Updated: May 25
COVID-19 and exchange crash- The sentiment within the stock markets across the planet is gloomy. This is often reflected within the frequent crashes within the share markets all told parts of the planet. Financial markets in India is witnessing sharp volatility currently as a result of the fallout in global markets.
The autumn is in line with the worldwide benchmark indices because the domestic market usually tracks the most important global indice, and also the high volatility is probably going to continue within the near future. Further, with overseas investors (FPIs) flying to the protection of dollar-backed assets from emerging markets has led to a pointy downfall within the Indian exchange. S&P BSE Sensex which was 42273 points on 20 January 2020 is 29894 points on 08 April 2020. The worth to Earnings Ratio of Sensex is a smaller amount than 18 (P/e is 17.81 on 31March, 2020) which is way but the historical range between 20-24. Markets across large, mid, and little caps have corrected sharply from their peaks. Within the FY20 the mid-cap index fell by 26 percent while the Sensex fell by 22 percent.
The exchange contains a history of crash and recovery-
The worldwide exchange contains a history of crash and recovery and also the Indian exchange is not any difference from that. Sensex plunged 53 percent in one year in Harshad Mehta Scam” (1992) but recovered 127 percent in 1.5 years. During the “Asian Crisis” (1996) Sensex dipped 40 percent in four years but recovered 115 percent in one year. During “Tech Bubble” (2000) Sensex crashed 56 percent in 1.5 years but recovered 138 percent in 2.5 years. When the US faced the “Real Estate – Lehman” crisis (2008) Sensex crashed 61 percent in an exceedingly year but recovered 157 percent in 1.5 years. The present market has crashed around 30 percent in but three months. Thanks to COVID-19, nobody knows when the economy are going to be back on course. Some Experts even compare this meltdown of economies with the “Great Depression” of the 20th Century. The “Great Depression” started in 1929 and lasted until the late 1930s. Between 1929 to 1932, worldwide Gross Domestic Product (GDP) fell by an estimated 15 percent. By comparison, worldwide GDP fell b, but 1 percent from 2008 to 2009 during the good Recession.
Recovery within the current stock market-
It would be foolish to expect a fast economic rebound from the present COVID-19 effect. Though the financial crisis is a inevitable, considering all-out efforts by central banks and monetary authorities, to melt the blow, deep economic slump can be avoided. it's true about the market that whether it's the correction or growth, both phases make equity or exchange interesting and value taking exposures. But it's highly advisable that don't jump into the market or don't try to catch the falling knife.