Where is share market headed after coronavirus? Sensex jumped, up to doubled after last 5 epidemics

By: |
Updated: May 21, 2020 1:18 PM

The Indian share markets reacting to economic fallout from the COVID-19 pandemic is not new; there have been five other major events in the past two decades which made Sensex plunge up to 15 per cent, but resurge to as much as double the following year.

Sensex, NiftyDuring the global financial crisis of 2008, the Wall Street benchmark index, the Dow Jones Industrial Average witnessed one of the biggest monthly falls ever in the American stock markets

Coronavirus pandemic, which has hit over 48 lakh people around the world, is not the first epidemic the world is witnessing. In the last 20 years, there have been at least five such epidemics which led to a cascading effect on the global as well as domestic share markets. These were SARS (Severe Acute Respiratory Syndrome), Avian Influenza, Swine Flu, Ebola and Zika. HDFC Securities has observed a pattern where during an outbreak of any epidemic, BSE Sensex fell as much as 15 per cent, but delivered over 90 per cent return in the following one year. “The study showed that the market reacted to every epidemic/ pandemic in history and the recovery period was lesser than the drag down period,” Raveendra Balivada, Head- Investment Advisers, HDFC Securities, said in its research report. 

The Indian share markets reacting to economic fallout from the COVID-19 pandemic is not new; there have been five other major events in the past two decades which made Sensex plunge up to 15 per cent, but resurge to as much as double the following year.

SARS (2003-04): The disease was contagious and led to fatal respiratory illness. It appeared in the year 2002 in China, which spread worldwide within the next few months. According to the HDFC report, Indian share markets started reacting to the disease at the beginning of January 2003. The markets however recovered in mere two and continued to march North for the following couple of months. During the outbreak, Sensex plunged as low as 13.75 per cent. However, in the following one year the 30-share index delivered a whopping 91.20 per cent returns.

HDFC Securities Research

Avian Influenza (2004-05): Just after the world overcame SARS, Avian Influenza gripped the people. This bird flu started spreading in early 2004 in the eastern Asian countries. Domestic equity markets slumped 14.91 per cent during the epidemic outbreak. It took just three months to recover and in one year after that BSE Sensex jumped 55.06 per cent.

 

HDFC Securities Research

Swine Flu (2009-10): During the global financial crisis of 2008, the Wall Street benchmark index, the Dow Jones Industrial Average witnessed one of the biggest monthly falls ever in the American stock markets, following which the Indian share market was also badly hit. Soon after the financial crisis, the Swine Flu pandemic outbreak in 2009. It was also known as H1NI pandemic, which was the second of its kind after Spanish flu in 1918. Though it didn’t have much impact on the Indian equities, which fell just 3.26 per cent in 2009. Markets recovered from this minor fall in just two months. However, in 2010, BSE Sensex surged 36.35 per cent.

HDFC Securities Research

Ebola (2014-15): This epidemic caused major loss of life and socio-economic disruptions in the African countries. Similar to Swine Flu, Indian share market wasn’t affected much with this disease as S&P BSE Sensex fell just 3.37 per cent during the year of outbreak. However, from the second month of the calendar year 2014, Indian share markets rallied. Domestic equity markets posted 47 per cent returns in the following year.

HDFC Securities Research

Zika (2015-16): Just after the Ebola disease, the widespread epidemic was caused by Zika virus in 2015. It first appeared in Brazil, which was, later on, spread to other parts of South and North America. Soon, it spread its wings to other countries of the world. This mosquito-borne flavivirus led to a 13.57 per cent decline in the BSE Sensex. Markets took 3.5 months to recover from its negative effects, thereby delivering nearly 26 per cent returns in the corresponding year.

HDFC Securities Research

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1mjunction’s tea fetches higher price for TGFOP variety
2Hike in ethanol prices to help sugar mills to clear cane dues
3Onion traders to get three days’ time before enforcement of stock limits: Govt