FEAR RULES DALAL STREET

Black Friday!

Oh! how we love to assign taglines and signages; give every occurrence a name so that it falls into a given slot!  How come we don’t assign other colours to the week – like Blue Monday, Red Tuesday ….get the gist of it?

But the crash of the markets today had nothing to do with it being the last day of the week. The markets, this entire week have been pretty volatile and 1000 points fall, we have seen that earlier too. Its just that when it happens on the last day of the week, it is unnerving.

The market it seems is inundated with so many negatives that there apparently, as this point of time, is nothing really to look forward to. The markets fell today on account of three reasons, one of which was already existent.

Firstly the spread of coronavirus. It is indeed turning into a pandemic and with 31 cases officially reported in India, the situation is scary. People are worried as they do not know where this is headed; all travel plans are on hold and the sense of uncertainty is the only certainty. The impact on the economy is slowly but surely already being felt across the globe. And because wo do not how far this virus will go, no one knows the course of action to take. The aviation and hotel industry is bleeding. Others will soon start feeling the brunt.

And adding to the fear factor was the episode on Yes Bank. While speculation was rife that SBI along with LIC will be arm twisted to takeover the private sector bank, RBI yesterday evening put it under a moratorium and took over. The failure of the PMC Bank just few months ago is still so fresh that this has got people worried. People all around are asking, “why are so many banks failing?” This feeling of fear has permeated all around. Yes Bank is more of a corporate and urban bank so its impact on the man on the street is limited unlike the failure of PMC. But the ire is about its failure – why does the tax payer need to bailout this private sector bank?

The third factor is a consequence of the first – the crash of the world markets due to the virus spreading. The Dow yesterday crashed 970 points, S&P fell 106 points and Nasdaq Composite fell over 279 points. Markets in SE Asia were all in the red so were Australia and Japan. When world markets collapse, the Indian markets were also expected to follow suit and that is precisely what it did.

As we said earlier, these are uncharted waters; no one knows where this virus will take the human race. At the moment, apart from the Antarctica, no place is safe. We just have to live through it.

The Indian economy was largely expected to bounce back in FY21 but if the impact of the virus continues for long, that recovery will get pushed further into the far away horizon. No amount of stimulus or rate cuts will get the fear of the virus out of people.

Till the virus continues to spread and thrive, markets will remain extremely volatile. It is only when we know that there is a cure or the virus disappears suddenly will a sense of calm return. Yes Bank is our systemic problem and that will have to be solved at the earliest.

So as the weekend comes, best to stay home and ponder over where we are heading in this globally connected world. Health, something which we have neglected all along in the race to reach ahead, is what matters, neither the money you earned nor the houses you built will save you. Indeed health is not valued till sickness comes calling…