Presentation studies the Impact of COVID on Different Sectors of Indian Stock Market. Article observes significant changes in Indian Industrial Sectors in the wake of COVID 19 Pandemic.

1. NAME : RAJIV ROY
COURSE : MASTERS IN BUSINESS ADMINISTRATION
SPECIALISATION : BANKING AND FINANCE
INSTITUTE : AMITY UNIVERSITY, MUMBAI
1

2. Impact of COVID on
Different Sectors of
Indian Stock Market

3. Economic and Sectoral Impact of COVID Pandemic
Introduction:
• The outbreak of COVID-19 has affected the entire global financial market in an unprecedented way.
• Due to the disruptions that emerged in the global market; the financial market of India also reacted to the pandemic
and witnessed sharp volatility.
• The rapid spread of the unprecedented COVID- 19 pandemic has put the world in jeopardy and changed the global
outlook unexpectedly. Initially, the SARS-CoV-2 virus, which caused the COVID-19 outbreak triggered in Wuhan
city, Hubei province of China in December 2019, and with time it spread all over the globe.
• This pandemic is not only a global health emergency but is a significant global economic downturn too.
• As many countries adopt strict quarantine policies to fight with the unseen pandemic, their economic activities are
suddenly shut down.
• Uncertainty and risk created due to this pandemic, causing significant economic impact all over the globe affecting
both advanced and emerging economies such as the US, Spain, Italy, Brazil, and India.
• In this context, the financial market has responded with dramatic movement and adversely affected.

4. 4Sector Impact:
Nearly two third of the Indian Economy is impacted by corona virus. While majorly all sectors are impacted by the
paramedic some sector saw some relief too. Indian economy is broadly divided into three key sectors: Agriculture,
Industry and Manufacturing, and they are further classified into various sub-sectors. The table below shows how
severely various sectors have been impacted by the pandemic.

5. 5Analysis of Selective Sectoral Impact in wake of COVID-19
Impact is bifercated on the basis of intensity and impact of COVID-19 pandemic on these sector .i.e, Low, Medium
and Highly affected sectors it also comprises of Company Specific impacted.
1.Low Impacted Sector – Healthcare
Healthcare industry in India comprises of hospitals, medical devices, clinical trials, outsourcing, telemedicine, medical
tourism, health insurance and medical equipment. The industry is growing at a tremendous pace owing to its strengthening
coverage, services and increasing expenditure by public as well as private players.
Growing incidence of lifestyle diseases, rising demand for affordable healthcare delivery systems due to the increasing
healthcare costs, technological advancements, the emergence of telemedicine, rapid health insurance penetration and
government initiatives like e-health together with tax benefits and incentives are driving healthcare market in India.
 By 2020, India is expected to rank amongst the top 3 healthcare markets in terms of incremental growth
 By 2020, the healthcare information technology market is expected to grow 1.5 times from current $1 bn
High-quality businesses will outperform in difficult market environments. The Indian Government announced a lockdown
of the entire country on the 22nd of March. The proactive measure by the Indian Government should help prevent a
widespread COVID – 19 pandemic though the impact of the global slowdown could last longer as developed countries
may take time to fully roll back all restrictions.

6. 6Impact of coronavirus on Healthcare stocks
On the other hand, investors have now come to realize the potential of Healthcare stocks amidst the ongoing crisis. They
appear to literally be on a shopping spree, with almost all the pharma companies, barring a few, closing in green every
single trading day. As of April 16, 2020, both the major indices tracking pharmaceutical stocks – S&P BSE Healthcare and
Nifty Pharma – grew by about 36% and 42% respectively since March 23, 2020. This major leap in demand for healthcare
stocks offers an excellent investment opportunity for retail and institutional investors.
In tandem with pharmaceutical companies, diagnostic laboratories have also witnessed a sharp rise in their share prices. As
of April 16, 2020, the stock prices of both Dr. Lal Pathlabs and Thyrocare, two of the biggest diagnostics firms in India,
have grown tremendously by around 20% and 14% respectively since March 23, 2020. This meteoric rise in share prices
was prompted by rising health awareness among consumers and a multi-fold increase in the number of preventive
checkups and diagnostic lab testing.

