong Kong and South Korea.

South Korea said the total number of infections in the country had risen to more than 1,000, while American health officials on Tuesday warned that they expected the epidemic to spread in the US. The first cases in Greece and South America were reported, while Spain locked down a resort in the Canary Islands, with about 1,000 guests and workers inside.

Meanwhile, Asia’s financial hub Hong Kong unveiled a record budget deficit as it promised cash handouts to residents and tax breaks to businesses to help absorb the blow to the recession-hit economy from the virus outbreak and recent violent protests.

India’s economy too will feel the heat. Manufacturers of electronic products such as smartphones as well as importers of solar modules and automobile parts have already started feeling the pinch of the prolonged closure of factories in China, especially in Wuhan, the epicentre of the outbreak.

Nomura said it expects India’s GDP growth to remain lacklustre in the near term, forecasting it to slow further to 4.3% year-on-year in the fiscal fourth quarter from 4.5% in the preceding three months. In the year starting 1 April, it expects GDP growth of 5.7%, below the RBI’s forecast of 6%. “A key downside risk in the near term, both on the supply and the demand side, is the adverse impact from the coronavirus outbreak,” it said.

The Centers for Disease Control and Prevention (CDC) in the US warned that the novel coronavirus could potentially cause a pandemic, considering its spread across the globe and escalating number of deaths. While the World Health Organization (WHO) has not declared the outbreak a ‘pandemic’ yet, it has warned that the disease has full potential to become one, as it has spread beyond China into other countries.

“The main reason behind such a big crash (in Indian stock markets) was the announcement from CDC, which warned of a broader disruption if the coronavirus threat spreads to the US,” said Shrikant Chouhan, a technical research analyst at Kotak Securities.

vistara cancels some flights

The spread of coronavirus has forced Vistara airline to cancel some flights to Bangkok and Singapore because of weak demand. Vistara said it will cancel 20 flights between Delhi and Bangkok and eight flights between Delhi and Singapore in March. It will also cancel 26 flights between Mumbai and Singapore.

“Vistara will continue to monitor the situation and progressively evaluate the need for any further adjustments to its schedule to meet changing demand patterns,” the airline said in a statement. While none of the other Indian carriers have announced changes in their flight schedule to these countries, IndiGo, Air India and SpiceJet have already suspended flights to China and Hong Kong.

Rating agency Crisil expects the impact of the outbreak to subside in China by April 2020, but warned of grim consequences in case the disease is not contained quickly. “In the worst case, the epidemic might well extend through the first quarter of fiscal 2021,” Crisil said.

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