The first two rounds of coronavirus outbreak have already wiped off Rs 52 lakh crore worth of equity investor wealth, with benchmarks Sensex and Nifty languishing at multi-year lows after falling 35 percent from their January peaks.

On Tuesday, the government announced a nationwide lockdown for 21 days, which is likely to bring all economic activity to a grinding halt.

As soon as the announcement of lockdown was made, people across the country resorted to panic buying to stock essentials despite the prime minister’s assurance of their supply. Amazon India and Flipkart temporarily suspended their services after the lockdown.

Sure, the lockdown has had us all extroverts and socialites a bit bored; there is no denying that the lockdown has had a few positive effects on the air quality, health and community service.

January was the month when the virus was spreading in China at a rapid pace. It brought about the first round of impact on India, where companies saw supply-side disruptions, owning to their over-dependence on Chinese imports.

Sectors like autos and pharmaceuticals were impacted severely due to the shortage of imported components.

The third round effect will likely materialize, as these shocks transmit to the rest of the economy, i.e. corporates facing a hit on bottom lines. Weaker firms will face cash flow shortages and workers will face pay cuts or retrenchments. This, in turn, can create a vicious cycle of lower corporate cap-ex and weaker consumer demand.

The worst virus-hit states account for Rs 130 lakh crore in terms of nominal GDP, or nearly 64 percent of national GDP. Maharashtra, with the largest number of cases, alone accounts for 14 percent of national GDP.

Although the prime minister has been pleading to the private sector to hold on to jobs and not let salaries go down, it is a difficult bet. It is left to the individual companies to try and see what best they can do. A lot to be done from the government’s side in the next few months. It cannot be just an amount kept for health infrastructure but a lot around the break in interest rates, in GST, a lesser amount of personal income tax for people; a mix of multiple things have to fall in place so that the consumer has some additional income.

Pegging the cost of the COVID-19 lockdown at USD 120 billion (approximately Rs 9 lakh crore) or 4 percent of the GDP, analysts on Wednesday sharply cut their growth estimates and stressed on the need to announce an economic package.

The Reserve Bank of India (RBI), which is scheduled to announce its first bi-monthly policy review on April 3, is set to deliver deep rate cuts and it should also be assumed that the fiscal deficit targets will be breached, analysts said.

It specified the cost of the three-week nationwide lockdown to be alone at USD 90 billion, which is over and above the lockdowns announced by various states like Maharashtra earlier.

They also said that the RBI is most likely to go for a 0.65 percent rate cut in the April review and will slash interest rates further by 1 percent during the course of the year.


The coronavirus outbreak represents a major external shock to the macro outlook, akin to a large-scale natural disaster.

As can be seen from the following table gives a comparative market movement of Global indices, it indicates that the fall in the Indian indices has been significantly lower than the stock market in other countries. Movement of major global indices are tabulated below:

Mirroring the emptying of supermarket shelves around the world, indebted corporates have rushed into money markets to hoard dollars, with a global shortage of dollar funding threatening to cripple firms from airlines to retailers.

PMI surveys from Japan showed the services sector shrinking at its fastest pace on record this month and factory activity contracting at its quickest in a decade.

China has announced it will lift the lockdown on Wuhan, the city at the epicenter of the coronavirus pandemic, on April 8, marking a significant milestone in its battle against the deadly outbreak.

For more than a month, Wuhan residents have been told to stay at home as the government escalated the lockdown measures — they’re not even allowed to go outside to shop for groceries, and instead have to rely on designated neighborhood committees to make group orders for daily necessities, often at a higher price.

Service sector activity took the biggest hit, with travel & tourism, F&B, and retail amongst the biggest areas hit as countries went into lockdown.

The good news, however, is that China is looking to return to business as usual. With the support of both monetary and fiscal policy, China will be looking to rebuild the supply chain.

GDP growth forecast for the world economy


The impact on the economy will be severe as we are looking at a situation of zero value addition over the next 21 days. This means no economic activity will take place for three weeks, except for essential services and public administration. This comes against the backdrop of a slow recovery from the downturn witnessed over the last couple of quarters, which further makes micro, small and medium enterprises vulnerable, while the informal sector will be the worst hit.

Here is how the situation might evolve from here on for the domestic economy and markets in different scenarios.


In case the situation worsens in India and globally, there would be further selling in domestic stocks and India’s GDP growth may drop to 3.5-4 percent levels even as the global economy slips into recession.


In a rosy situation, the virus will be contained in India, and the shutdown would not extend beyond April 15. In such a case, there would be gradual buyers in equities. Indian economic impact will be limited and FY21 GDP target will be 4.5-5 percent. But the March quarter impact will be severe.


In the third scenario, the virus will be contained in India, but the crisis would worsen globally. In such a case, Indian equities will outperform and India’s GDP would grow at 4-4.5 percent amid a global recession.


Lastly, if the situation is contained in India and globally, Indian markets may outperform. There will be aggressive buyers in such a scenario at current levels. There would be a manageable economic impact on India and the global economic slowdown will last 3-5 months.

A few hours back our Finance Minister Nirmala Sitharaman announced an economic package of Rs 1.70 lakh crore, with focus on a marginalised section, amid the coronavirus lockdown.