When the Bears Dominate

For most of us who wished for good prospects to show up at the turn of the decade, today is definitely nowhere close to what we had thought of. The new Coronavirus has taken its toll over the human population, the global stock markets are down and people all over have been asked to stay indoors which has affected businesses. In Industries such as Aviation and Automobile, the demand is less and hence, these are the ones that have suffered the most.

 

GoAir, a low-cost- carrier airline has asked around 35% of its employees to go on leave as it plans cost cuts. The automobile sector, which was already hit by a slowdown, has had it worse with lesser demand and compulsive production halts. Sensex and Nifty have already hit the lower circuit twice in the month of March due to which trading had to be paused for 30-45 mins.

 

For AMCs in the market, the Pharma sector is the new investment haven as these companies are working in full capacity to meet various medical needs across the country. With the Government placing a cap on mask and sanitizer prices and marking them as essential goods, companies like Godrej are selling hand sanitizers for less than the cost price incurred, in national interest. Dabur has cut the prices of sanitizers that are sold online. Online delivery schedules by Flipkart and Amazon stand cancelled due to COVID-19 scare. Meanwhile, the bears are making merry at D-Street.

 

The Confederation of Indian Industry (CII) has said that the growth in FY’21 may slip below 5%. Many countries have slashed rates to boost economic growth. Surprisingly, RBI did not follow suit which many expected it would. Instead, it has planned to buy Government securities worth Rs. 30,000 crores via Open Market Operations (OMOs) so as to ensure liquidity into the market. The Rupee has attained a historical new low of Rs. 75. All this really puts us off and presents to us, an uncertainty that we are obviously not very comfortable with.

 

A financial stimulus package has been announced by the Finance Minister which aims to boost the sentiments of the market. This package has got mainly to do with the deadlines and timelines involved in settling accounts. One feature of this package is that it has extended the deadlines to file TDS, pay GST dues etc. to June 30, 2020. The GST rates have been reduced significantly. All of this is expected to boost the demand in the economy and put it back on track.

A slowdown or recession is temporary. We still do not know whether we have bottomed out or there more left. Given the current scenario, we need to agree on one thing – the pandemic has affected all of us and slowed down the world economy. It will take some time to bounce back and meanwhile, we can work on ourselves and build our skill-sets so that once the economy bounces back, we are ready with the best version of ourselves. To sum it up, when the bears dominate, place your bets on stocks which can give you good returns in the long term (your skill-sets!).

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