The 6 Most Affected Sectors by Covid

In 2020, one could not think of anything beyond coronavirus.

The damage caused by the lockdowns affected several businesses beyond repair.

The impact of the second covid-19 wave on the economy may not be as devastating as 2020, but it's gradually taking a toll on many financially important sectors.

Several ratings agencies and brokerage houses have forecasted India's economy will bounce back soon after the second wave reaches its peak.

Even as efforts have been ramped up to break the chain of infections, the economic damage on some sectors could have a cascading effect on the medium-term growth outlook.

Top 6 Sectors Hardest Hit by the Second Wave

Hospitality Sector

The hospitality sector is facing a repeat of 2020 as many states have strengthened local lockdown rules.

This sector includes many businesses like restaurants, bed and breakfasts, hostels, service apartments, pubs, bars, nightclubs, and more.

The sector, which contributes a large portion of India's annual gross domestic products (GDP), has been hit hard by the restrictions and curfews imposed by states.

Many of these businesses have been brought to a standstill as they are merely allowed to deliver food that qualifies as an essential service.

In places where restrictions are less severe, footfalls have reduced sharply.

When covid-19 cases were initially rising during the second wave, the hospitality industry in Maharashtra, the first state to announce strict restrictions, told the government that it's a death knell for many businesses.

However, almost all hospitality-related businesses in the country are now facing a similar challenge.

The economic impact of the second wave could last longer than a quarter and many small businesses may have no choice but to shut shop permanently.

Here's the list of stocks that belongs to hospitality sector.

SCRIP	BSE PRICE(Rs)	NSE PRICE(Rs)
COUNTRY CLUB	5.9	5.9
EIH	110.2	110.5
HLV	7.2	7.2
INDIAN HOTELS	133.2	133.2
MAHINDRA HOLIDAYS	258.4	258.1
ORIENTAL HOTELS	37.9	37.9
TAJ GVK	138.8	138.5

Source: Equitymaster

Tourism Sector

The hospitality sector is interlinked to the all-important tourism sector.

The tourism and travel sector that employs millions of Indians started bouncing back after the first wave of covid until it was hit by the second round of covid.

The tourism sector, which contributes nearly 7% of India's GDP, comprises hotels, homestays, holiday homes, motels, and more.

The restrictions due to the second wave have crippled the tourism sector, which was struggling to recover from the initial losses suffered in 2020.

Many smaller establishments may not be in a position to resume their businesses again after the second wave subsides.

This is likely to have a devastating impact on household incomes as unemployment will rise.

Here's the list and stock price details of India's top travel support services stocks.

SCRIP	BSE PRICE(Rs)	NSE PRICE(Rs)
BLS INTERNATIONAL SERVICES	108.0	108.5
COX & KINGS	1.4	1.6
CROWN TOURS	19.0	Not Listed
INTERNATIONAL TRAVEL	68.3	Not Listed
IRCTC	1,895.6	1,896.25
THOMAS COOK INDIA	58.2	58.2
VMV HOLIDAYS	8.6	Not Listed

Source: Equitymaster

Aviation and Travel Sector

Aviation and other travel sector establishments faced a massive struggle during the first wave of the pandemic.

The situation during the second wave is slowly turning grim as restrictions continue to rise.

Reports suggest that air travel has seen a 50% reduction over the past few weeks. The fact that people are scared to step out of their houses indicates that the larger travel sector is also taking a battering.

While airlines were slowly starting to increase revenue margins, the second wave has made the situation turbulent again.

Given below is the list of airline stocks.

SCRIP	BSE PRICE(Rs)	NSE PRICE(Rs)
INTERGLOBE AVIATION (INDIGO)	1,776.2	1,776.1
JET AIRWAYS	101.9	103.1
SPICEJET	79.15	79.2

Source: Equitymaster

Automobile Sector

The second wave has interrupted the sales momentum recorded by the automobile industry in third and fourth quarter of the financial year 2021.

Accordingly, many original equipment manufacturers (OEMs) have advanced maintenance shutdowns to April and May on account of dampening consumer sentiments, closure of automotive dealerships, as well as supply-side constraints.

The domestic automobile industry's sales volume (excluding commercial vehicles) declined 30% month-on-month (MoM) in April 2021.

Personal vehicle and two-wheeler sales declined by 10% and 34% MoM, respectively, in April 2021. Three-wheeler sales declined by 57% amid a further reduction in preference for shared mobility.

Nevertheless, exports volumes continued the growth trend in April 2021, up 19% MoM, mainly led by 21% MoM growth in two-wheeler exports.

Personal vehicle (PV) demand remained resilient in April 2021, and witnessed the least decline, benefitting from the increased demand.

The domestic personal vehicle market continues to see an increasing shift towards utility vehicles, which accounted for 42% of domestic PV sales.

Besides, volumes in the utility vehicle segment declined by 11% MoM, passenger car volumes also declined by 10% MoM and by 12% from April 2019, led by a 14% fall in the sales volume of compact cars.

Motorcycle and scooter sales fell 34% and 33% MoM, respectively, in April 2021.

Demand has also been adversely affected due to schools and colleges remaining closed, which typically restart during the first quarter.

Since automobiles are discretionary items, vehicles sales will largely depend on consumer sentiment.

This table shows the share prices of India's top automobiles stocks.

