Today morning, there was Conference call conducted by Mr. Nilesh Shah regarding his perspective on Coronavirus on current markets.
Highlights of the Conference Call
In fear of corona virus spreading, market has corrected almost 10% from the top, where surprisingly Mid & small-cap indices have outperformed Nifty 50 index – considering the valuations are driving the markets.
From historical perspective we are pretty much hopeful that this impact of CORONA virus will get smooth within 3 months as,
· During ZICA, IBOLA, SARS which was deadlier than Coronavirus, the markets has corrected in short term due to panic, but from that levels market is tenfold now.
· The Hang Seng and shanghai have delivered positive returns ,which shows that things are getting normalized in China
· Apple has mentioned that they have started 85% of their stores in china
· Number of people infected, have started coming down in china
Thus for medium to long term, if you invest into this correction, you will tend do well.
There are couple of benefits of corona virus to India
- Crude oil prices have corrected from 68$ to 50$ levels
- We are running a large trade deficit with china (50$ bn officially) which will come down as the imports have come down. Additionally we were importing certain unnecessary items from china which we could manufacture in India. That will beneficial to the local manufacturers of India.
India is the 2nd most preferred country to outsource the goods by 65% of American companies (from 3000 surveyed companies), which showcases the growth opportunity for India.
Thus real benefit to India can be, we can capture the supply chain disruption arised from china due to Corona virus.
Overall yields are softening across the globe for short, medium and long term which will have a positive impact.
Reserve Bank is pumping money and cutting interest rates.
ECB, Bank of Japan and FED together will pump-in liquidity and cut interest rates
Last week, FIIs have took out 12,000cr from Indian equity markets, once this will be stable that money will come back to the market.
Inflation : As per our view, Inflation is not a big worry.
· Due to Coronavirus, there will be increase in the price of certain items like consumer electronics, mobiles phone, Pharmaceutical etc.
· In India, For CPI calculation, half of the inflation is from food prices, on which coronavirus has no impact.
· Additionally, about 15% consumption weightage in basket is coming on fuel and related products, lower oil prices have benefited from the same.
· Therefore the price increase due to corona virus is far lesser than the benefits we are getting in terms of lower oil prices
Overall we see CORONA virus will have positive impact on India as long as the world and us are able to contain it.
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