7. 7Reasons for Healthcare stocks’ rise during market volatility
Now that you’re aware of the impact of coronavirus on healthcare stocks, let’s take a closer look at some of the factors
fuelling this rise.
1.Tracking of global trends
The Indian financial markets are closely interlinked with the global markets. When it comes to stocks, the investors’
sentiments play a huge role in determining the price movement. The rapid rise in the share prices of pharma stocks in India
is partly fuelled by the overall global trend. As of April 16, 2020, the Dow Jones U.S. Pharmaceuticals Index has also
shown a growth of around 28% since March 23, 2020. The same uptrend can also be witnessed in the pharmaceutical
indexes of China, the United Kingdom, and Japan. This is testament to the fact that the global outlook on pharma stocks
has turned overwhelmingly positive.
2.Rise in demand for drugs
The COVID-19 outbreak has significantly increased the demand for generic and branded generic drugs. This is another
major reason for pharma stocks’ rise during market volatility. The demand for drugs like paracetamol, ibuprofen, and
multivitamins, among others has skyrocketed ever since the coronavirus outbreak. Specific drugs like those used to treat
asthma, COPD, and diabetes have also shot up excessively. Furthermore, the USFDA has awarded quick approvals for
asthma drugs manufactured by Indian pharmaceutical companies, leading to a positive impact in Indian pharma stock
prices.

8. 83.India’s standing in the global pharmaceutical industry
Indian pharma companies have always had a good standing in the global pharmaceutical industry. They have consistently
been leaders in manufacturing of generic drugs both domestically and globally. Several drugs manufactured in India have
reached the shores of various developed economies such as the UK, the EU, and the US. On top of this, India also enjoys a
cost advantage, since the drugs manufactured here are more affordable. All of these factors combined have made both
domestic and global investors take a good look at the Indian pharmaceutical sector, thereby driving the demand for drugs
made in India.
Conclusion :
The world has now shifted towards viewing hydroxychloroquine, the anti-malarial drug, as a potential drug that could be
used in the treatment of COVID-19. This sudden shift has put the anti-malarial drug into the spotlight. Even the President
of the United States recently sought help from India with respect to procurement of the drug. Fortunately, India is one of
the leading manufacturers of hydroxychloroquine with several pharma companies such as Zydus Cadila and Ipca Labs,
among others, actively manufacturing the drug. Considering all of these facts, in the current scenario, the golden run of
pharma stocks is unlikely to subside in the short-term.

9. 9Analysis of Impact on Companies in Healthcare Sector
A)Apollo Hospitals Enterprises Limited.
Apollo Hospitals Enterprise Limited is an Indian Hospital chain based in Chennai, India. It was founded by Prathap C.
Reddy in 1983 as the first corporate healthcare provider in India. Several of the Apollo's hospitals have been among the
first in India to receive international health accreditation by the America-based Joint Commission International (JCI) as
well as 13 NABH National Accreditation Board for Hospitals and Healthcare Providers hospitals. Apollo’s hospital
business revenue has been hit by about ₹70 crore due to lower footfall in March. But the pre-covid growth was decent. This
saw the standalone hospital business clock a revenue growth of 17% year on year (y-o-y) in Q4.

