Will Coronavirus Impact Spread To Your Investments? - Outside View by PersonalFN

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Will Coronavirus Impact Spread To Your Investments?
Feb 12, 2020

Just when investors heaved a sigh of relief from easing of trade war between US and China, outbreak of the deadly coronavirus has spooked investors yet again. The virus which originated in the city of Wuhan in China has till now infected over 40,000 people and killed more than 900 people.

China, the world's second largest economy, has been forced to shut businesses across sectors to contain the spread of virus. This could have a far-reaching effect on the global trade as China makes up about 16% of global GDP.

In India, while the health impact of the virus is confined to just three reported cases till now, the economic impact could be greater. India is a major importer of various products from China such as electronics, machines, chemicals, plastics, etc. Businesses dependent on China for supplies of various components and finished products are bound to be hit.

Graph: India's imports from China in the last five years (in Rs Billion)

The auto industry in India, already reeling with a slowdown, could see further disruption in their production if critical components from China do not arrive in time. According to the industry, they may struggle to meet the March 31 deadline to roll-out BS-VI compliant vehicles.

Venkatram Mamillapalle, MD, Renault India, while speaking to media said, "This is worse than the impact of the tsunami in Japan in 2011. This time around, factories across the world can potentially come to a standstill because of supply drying out on account of the Coronavirus".

China is a key supplier of components for electronics such as TV, refrigerator, air-conditioners, mobile phones, etc. to India. The supply chain for these products will feel the impact as inventories dry-up.

India imports bulk drugs or active pharmaceutical ingredients (APIs) from Hubei province, whose capital is Wuhan, to manufacture antibiotics. The Department of Pharmaceuticals is mulling restrictions on the exports of some crucial antibiotics to prevent shortage. "We do store two months stock of APIs and intermediates as part of inventory holding norms. If the plants do not start by end February, then it will become a delicate situation not only for us but for the entire pharma industry", Mr Kedar Upadhye, Global CFO, Cipla, said while speaking to media.

Indian airlines may be staring at revenue loss as they have cancelled flights to China in the wake of the epidemic.

Prolonged disruption in production would lead to scarcity of goods and result in higher prices of products. Finding alternative supplier may not be easy and could prove to be expensive.

India could also face disruption on the export front as the country supplies products such as spices, diamonds, fish, tea, coffee, etc. The demand from China will be limited as people are likely to stay at home.

RBI Governor Mr Shaktikanta Das recently raised concerns over the spread of the virus and suggested that a contingency plan should be prepared to deal with the impact of the virus on the economy.

Here's a prescription to improve the health of your mutual fund portfolio.

FundSelect, PersonalFN's unbiased premium research service will provide insightful and practical guidance on equity and debt mutual funds schemes - the ones to Buy, Hold, or Sell.

Don't lose this investment opportunity in the interest of your financial wellbeing.

The Monetary Policy Committee (MPC) added that the virus may impact tourist arrivals in India and global trade. MPC observed that Equity markets rallied across Advanced Economies and Emerging Market Economies, turning bearish towards end-January with the outbreak of the coronavirus as markets braced up for the likely adverse impact on growth prospects, particularly in China. However, equity markets in most economies recovered some of the losses in early February.

What should investors do?

The extent of impact of the virus on the economy and investments will depend on how damaging the outbreak will be going forward and how the Chinese government manages the situation. If the virus continues to spread rapidly then the impact could be greater.

Corporates in India and around the world will be following a `wait and watch' approach and closely monitoring the developments as it may affect their earnings. Indian equity market along with other Asian and global markets may face pressure as fear of the virus catches on. However, any impact from the epidemic may prove to be temporary. Just like the world economy recovered in the past from epidemics like SARS, Swine flu, Ebola, etc. it will recover from this as well.

As an investor, do not let short term hurdles derail your long-term investment objectives. Diversify your investment across asset classes based on your personalised asset allocation plan to mitigate risks involved. Stick to your investment until your set objective is achieved, but make sure that you conduct a periodic review of your investment portfolio to ensure that it is on the right path to help you realise your goals.

Author: Divya Grover

This article first appeared on PersonalFN here.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.


The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

Equitymaster requests your view! Post a comment on "Will Coronavirus Impact Spread To Your Investments?". Click here!


More Views on News

Why Did Sunil Singhania Increase Stake in Rupa & Company? (Views On News)

Jan 13, 2022

Sunil Singhania owned Abakkus acquired an additional 2.9% equity stake in Rupa & Company via open market transactions.

5 Indian Companies Best Placed to Fight off an Inflation Scare (Views On News)

Jan 12, 2022

These companies can hold their own in an inflationary environment.

6 Stocks with Consistently Increasing Return Ratios (Views On News)

Jan 11, 2022

Look for trends in return ratios over many years and analyse each of its components.

Key Points to Know Before Applying to AGS Transact Technologies' IPO (Views On News)

Jan 15, 2022

AGS Transact Tech shares were available at a grey market premium of Rs 23 per share yesterday.

Time to Buy Energy Stocks (Fast Profits Daily)

Jan 14, 2022

Energy is a sector that looks set to take off. It's time to get in.

More Views on News

Most Popular

India's Best Semiconductor Stocks Views On News (Views On News)

Jan 7, 2022

Modern wars are fought with semiconductors. India's best semiconductor stocks have big tailwinds from defence and manufacturing.

10 Indian Companies with the Fastest Growth in Dividend Payouts... (Views On News)

Jan 10, 2022

These companies have been consistently paying higher dividends for several years.

Tata Steel vs SAIL: Which Stock is Better? (Views On News)

Jan 13, 2022

With government initiatives set to boost the steel sector, find out who has a better chance of coming out on top.

Looking for Consistent Compounding Stocks? Here's a Watchlist for You (Views On News)

Jan 6, 2022

These companies have generated mind boggling returns for investors over the years.

My Best Sectors for 2022 (Fast Profits Daily)

Jan 4, 2022

My top 2 sectors for 2022 might surprise you.


Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Jan 14, 2022 (Close)