Is this 21-day lockdown going to extend to a 90-day …

Mudassir Ali
Apr 08, 2020 01:42 PM 0 Answers
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Is this 21-day lockdown going to extend to a 90-day lockdown?

Mudassir Ali
- Apr 08, 2020 01:42 PM

Originally Answered: Does this 21-day lockdown going to extend to a 90-day lockdown?

With fresh coronavirus cases on the rise in India, the nation has started witnessing second-round effects of the virus spread: a complete halt to economic activity.

The government, analysts said, must consider more measures to tackle the situation, if third round of effects – job losses, stretched balance sheets, lower capex and weak consumer demand – are to be tamed.

The first two rounds of coronavirus outbreak have already wiped off Rs 52 lakh crore worth of equity investor wealth, with benchmarks Sensex and Nifty languishing at multi-year lows after falling 35 per cent from their January peaks.

January was the month when the virus was spreading in China at a rapid pace. It brought about the first round of impact on India, where companies saw supply-side disruptions, owning to their over-dependence on Chinese imports.

Sectors like autos and pharmaceuticals were impacted severely due to shortage of imported components.
As the virus began spreading in India, it paved way for the second-round effect, where economic activity came to a halt due to lockdowns.

A host of companies from cement (India Cements) to heavy engineering (BHEL) and from automakers (Maruti Suzuki, M&M and Hero MotoCorp) to ancillaries (Amtek Auto) Castrol India), have announced temporary shutdowns.

FMCG firms such as Hindustan Unilever, ITC and Dabur India also shut manufacturing facilities, except for plants producing essentials, after the government announced partial lockdowns in some parts of the country.

On Tuesday, the government announced a nationwide lockdown for 21 days, which is likely to bring all economic activity to a grinding halt.

“The third round effect will likely materialize, as these shocks transmit to the rest of the economy, i.e. corporates facing a hit on bottom lines. Weaker firms will face cash flow shortages and workers will face pay cuts or retrenchments. This, in turn, can create a vicious cycle of lower corporate capex and weaker consumer demand,” Nomura India warned.

Foreign brokerage Morgan Stanley has cut India Inc’s earnings for a third time since the virus outbreak.

“Our F2021 BSE Sensex EPS growth estimate is now 10 per cent, down 20 per cent from mid-February,” it said in a note on March 23.

In case the situation worsens in India and globally, there would be further selling in domestic stocks, and India’s GDP growth may drop to 3.5-4 per cent levels even as the global economy slips into recession, it said.

In a rosy situation, the virus will be contained in India, and the shutdown would not extend beyond April 15.

In such a case, “we would be gradual buyers in equities. Indian economic impact will be limited and FY21 GDP target will be 4.5-5 per cent. But the March quarter impact will be severe,” Phillip Capital said.

In the third scenario, the virus will be contained in India, but the crisis would worsen globally. In such a case, Indian equities will outperform and India’s GDP would grow at 4-4.5 per cent amid a global recession.

Lastly, if the situation is contained in India and globally, Indian markets may outperform. “We will be aggressive buyers in such a scenario at current levels. There would be manageable economic impact on India and the global economic slowdown will last 3-5 months,” Phillip Capital said.

Dalal Street awaits sops
Finance Minister Nirmala Sitharaman on Tuesday said the government was preparing a stimulus package and the same was awaiting a few procedural clearances. The government has so far requested India Inc to play salaries on time during the lockdown.

JM Financial expects focused measures for sectors such as aviation, retail and small businesses in the coming days.


If the situation gets worse the government will have no other option but to extend the lockdown. This you can imagine why the government is providing food grains of 7kg per person for 3 months which means there is a chance of lockdown being extended.If so get ready for seeing a crisis you have never seen before.

#Stay Home #Stay Safe..!!

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