10. 10On a positive note, Apollo lowered its debt by about ₹440 crore, according to analysts, with the sale of its entire stake in
Apollo Munich Health Insurance. Apollo has also completed its expansion programme, which will keep the overall net
debt under control. It will incur some borrowings this year to tide over the fixed costs expenses, but that should be
manageable. The pharmacy business may be the saving grace during these tough times and should keep the cash flowing.
The market is expecting this vertical to grow decently in the coming year. Analysts see Apollo going back to its hospital
margin expansion trajectory in FY22 to help drive cash generation and debt reduction. In a very polarised market where
drug makers and IT stocks are ruling the roost, Apollo hospital stock has been quietly hitting new highs continuously, no
matter whether the broader market is in a correction mode, or in an uptrend. That even when its peers are down in the
dumps. The company, like all its peers, was deeply impacted by the Covid-19 pandemic, which forced people to postpone
elective surgeries, and stay indoors due to the forced lockdown. The company, like all its peers, was deeply impacted by
the Covid-19 pandemic, which forced people to postpone elective surgeries, and stay indoors due to the forced lockdown.
In June, the company had warned that the pandemic has had a material impact on its healthcare services business
operations, though its standalone pharmacy business continued to show growth.
On September 14, Apollo Hospitals Enterprise reported a consolidated net loss of Rs 226.24 crore for June quarter,
compared with a Rs 49.15 crore profit reported for the same period a year ago.
Foreign institutional investors and mutual funds trimmed their holdings in the stock by 34 basis points.
and 54 basis points, respectively, in the June quarter. However, the stock has jumped 50 per cent since then.
The brokerage said even though Apollo Hospitals is largely perceived as a hospital business, several segments of its
integrated offering are now meaningful – such as operating India’s largest pharmacy chain, scaling-up neighborhood
presence for patients through Apollo Health and Lifestyle (AHLL)—diagnostics, clinics, diabetes and dialysis centres, day-
care surgeries; and) digital health, whereby Apollo 24|7 offers digital consultation, e-diagnostics, e-pharmacies and chronic
disease management. “We remain positive on the company as besides strong healthcare pedigree and asset base the
company owns one of the best pharmacy models in the world, which provides an overall cushion in difficult times,”the

11. 11B)Fortis Healthcare Limited
Fortis Healthcare Limited is a leading integrated healthcare delivery service provider in India. The healthcare verticals of
the company primarily comprise hospitals, diagnostics and day care specialty facilities. Currently, the company operates its
healthcare delivery services in India, Nepal, Dubai and Sri Lanka with 36 healthcare facilities (including projects under
development), approximately 4,000 operational beds and over 415 diagnostics centres.
Fortis said it has a well-capitalised balance sheet and managed its liquidity position via cost efficiency initiatives, better
working capital management, and external funding. It does not expect any impact on its current ability to service debt and
other financing arrangements or anticipate at present any disruptions in the supply chain or any impact on internal financial
controls. Fortis Healthcare Ltd (FHL) and its listed subsidiary Fortis Malar Hospitals Ltd; both reported losses for the
quarter. FHL’s consolidated revenue from operations stood at ₹606 crore during the June-ended quarter as compared to
₹1,138 crore during the corresponding period last year, a drop of 47 percent. It recorded losses of ₹188 crore against a
profit of ₹78 crore for the same period last year, while its hospital occupancy during the quarter was at 37 percent as
against 66 percent in FY20.

12. 12 WHY IT'S
STRONG SELL
1.With a Operating Losses, the company has a Weak Long Term Fundamental Strength
Company's ability to service its debt is weak with a poor EBIT to Interest (avg) ratio of 0.22
The company has been able to generate a Return on Equity (avg) of 1.97% signifying low profitability per unit of
shareholders funds
2.With a fall in Net Profit of -1335.21%, the company declared Very Negative results in Jun 20
The company has declared negative results for the last 2 consecutive quarters
NET SALES(Q) At Rs 605.95 cr has Fallen at -47.7 %
PBT LESS OI(Q) At Rs -216.02 cr has Fallen at -866.5 %
PAT(Q) At Rs -179.37 cr has Fallen at -46806.7 %
3.Stock is technically in a Mildly Bearish range
The technical trend has deteriorated from Sideways on 23-Oct-20 and has generated -1.52% returns since then

13. 13C.Religare Health Insurance Company Ltd.
Care Health Insurance (formerly Religare Health Insurance Company Limited)[is an Indian Health established in July
2012, by Religare enterprise limited,[5] Union Bank of India and Corporate Bank. The company is headquartered
in Gurgaon, Haryana and operates out of 146 offices across India with 6000+ employees. It currently offers products in the
retail segment for Heath Insurance, critical illness insurance, Personal Accident Insurance, Top-up Coverage,
International Travel Insurance and Maternity along with Group Health Insurance and Group Personal Accident Insurance
for corporates.
If health insurers have been some of top beneficiaries of Covid-19 pandemic, then this company has been an out-and-out
winner. Care Health Insurance is the new avatar of Religare Health Insurance. Religare Enterprises NSE 0.10 % NSE 2.11
per cent informed bourses earlier this month that it has changed the name of its health insurance subsidiary to Care Health
Insurance. But the firm emerged as a star performer even before that Insurance as a sector has a very less penetration in
India. However, the recent pandemic has put everyone on alarm, leading to robust sale of health policies. Last
week, Religare Company, in a stock exchange filing, said the name of its subsidiary Religare Health Insurance (RHICL)
has been changed to “Care Health Insurance” with effect from August 19. RHICL commenced business in 2012.
Given the importance of health insurance in promoting better healthcare outcomes across the country, the company
underscored the importance of leveraging this trend by apprising people about the far-reaching benefits of comprehensive
health policies. Moreover, against the backdrop of pandemic-induced income losses for a significant employed segment,
the role of health insurance can be paramount in saving lives in the event of any healthcare crisis.

