Healthy economy, healthy people

Healthy economy, healthy people

Nationwide lockdowns implemented early and aggressively are necessary to curb the coronavirus pandemic, but many of us are fretting about the deep economic pain that comes with it – petrifying growth rates, unemployment, business closures.  

World markets have been swinging violently.

The benchmark S&P BSE Sensex  rises 500 points one day only to give up 1200 points in the very next day, and the short-term outlook is not too clear either.

The IPO of the state-owned monopoly, Indian Railway Catering and Tourism Corporation (IRCTC), lost nearly 50% from its all-time high of Rs 1,995 hit on February 25 this year.

Shares of the country’s biggest pure-play credit card company, SBI Cards and Payment Services, is struggling on bourses to trade around its issue price of Rs 750 per share.  Though many brokerages were optimistic about the highly fancied IPO, with some predicting up to 60 per cent upside from the IPO price range of Rs 750-755, given its dominant position in the credit card market and strong parentage, it is now trading 12.60 per cent lower to its issue size.

The Sensex fell from a peak of 42,000 points this January 17 to below 28,000 in three months. In the last couple of weeks, the New York Stock Exchange halted trading on several occasions, witnessing the largest single-day fall during this period. A daily fall of 2,000-3,000 points in several global indices appears to be a routine affair, and regulators are clueless about what to do.

It is evident that vicious market swings are becoming the norm, and Wisdom Capital market analysts expect markets to swing sharply until we slow down this global health crisis, and the number of new infections stops accelerating.

Many of Wisdom Capital’s young clients have never experienced a market selloff as violent as this, and they draw comparisons between the coronavirus crisis and the global systemic crisis of 2008.

But experts warn that the present crisis could outdo both the dot-com bust and the 2008 financial crisis.

Governments are doing their best to mitigate these effects by using traditional monetary and fiscal policies such as cutting interest rates, quantitative easing, increasing unemployment insurance, bailouts and  non-traditional methods like direct cash transfers. 

The consensus among Wisdom Capital market analysts is that we need economic policies that mitigate the impact of lockdowns and ensure that the current crisis does not trigger financial, debt or currency crises. The policies should focus on flattening the recession curve, ensure that the shutdown has only temporary effects, and facilitate a quick recovery once the economy is taken out of the deep freeze. As the number of coronavirus infections globally head toward 10,00,000, it becomes imperative for nations to have a singular focus on containing and reversing the spread of COVID-19.  Because you cannot have a healthy economy without healthy people.