In the run-up to the Budget 2020 market momentum got disrupted due to the outbreak of Coronavirus in China which is now spreading to other countries as well, but this is not isolated incident for equity markets and investors should use the dips to get into quality stocks, says Pankaj Pandey, Head Research at ICICIdirect.com.
The outbreak will have an impact on global growth as well as Chinese growth if it plays out for an extended period of time. China usually contributes about 16 percent of global GDP and the last time when we had the instance of SAARS virus it led to a decline of 50 bps in the GDP, said Pandey.
Something similar is possible, but our sense is that the way growth bounced back after a few quarters – we expect a similar reversal to happen, explains Pandey.
He further added that in case the market correct we see it as a buying opportunity for investors as the impact will be short term.
Frequently Asked Questions
A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.
There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.
Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.
In terms of expectations from Budget 2020, the emphasis would be on supporting or reviving growth that would be of prime importance along with measures to boost consumption, kickstart investment cycle, and generate environment.
But, the Budget is unlikely to surprise equity markets in a big way. We expect the fiscal deficit to slip towards 3.8 percent, and next year as well it would remain at elevated levels of 3.5 percent but that would not be taken negatively by the market, suggest Pandey.
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