14. 2.Medium Impacted Sector – Consumer Durables.
The sudden lockdown due to COVID-19, brought daily life to standstill and disturbed all economic activities. It restricted
movement of people, induced labour shortages, impacted factory operations, disrupted logistics, led to outlet closures for
non-essential products and food service providers, triggered panic buying among consumers for staples and left retailers
with stock-outs in few categories. Despite easing of lockdown from 4 May 2020, the movement of goods continues to be
the pain point for CP companies that have drawn up plans to improve operations to 50-75% of capacity from 20-30%
currently1. Truck availability has improved to only 10% from 8% out of a total vehicle count of nine million pan-India
during strict India’s private final consumption was about $1,700 billion in FY19 ၔ Food and non-alcoholic beverages,
accounting for $510 billion of consumption is likely to see lesser impact of the pandemic and lockdown ၔ Discretionary
categories like clothing and footwear ($100 billion), appliances ($50 billion); and restaurants and salons ($30 billion) are
likely to see higher impact This is also being reflected in what investors are expecting.
After the onset of the pandemic in India, Healthcare is the only industry to have witnessed market cap expansion during
March - April 2020. Consumer Shortage of manpower to work in factories as well as distribution centres continues to
challenge industry players. The Indian consumer products sector is in a flux. The industry has been facing demand pressure
(especially from rural consumers) due to agri-slowdown, liquidity crunch and employment challenges. The already
challenging market environment is now further exacerbated by the onset of COVID-19 pandemic. The maximum effect
would be seen in consumer discretionary categories, while consumer staples like food would see lesser impact. staples is
well protected from market cap erosion despite ongoing challenges in the industry, while consumer discretionary sector
and various other sectors are facing a tough time.

15. Analysis of Impact on Companies in Consumer Durables
A)Titan Company Limited
Titan Company Limited (earlier known as Titan Industries Limited) is an Indian luxury goods company that mainly
manufactures fashion accessories such as watches, jewellery and eyewear. The watch-to-jeweller major said the company’s
operating cash flow was negative due to virtually zero sales in the first six weeks of lockdown, increase in mark-to-market
cash outflow on gold hedge due to rising gold prices and committed costs being incurred. However, these mark-to-market
cash outflow is expected to be recovered when jewellery sale commences. Thus, the Covid-19 situation was adversely
affect profitability during the first half of this year. Financial Year 2021 is likely to be painful for consumer discretionary
giant Titan Company as brokerages believe that normalcy can only be expected by the last quarter of this fiscal.
At a time when experts fear that the COVID-19 pandemic may trigger a shift in consumer behaviour in the way how they
spend, Titan Company, being at the extreme end of discretionary consumption, has a lot to fight against. The company on
June 8 reported a 21 percent year-on-year growth in standalone profit due to strong operating performance and low base in
the year-ago period. But higher tax expenses (up 58 percent YoY) limited bottom-line growth. Revenue from operations
fell 5.2 percent year-on-year to Rs 4,428.75 crore during the March quarter. "The company was impacted significantly in
the second half of March due to COVID-19 pandemic with the shutting down of all stores," Titan said.

