Coronavirus: India Inc Concerned, Markets See Fall
New Delhi: India Inc, as well as domestic stock markets, have shown concerns over the spreading cases of Coronavirus and its impact on global trade recovery.
The new virus, which is of the same genre as SARS of 2003, was first reported in WHO Disease outbreak news on January 5 in China’s Wuhan. Till now it has progressively spread across many countries.
According to the State Bank of India, the virus threatens global recovery.
In SBI Ecowarp report, the lender said that studies on economic impact of SARS virus of 2003 suggest that the outbreak had impacted industries such as tourism and the retail service sector.
As per the report, the total cost of SARS outbreak in 2003 was $40 billion which at current prices is around $57 billion.
“Although the fatality is low, the new virus has progressed much faster than 2003 SARS case. The impact of outbreak on China will be severe as Wuhan is the hub of transport and industry for central China,” the report said.
“With sudden shift in expenditure priority, growth will be affected in China and globally. Epidemiology models suggest disease is in ascending phase hence it is difficult to assess the full impact at this stage.”
The Engineering Export Promotion Council (EEPC) of India called for review on Coronavirus impact on trade, as China is amongst the top 10 engineering exports destinations.
It urged the authorities to comprehend the possible impact on trade as well, since engineering exports to China have been showing a robust growth in the current financial year.
Indian engineering exports to China increased by a significant 27.6 per cent to $1.77 billion during April-December 2019 -20 from $1.33 billion a year ago, according to EEPC India analysis.
“In fact, China has emerged as our 10th largest export destination for engineering goods, dominated by iron and steel as also industrial machinery,” EEPC Chairman Ravi Sehgal said.
He said that the government high level review has directed the Ministry of Shipping to initiate entry screening at the international ports having traffic from China.
“With disruptions reported in China due to transport and travel restrictions in several cities, we are trying to ascertain the exact impact on the trade,” Sehgal said.
YES Securities said that although the health scare is nothing short of a “black swan event”, the anxiety and fear in the financial markets will be a short-lived affair, going by past crises.
“The restrictions on travel in Wuhan and other cities of Hubei province will dent consumer spending, especially during Chinese New Year Holidays,” it said.
“However, the impact is deemed to be temporary. During similar epidemic in the past (SARS), economic impact was very short-term in nature, with the health-scare induced slowdown not persisting for more than 3-4 months.”
The Sensex on Tuesday closed below the 41,000 mark as market sentiments were dampened on worries that the Coronavius would drag world economic growth.
Stock markets in China will be shut until next Monday after authorities extended the Lunar New Year break by three days in the midst of the Coronavirus epidemic.
The Sensex closed 188.26 points lower at 40,966.86 while the Nifty closed at 12,060.25, lower by 58.75 points. All the sectors ended in red except IT and realty. Metals continued to be the biggest loser followed by auto and media.