SCRIP	BSE PRICE (Rs)	NSE PRICE (Rs)
ASHOK LEYLAND	124.4	124.6
BAJAJ AUTO	4,200	4,199.5
EICHER MOTOR	2,638	2,638.5
ESCORTS LIMITED	1,162.1	1,162.4
FORCE MOTORS	1,249	Not Listed
HERO MOTOCORP	2,990.9	2,991.6
M&M	846.2	845.9
MARUTI SUZUKI	6,956	6,970
TATA MOTORS	319	318.8
TATA MOTORS DVR	151	150.6
TVS MOTORS	619.4	619.7

Source: Equitymaster

The S&P BSE AUTO Index was at 23,572.4 (up 0.3%). The index is up 8% over the last 30 days. Over the last 1 year, it has gained 76%.

Real Estate and Construction Sector

According to a report, Indian house prices will stagnate this year, as the slowdown has crushed demand. This has offset government tax rebates and incentives for property developers.

Apart from that, real estate and construction sector activity has started facing disruption during the second wave, as a large number of migrant workers left urban areas.

The lack of labourers has hit both housing and construction projects in urban areas; states, where the virus is spreading fast, are likely to face significant delay in the completion of pending projects.

As many migrant workers are leaving for their home towns, construction sites are operating with roughly half the strength.

Not just a lack of workers but builders are also facing material shortage due to the restrictions.

While the situation is not as grave as 2020, the real estate and construction sector could face serious disruption if the covid-19 restrictions continue.

Here is a list of real estate stocks.

SCRIP	BSE PRICE(Rs)	NSE PRICE(Rs)
DLF	286.4	286.3
GODREJ PROPERTIES	1359.8	1359.9
INDIABULLS REAL EST	97.9	97.9
KOLTE PATIL	230.3	230.9
MAHINDRA LIFESPACE	522.1	521.7
NBCC (INDIA)	48.6	48.9
NCC	83.4	83.4
OBEROI REALTY	585.8	586.1
OMAXE	80.9	80.6
PHOENIX MILL	766.1	766
PRESTIGE ESTATES	272.2	272.3
PURAVANKARA	80.8	80.9
REL.INDUS.INFRAS	425.1	425.7
SOBHA	472.4	475
WELSPUN ENTERPRISES	107.7	107.6

Source: Equitymaster

The S&P BSE REALTY Index was at 2,644.9 (up 0.1%). The index is up 5.9% over the last 30 days. Over the last 1 year, it has gained 100.9%.

Insurance Sector

India's health insurance sector could face billions of dollars in fresh Covid-19 claims over the coming months as the second wave.

As per the data compiled by the General Insurance Council (GIC), the insurance industry has registered 1 m coronavirus claims worth Rs 147.4 bn until 7 April 2021.

Of these, insurers have settled 8.6 lakh claims worth Rs 79.1 bn, according to GIC data.

Here's the list of stocks that belongs to insurance sector.

SCRIP	BSE PRICE(Rs)	NSE PRICE(Rs)
GIC OF INDIA	192.8	193
HDFC LIFE INSURANCE	668.7	669
ICICI LOMBARD GENERAL INSURANCE	1,486.2	1,484.1
ICICI PRUDENTIAL LIFE INSURANCE	546.3	546.7
SBI LIFE INSURANCE	977.4	976.9
THE NEW INDIA ASSURANCE	163.4	163.4

Source: Equitymaster

Few Other Factors that Could Affect the Recovery

The Indian government has encouraged local governments to adopt more localised and targeted containment measures to avoid too big an economic impact.

The Nomura India Business Resumption Index (NIBRI) fell to 60 for the week ended May 23, down from 63 a week earlier.

The index, which tracks high-frequency economic indicators such as mobility, power demand and unemployment, is down to levels seen in June last year after a full recovery in February.

Manufacturing at 7-Month Low

In March 2021, India' Manufacturing Purchasing Managers' Index (PMI) slipped to a seven-month low of 55.4 from 57.5 in February 2021.

Data for April indicates a slight improvement to 55.5 after declining to a seven-month low in March at 55.4.

The surge in covid-19 cases could dampen demand further when financials of companies are already susceptible to the hurdle of rising global prices.

Slowdown in Services

India's services activity slowed down to a three-month low in April as businesses were forced to reduce operations.

According to a report, Purchasing Managers' Index (PMI) for the services sector declined to 54 in April from 54.6 in the preceding month.

A figure above 50 indicates expansion, while sub-50 signals contraction.

Covid-19 Second Wave: 7.5 m Jobs Lost Across Different Sectors

The second wave of covd-19 has taken a heavy toll on employment as restrictions to control the second wave of the pandemic has crippled businesses.

About 7.5 m jobs have been lost across sectors in February-May 2021.

This is the worst-ever loss of jobs in India since liberalisation. The 2007-2009 financial crisis had a relatively smaller impact, with about 5 m jobs lost.

Jobs were lost across sectors such as travel/tourism and hospitality, which rely on people movement to sustain business, as well as start-ups and financial services.

A recent report by centre for monitoring Indian economy (CMIE) showed double-digit unemployment rate in April and May.

Unemployment rate touched 14.5% in the week ended 16 May 2021 and rose further to 14.7% in the following week.

Stress Point

Inflation could pose another source of worry, as it would erode purchasing power of consumers while making it difficult for the Reserve Bank of India (RBI) to maintain an accommodative stance for long.

Retail inflation, calculated over a two-year period, remained high in April at 5.7%.

A larger worry is the rise in core inflation, which excludes volatile items such as food and fuel.

Some economists fear that rising wholesale prices could also soon spill over to retail prices, hitting consumers hard.

Considering all of the above factors, many analysts have downgraded their estimates for India's economic growth, citing the impact of the pandemic-induced lockdowns and the slow pace of vaccinations.

At a time when several major economies are recovering fast, India's economic report card doesn't look good.

How the above factors will impact the Indian share markets remains to be seen. Meanwhile, we will keep you updated on the latest news from this space.

Stay tuned!

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