16. Management remains positive amid challenges:
The impact of COVID-19 on Titan's business is expected to remain for a longer time. In a conference call, the management
of the company hinted that the firm will emerge stronger and consumer's trust in the brand will remain intact.
They highlighted a significant focus on cost-savings across rentals, ad spends and fixed costs and also reduction in working
capital.
The management also sees a strong opportunity for growth in jewellery, watches and eyewear purely on account of their
strong customer outreach programs and the overarching trust on Titan and Tata brand in these uncertain times.
The first quarter of FY21 will be painful for the company. Brokerage firm Motilal Oswal Financial Services highlighted
that Q1 FY21 would also take a hit due to the ‘ineffective hedge’ on account of higher gold prices, which would be
reversed in subsequent quarters. A one-off gold sale back to suppliers in Q1 FY21 is also expected, on which no profit
would be made.
The road ahead:
Brokerages have faith in Titan's long-term story but it is important to see how COVID-19 pans out for Titan going ahead
and to what extent the management of the company succeeds in its attempt to counter the impact of the pandemic. The road
ahead for Titan is bumpy due to COVID-19. There are very dim prospects for the company during FY21, however, owing
to its market share, aggressive marketing strategy and cost-saving measures, experts believe the company will bounce back
in FY22.

17. Shares of TitanCo. posted the best quarter in nearly three years as investors bet on a recovery in demand ahead of the key
festive season and as an economic slump weakens its competitors. The stock jumped nearly 27% in the quarter ending
Sept. 30, the most since the three months ended December 2017. That compares with a 9% increase in the benchmark S&P
BSE Sensex. The rally comes as local gold prices head for a second consecutive monthly loss, capping gains of about 30%
this year. The drop in prices, while still near record highs, comes ahead of India’s festival season that gathers pace from
mid-October and peaks around Diwali, which falls in November this year.
Buying and gifting of gold is usually considered auspicious during this period by Hindus and with consumers in the
world’s second-biggest buyer getting used to high prices, any correction is likely to lead to a rush to stores, ICICI
Securities Ltd. said in a note last week. “Gold itself being in a bull market has catapulted the stock,” said Sanjiv Bhasin,
director at IIFL Securities Ltd. Additionally, “Indians’ spending by nature is very, very strong on gold” and the festival
season should bode very well for a “pedigree stock” like Titan, he said.

18. Titan also stands to gain from the financial distress faced by smaller jewellers after the economy contracted 23.9% last
quarter following one of the world’s strictest lockdowns. Regional unorganised jewellers are under pressure from liquidity
constraints, funding issues and limited ability to sell online, providing bigger companies like Titan an opportunity to gain
market share, ICICI Securities said.
India’s gold demand has been slammed this year by lockdowns imposed from March end to control the coronavirus
outbreak. While the restrictions have been slowly eased over the last couple of months, jewellers are staring at record-low
sales of the precious metal as the economy contracts sharply and prices remain near all-time highs.
Titan also stands to gain from the financial distress faced by smaller jewellers after the economy contracted 23.9% last
quarter following one of the world’s strictest lockdowns. Regional unorganised jewellers are under pressure from liquidity
constraints, funding issues and limited ability to sell online, providing bigger companies like Titan opportunity to gain
market share, ICICI Securities said.
India’s gold demand has been slammed this year by lockdowns imposed from March end to control the coronavirus
outbreak. While the restrictions have been slowly eased over the last couple of months, jewellers are staring at record-low
sales of the precious metal as the economy contracts sharply and prices remain near all-time highs.

19. B)Voltas Limited
Voltas Limited, is an Indian multinational Home appliances company specialising in air conditioning and cooling
technology. The company is broadly structured into projects and products business. The projects business is divided into
Domestic Projects Group (DPG) and International Operations Business Group (IOBG). Meanwhile, the products business
is classified into Unitary Products Business Group (UPBG), Mining & Construction Equipment Division (MCED), and
Textile Machinery Division (TMD).
Government’s ban on import of air conditioners(ACs) with refrigerants is expected to lead to small market share gains for
bigger companies engaged in the AC business. Further, this import ban is not expected to have a big impact on large listed
companies such as Voltas, Blue Star and Havells (Lloyd). That’s because these companies do not import full AC units, said
analysts. At the same time, shares of Amber Enterprises India Ltd touched a new 52-week high, closing the day with 9%
gain on expectations the AC import ban will boost demand for the company. Analysts from Jefferies India Pvt. Ltd said in
a 15 October report: “Major players in India such as Voltas/ Blue Star primarily import compressors and refrigerants
versus the entire unit and will not see a material impact."

