Hotels & Tourism business will get highly effected.
Indore Management Association organized its New WebEx Webinar Live session series, Unfolding Secrets: THE IMA Way on the topic “Impact of Covid – 19 on Economy & Market Outlook” on Saturday, May 02, 2020. Speaker for the session was Mr. Nilesh Shah – Managing Director, Kotak Mahindra Asset Management Company Ltd.
Mr. Nilesh Shah is the Managing Director of Kotak Mahindra Asset Management Co Ltd. In his previous assignments, Nilesh has held leadership roles with Axis Capital, ICICI Prudential Asset Management, Franklin Templeton and ICICI securities.
Nilesh is a gold medalist chartered accountant and a merit rank cost accountant. He has been the part of the teams that received ‘Best Fund House of the Year’ award at Franklin Templeton, ICICI Prudential and Kotak Mutual Fund.
Mr. Shah started the session by stating that; During this unprecedented crisis triggered by the new coronavirus pandemic, markets won’t get confidence or comfort unless there is a medical solution.
We need a medical solution before a financial solution can emerge and markets can recover,” he said, hoping for a cure against Covid-19 to emerge soon.
He said; “My presumption is the central government will have to focus on multiple things like the banking sector NPAs, consumption continuity”. The RBI, in fact announced a liquidity support of Rs 1 lakh crore to banks via repo operations as it as it tries to prevent a freeze in the credit markets. The finance minister, too, is expected to announce measures.
The shutdowns will cause a slowdown but, at the same time, benefits will flow in as the central bank and the government respond to current situation by way of lower interest rates, higher liquidity and fiscal stimulus, Shah said. There will also benefits from lower oil prices and lower trade deficit.
Mr. Shah further said that; Investors could search for opportunities in sectors such as financial services, technology, healthcare, contract manufacturing, and cloud computing. The companies with low leverage and higher-margin also offer good opportunities to market participants.
He also said that; Systematic investment plan (SIP) investors stand a good chance at investing, given this is an opportune time to average. This is also the period where leveraging can be potentially lethal.
Gold prices have done well when interest rates were low and liquidity was high. Gold moved from $750 in November 2008 to $1,875 in September 2011, on the back of lower interest rates and high liquidity.
Similar liquidity and interest rate situation is likely to prevail from here on. Gold price will be supported. Gold can see a bigger jump if China decides to diversify a part of its foreign exchange reserves from dollar to gold.
There is a nascent but growing movement in the US and the world to seize Chinese assets and use them to settle corona virus claims. This low probability but high impact event could push China to buy gold. If that happens, gold prices can remain elevated for some time to come.
Key takeaways from the session:
- Most of the discretionary expenditures will increase at a severe rate.
- Vendor payment times will be increased.
- Most vulnerable companies will be the leverage companies.
- Hotels & Tourism business will get highly effected.
- Savings will increase in coming days.
- Mutual Funds, NBFC will be benefitted through this.
- Insurance companies will focus more on Health Insurance part.
- Entertainment will be an indoor thing instead of outdoor.
- Government will spend more in health care sector.
- Consumers will probably buy more small ticket consumer items like; food, ice cream etc but consumer durable will face a downfall.
- Technology companies will work from home & this culture will increase. TCS announced 75% of its employees for next 5 years will work from home.
- Companies which allow your data to save on cloud will do well in coming days.
- FDI will increase in India for domestic saving.
- India has a tremendous goodwill across investors & we need to encash it.
- India will be getting 3-7 billion equity investment from foreign investors.
- We must leverage our domestic market than China & let India start & flourish it.
