Financial Markets @ May 2020

In last two months global market were impacted by the news flow around Coronavirus as cases spread beyond China to other parts of the world.

The Global market seems to be witnessing some sense of stability following the massive liquidity infusion by govt. and central banks in the global economies.

The Economic implications of the virus are expected to be significant. It can be safely assumed that several countries will face a deep and long recession. The Euro zone is expected to be severely impacted, followed by US. Asia will also be impacted; however the data from China is not so negative.

The standoff between the major oil producing nations, Russia & Saudi Arabia has resulted in Oil prices crashing to multi years low, however a tentative agreement has been recently reached.

The World GDP growth likely is negative in 2020. IMF expects the world GDP to shrink by 3% in 2020 with advance economies expected to shrink by 6.1%.

Sectors such as airlines travel and tourism, Hotels, retails and Automobiles are amongst the sector likely to be most impacted.

The Banking system is expected to see a rise and stress on their portfolios – both retail and corporate (especially MSME). Over the medium term, lower Oil and Commodities Prices, and low interest rates are a positive for an Indian Economy.

In the current volatility, valuation of many companies (across the market cap spectrum) has become reasons making equity more attractive.

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