VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services
He is known for his articles on capital markets, wealth management, and Indian and global economy. He has presented many papers and delivered many lectures on the capital market in national and international seminars. He has authored four books on economics, presented eight papers in international seminars and 65 papers in national seminars.

Global recession due to pandemic inevitable; but recovery can be fast

There are a few who fear that this can even lead to a depression.

BCCL
A prediction, which can be made with reasonable accuracy, is that the global economy will slip into recession in 2020.
We have never had a global recession or market meltdown triggered by a public health crisis in modern history. Recent recessions and market meltdowns were triggered by economic/financial causes. But now, we have a market meltdown triggered by a global pandemic.

The meltdown has been savage, globally. This is the worst crash in the shortest time. In 2008, the crash was worse. In India, Nifty crashed 65 % from the peak; but that was spread over several months. This time a 30 per cent crash happened within a few days. In the mother market US, Dow crashed 32 per cent in 18 days.

The crucial factors everyone is looking forward to is: When will the new cases peak? In China, it peaked in two months after the outbreak. Once new cases peak in the US and Europe, stability will return. This medical number will dictate the financial/ economic numbers.


Global economy is already in recession
A prediction, which can be made with reasonable accuracy, is that the global economy will slip into recession in 2020. Almost certainly, we are in recession now. There are a few who fear that this can even lead to a depression. Initial estimates suggest the global economy will contract 1 per cent this year. Q2 contraction would be savage. Last time the global economy contracted was in 2008-09.

Even in 2008, when the market crash was worse, the real economy was working. But now, the real economy has come to a grinding halt due to the total shutdown in most parts of the world.

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Recovery? Yes. When? Difficult to predict
Another possible prediction is that this epidemic will also come to an end and the global economy will recover. But when the epidemic will end and when will the global economy start to recover is difficult to predict, perhaps in two months, perhaps in two quarters. The recovery in the markets is likely to be swift and sharp.

Our markets have been dancing to the tune of the mother market, Wall Street. But it is important to appreciate the fact that the situation is much better in India in terms of the virus impact. A very recent research report said warm temperature can slow down the spread of the virus. So it is possible that India may be less impacted.

Stay calm
True, these are unnerving times. In panic situations like this, it is important to stay calm. The market is down by around one-third already. Values that we see in the market are reflections of fear, panic and total confusion. So stay calm.

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Investors can certainly nibble at blue chips available at attractive prices. FMCG, pharma and IT and very selective financials look attractive in the present context.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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