In spite of the Covid-19-induced shutdown, the only sector that remains constant and upward in the stock market is chemicals.
The rapid spread of the unprecedented COVID- 19 pandemic has put the whole world in deep jeopardy and changed the global outlook. This pandemic is not only a global health emergency but a significant global economic downturn too. It has been the biggest challenge to the overall business industry this year. Some have been beneficial while whereas some have seen a major setback with the impact of this pandemic. The government of India announced Janata Curfew on 22nd March 2020 and a lockdown policy to limit the spread of this deadly virus which has sent millions of people to death beds. The Sensex fell by 3934.72 points on 23rd March after the announcement of lockdown. This was the biggest fall after the Harshad Mehta Scam news broke down.
The fall in Sensex was due to the stoppage of movement of goods and services which caused major challenges to business. The most serious challenge was being mere Survival in this cut-throat business environment.
The market had fallen to death and has now again risen to stars. Let’s take a look at the impact on certain key sectors:
One of the most affected sectors during the pandemic is the pharma Sector. Pharma has seen an upward trend in the net profits (Before Tax) before the half-yearly results, 2020, in comparison to the respective results of the previous year. Companies like IPCA Laboratories Ltd has seen more than a double-fold increase in their Profits. Their profits has increased by INR 484.34 Crores while compared with Half Yearly results of 2019. Their share price has increased by INR1264. from INR 901.9 to INR 2166.85. IPCAs growth was driven by strong double-digit growth in its pain, cardiac, and antidiabetic, and derma portfolio. Similarly, companies like Torrent Pharmaceuticals Ltd., Abbott India Ltd., Pfizer Ltd have all seen an upward trend in their profits and share price.
Health Care Sector
If we look at the health care sector, the industry was already in a fragile state in the pre-covid period in terms of its financial robustness. During the lockdown, the private healthcare sector has witnessed an 80% fall in patient visits, resulting in a drop in revenue. The healthcare sector has seen a decline in the business during the first quarter of FY 20-21 while compared with FY 19-20 but has shown an upward trend in Second Quarter due to the relaxation given in lockdown. Companies like Metropolis healthcare ltd. & thyrocare technologies ltd. have seen a decrease in Quarter 1 profit of FY 20-21 while compared to Quarter 1 profit FY 19-20 but had seen an increase in quarter 2.
Consumer Goods Sector
The Indian economy is seeing significant growth in the FMCG sector with diverse businesses, including grains, cosmetics, etc. In the era of the pandemic, more consumers are seeking value purchases and avoiding high prices. Consumer Sector companies like HUL, Godrej Consumer, Dabur India have all seen an increase in half-yearly profits, 2020 as compared to half-yearly profits, 2019. This is due to their constant analyses of the consumer and market demands. All have introduced their anti-corona products which are high in demand considering the market situation. These companies have shown their active interest in the changing economies and have made adjustments in their product lineups during as well as post covid period.
Agrochemicals/ Fertilisers Sector
In spite of the Covid-19-induced shutdown, the only sector that remains constant and upward in the stock market is chemicals. Share of most of the companies under this sector has increased during covid. Companies like Rallis India, Kaveri Seed, Galaxy Sufricants have seen an increase in the range of 20-35% in PBT when compared to the last half-yearly Results, which has increased in their share price ranging from 7% to 61%. The biggest gainers in this sector are Bayer CropScience Ltd, their PBT has shown an increase of over 50% which has resulted in an increase in share price by 76% as of 30-09-2020 when compared to the share price as of 30-09-2019.
Markets react sharply and violently on both sides. The impact of covid was one such example of a swift downturn, which brought a surprise for everyone. The fall was compared to the 2008 financial crisis and there was pessimism across global markets. But somehow the market has surprised every analyst out there. Stronger players were able to dominate the marginal ones and gain market shares due to size, operational efficiencies, improved productivity, and cost-cutting measures. Great Businesses make the best out of the worst situation. The value of good companies is realized only during bad times.
Rajat Mohan is Senior Partner at AMRG & Associates. Views expressed are the author’s personal.