Corona impact on stocks!

All over the world, equity market has been witnessing a massive sell-off due to weak market sentiments triggered by the outbreak of Coronavirus. This panic-like situation has resulted in a sharp fall in the benchmark indices all over the world. BSE Sensex from its recent peak in January 2020 has fallen more than 20 per cent.

In view of curtailing the increasing spread of Coronavirus, many states such as Maharashtra, Delhi, Karnataka, Punjab, Chhattisgarh, Telangana, etc have ordered the closure of all malls, multiplexes and other places, events of mass gatherings like marriages and religious gatherings to avoid the spread of the virus till the end of this month.

This closure will put economic activity like trade, commerce and services to a standstill, which would negatively affect in the quarterly performance of the major companies especially consumer facing companies. Further, closure of pubs is expected to weigh on the alcohol makers like United Spirits.

The stocks of such consumer facing companies are under pressure and witnessed a sharp fall. The stock of Future Retail which owns Big Bazaar, Hypercity, Ezone etc has tanked nearly 60 per cent from the recent high in February 2020 while, the stock of Phoenix Mills has corrected more than 25 per cent during the same period. Further Trent, which owns retail brand chains like Westside is down by nearly 30 per cent. The stocks of multiplex operators such as PVR, Inox Leisure and Mukta Arts have tanked more than 43 per cent, 38 per cent and 50 per cent, respectively from the recent high of February 2020 to till date.

Due to the outbreak of Coronavirus, the number of stocks has witnessed a sharp fall in their prices that pushed many overvalued stocks to their fair value while, many stocks are available at an attractive valuation. No one can predict when this turmoil will come to an end but investors can slowly and wisely start deploying their money into stocks which have a strong business model, healthy balance sheet as during this time, the companies income statement might get hit but a strong balance sheet (debt free, surplus cash) can help them to survive and bounce back till the situation goes back to normal.