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Markets respond to new COVID restrictions in the country

While the new COVID restrictions might lead to some short term volatility and impact certain companies, this could also be an opportunity for other firms. As an investor, sticking to your plan is the best path to tread despite the noise.

What’s the News?

New Covid-19 restrictions have been placed in some parts of the country.

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Several states including Maharashtra have imposed partial lockdowns due to a sharp rise in new Covid-19 cases. India's economic recovery momentum could see a dampener if states decide to impose stricter restrictions to contain the infection. The partial lockdown imposed by several states will impact key economic activities like manufacturing and construction. As Covid-related restrictions get tighter we will have to wait and watch to assess the impact that this may have on the economy.

Maharashtra contributes over 13% of the country’s GDP. The Maharashtra government on April 4 announced new restrictions under its ‘Break the Chain’ campaign to curb the spread of novel coronavirus infections. These restrictions will last till April 30, as of now. 

Following the Maharashtra state government notification to shut theatres for a month, shares of PVR Ltd and Inox Leisure Ltd fell 5% and 4% respectively. The Maharashtra government said all hotels and bars will remain closed as part of restrictions; only "takeaway" facility will be allowed. Similarly, business such as tourism, aviation and consumer goods are also likely to take a hit if partial lockdowns are announced.

While shares of some companies have taken a beating, there are others that have risen due to external factors. Increased testing, and other steps,  have given a boost to companies in the diagnostics segment. Companies such as Dr Lal Path Labs, Metropolis Health Care, Thyrocare Technologies Ltd Etc.  have risen anywhere between 10% to 20% in the past month.

How does this affect your wealth?

The stock market may experience short term volatility. However, it is important to know that while there are companies that may be negatively impacted, there are others that may be able to thrive in such environments. As an investor, one must stick to the investment plan and continue investing. Let the fund managers decide how to best capitalize on opportunities.

 

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