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As of March 20th, there are approximately 245000+ confirmed
cases of corona virus with 10000+ deaths. While China is the
epicenter of the virus, 2/3rd of the confirmed cases outside
of China across 180 different countries.
As a point of comparison, the SARS (severe acute respiratory
syndrome) outbreak in 2003 lasted about 9 months, from
November 2002 to July 2003, resulted in 349 deaths with
cases spanning 29 countries. It is pertinent to note that
SARS virus had an impact of ~50 bps on Chinese GDP in 2003
and therefore, extended presence of the Corona fears will
have significant impact on the global growth.
Corona virus scare has grown multifold post its spread
across the key economic zone of Europe and US. Of course,
while the numbers of affected cases in India, currently, are
not significant, we believe that the pre-emptive
geographical lockdown is likely to keep the overall numbers
within a limit. Nonetheless, the outbreak of the corona
virus will definitely have an overall impact on global as
well as Indian GDP growth in the interim. Both trade as well
as discretionary spends (travel, leisure etc.) are likely to
take a hit in near term as public movement will be
restricted given the fear over the same. The recent market
correction is result of the same.
However, historically, it has been seen that market recovery
in such case is usually sharp and quick and precedes the
economic growth rebound. Therefore, we see the current
correction as a buying opportunities for the investors who
should utilise the declines to lap up the good businesses
which have comfortable leverage, strong return ratios and
enjoy leadership position. The allocation, however, can
either be made in staggered or in lump sum, depending on
investor’s risk appetite.
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