2020s Black Swan: Coronavirus

Many days are red followed by some green and then red again!! The highly networked world seems to cause more panic and the market is reacting to all this causing a lot of churn. I recommend everyone to read the Goldman Sachs report on the virus.

Central banks have started taking measures to support the economy. The US Fed did what the markets were expecting and more but even that seemed to fall short of the Street's expectations. Investors turned more nervous after the US Fed cut benchmark interest rates by 50 basis points, with the Dow dropping by 2.9% on Tuesday. Domestic investors too remain on tenterhooks, parsing news for news on whether the coronavirus is spreading, with the broad market down by 0.5% today. Meanwhile, back home the December quarter GDP numbers show that the economy has not recovered. The Gross Value Added numbers fell from 4.8% in the September quarter to 4.5% in the December quarter. That’s the lowest growth since the March 2013 quarter. On the positive side, however, the manufacturing PMI numbers for February showed a robust recovery. Manufacturing Purchasing Managers Index (PMI) for February 2020 came in at a high 54.5, allaying concerns that the Covid-19 virus had taken a toll on Indian manufacturing. While the PMI was lower than January’s level of 55.3, it still indicates robust expansion.

Meanwhile, OECD's interim economic report has cut the 2020 growth rate for India to 5.1% and forecast for 2020-21 to 5.6%. The report continues that India can do better with reforms and monetary policy support. All eyes are now on what the Indian government will do to balance fiscal policy and support investments.

Source: Moneycontrol & Goldman Sachs

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