The nationwide lock down, that began on 25th of March, 2020, has affected the economy and the stock market drastically. Though pharma stocks are on the rise, other industries are facing a highly uncertain future. The stock market has been volatile and risky ever since this lock down.
In this article, I am going to talk about how the lock down and the events that transpired have affected Nifty 50.
On 23rd March 2020, the Indian equity market continued to remain under pressure amid massive sell-off by investors who feared that the pandemic of coronavirus may cause heavy damage to the economy. The central government and various states took major steps over the weekend, including suspension of public transport such as railways, metro rail and bus services, and lock down of 75 districts across the country to prevent the spread of the deadly virus. Nifty 50 closed 12.7% lower.
Although, starting 24th March, the index started recovering till the 27th of March; it started falling again due to the bank strikes and back to back holidays. So, on the 30th of March, the index closed 4.37% lower. On 31st March, Nifty 50 saw some improvement and closed 3.8% higher. But on the 3rd of April, ICRA said that the banks and NBFCs would see bad loans piling up after the moratorium period, which led to a fall of 5.9%.
On 7th April, Nifty 50 saw the biggest single day gain in 2 weeks, i.e., 8.7%. This gain was the result of the hopes of declining deaths due to COVID-19. The next day, it ended 0.5% lower due to the fear of extended lock down. Although it recovered the next day, ending 4.14% higher.
On 13th April, it closed 1.29% lower, because of high volatility and a negative bias. Today, the extension of the initial lock down was announced by our PM Mr. Narendra Modi. Now the lock down is set to continue till 3rd of May 2020. This development has inculcated fears amongst the public as well as the experts.
Barclays cut India's GDP forecast to 0%, citing this extension. Even ICRA said that the lock down extension might cause contraction of GDP of India, maybe even slip to negative 1% at the lower end. IMF claims that this might turn out to be the worst recession for the global economy, since the Great Depression of the 1930s.
What do you think the reaction of the market will be tomorrow morning? Will the Indian economy survive this hit? Or will it be hit the worst? Do you think COVID-19 categorizes as a “Black Swan Event?”