Posted at 11:05 AM , on March 4, 2020
During the week, the Sensex lost close to 3000 points and the Nifty has now given up 10% from its peak. But the Indian markets were not alone. The virus pandemic has literally hit markets across the globe.
How the world markets fell
Some of the numbers pertaining to the fall in DJIA were staggering. The Dow lost nearly 10% in one week, the worst performance since the Lehman crisis. Even the NASDAQ fell sharply. But the US markets were not alone. The UK FTSE and the German DAX were also down more than 10% in a month as the Chinese virus threatened to spread its wings to Europe also. In Asia, the damage has been across the board with Japan and most of Asia taking deep cuts even as Australian markets sank. What explains the panic?
China is the new GDP driver
If you look at the $3 trillion accretions to global GDP each year, then China accounts for more than 33% of this growth in absolute terms. The reliance on China is huge both ways. Automakers, luxury goods makers, and mobile phone manufacturers count on China to sustain demand. There is also a supply chain issue. Sectors like auto, electronics, pharma, and textiles rely heavily on cost-effective from China. A virtual shutdown in China means all these inter-linkages get impacted.
Posted at 12:10 PM , on February 25, 2020
An elaborate report by CNN had clearly brought out that the Indian pharma industry could be the most vulnerable to the Chinese Coronavirus pandemic. It only magnified the already existing problems for the pharma sector in India.
Why China matters to pharma
Over the last 30 years, Indian pharma companies have become giants riding on the back of the generic drugs wave. Today, India produces nearly 20% of all drugs manufactured in the world by volumes. The big challenge is that India relies on China to supply nearly 70% of the raw materials for the manufacture of these drugs. Popularly known as active pharma ingredients (APIs), the factories to manufacture these APIs are largely based in the Hubel province of China. This region is one of the worst affected by the Coronavirus scare as the virus is expected to have originated there. Most factories in this region are shut and hence production is badly affected. Then there is the challenge of dwindling inventories. Most of the Indian pharma companies keep inventories up to 2 months with them. The production disruption has already crossed 1 month and most of the pharma companies are now worried that this could create a major supply chain problem for them. Companies like Cipla heavily depend on China for feeding their supply chain and the impact is evident on the stock price. Even alternate sources of APIs have an indirect dependence on China.
Posted at 11:17 AM , on January 27, 2020
No economist, policy maker or even CEO of an Indian company believes that the government would be able to hold 3.3% fiscal deficit in 2019-20. Some leeway is bound to be there in a year when outlays are growing and inflows have been tepid. But there are four key issues to tackle with the fiscal deficit.
Stay within the leeway
This year the government may not have much of a choice but to offer a counter cyclical approach to growth. It will have to give some leeway on the fiscal deficit front to propel growth but the question is how much? Ideally, the government should stick to the limits prescribed by the NK Singh Committee which permits a maximum deviation of 50 bps in an exceptional year. If the government can hold the fiscal deficit at less than 3.8%, it will be seen as a positive move. Continue reading
Posted at 6:15 PM , on October 12, 2015
What will drive markets from here on?
As the Nifty gets closer to the 8200 mark, the question is whether the rally has further legs from these levels? The answer can be quite tricky. Currently, there are quite a few key factors which need to be addressed before we can have a clear picture on where the markets are headed.