20. Smaller firms which import the entire AC unit are likely to be adversely affected. This, in turn, may lead to some market
share gains for the bigger players. “Value segment AC players like Voltas/LG/Samsung could see some marginal market
share gains," points out Jefferies.

21. C) CG Power and Industrial Solutions
CG Power and Industrial Solutions Limited, previously known as Crompton Greaves (CG) is an Indian multinational
company engaged in design, manufacturing, and marketing of products related to power generation, transmission, and
distribution based in Mumbai. It is now a part of the Murugappa Group.
Crompton Greaves Consumer Electricals (Crompton Consumer) has gained about 21 per cent since May lows. While the
company's March quarter performance had shown resilience on the margins front, even as sales declined, the easing of the
lockdown has improved sentiment. Analysts, despite cutting their FY21 earnings to factor in the lockdown impact, have
also been hopeful of a faster recovery for the company, given it’s product range, which is less discretionary and seasonal in
nature. In Q4, the profit margin maintained a strong trajectory, improving sequentially due to cost control and a superior
sales-mix. Analysts believe Crompton Consumer is better placed than peers because of limited exposure to the B2B
(business-to-business) or wholesale segment and less discretionary nature of products, such as fans, lighting equipment, and
pumps. Pumps for agricultural purposes may make gains in the monsoon season, given a strong rural outlook.

22. For the March quarter, revenues had fallen 15 per cent year-on-year (YoY) and so did operating profit, but the operating
profit margin at 13.8 per cent remained the year-ago level, and was better than the December quarter's 12.8 per cent. After
results in mid-May, Emkay Research's analysts said market share gains and a stable margin in a tough demand scenario are
key positives. The management, too, hinted at an additional Rs 100 crore cost savings over and above its ongoing cost
optimisation programme. Notably, before the lockdown, during January-February, volume growth was strong, led by 18
per cent growth in the electrical consumer durables (ECD) segment, wherein fans (up 21 per cent) and domestic pumps (up
19 per cent) did well. Appliances, too, grew 60 per cent led by water heaters (up 48 per cent in volumes and 97 per cent in
value); mixer grinders and air coolers grew by 54-83 per cent in value.

23. Most analysts, thus, remain positive on Crompton Consumer even as they have cut forward earnings estimates. After
results, the average target price of 26 brokerages polled by Bloomberg is Rs 248, for the stock currently trading at Rs 240.
Given the near-term challenges, long-term investors may use corrections for a better entry point.
3.High Impacted Sector – Aviation
The impact of the coronavirus pandemic and the lockdown it triggered is clearly visible in financial markets. But there is
still no clarity on the deeper impact that it is having across businesses and industrial sectors. here is an impact analysis of
the aviation sector.
Aviation is among the worst-affected sectors amidst the Covid-19 crisis that has taken the scale of a pandemic. According
to the International Air Transport Association, airlines globally can lose in passenger revenues of up to $113 billion due to
this crisis. Airfares have also come under pressure due to nearly 30 per cent drop in bookings to virus-affected destinations.
As a result, airfares to such destinations have fallen by 20-30 per cent. Domestic traffic growth is also gradually being
affected with domestic travellers postponing or cancelling their travel plans.
Some companies have reported more than 30 per cent drop in domestic travel this summer compared with last year. Airfare
in the popular domestic routes have been reduced by 20-25 per cent and airfares are expected to remain subdued for the
summer season as well. Cash reserves of airline companies are running low and many are almost at the brink of
bankruptcy. Moreover, the crisis could lead to loss of jobs and pay cuts. Some airlines have asked many of their employees
to go on leave without pay. Air Deccan has suspended operations and sent employees on unpaid leaves.

24. The Indian aviation sector is likely to lose up to $4 billion in the financial year 2021, advisory firm CAPA India has said,
raising the loss estimate from the earlier $3.6 billion. In a report released on July 3, CAPA India also talked of a higher
capitalisation need for Indian airlines, up from $2.5 billion to $3.5 billion. Critically, the firm said the Indian aviation
sector may be reduced to just two to three players, from more than half a dozen now, including Air
India, IndiGo, SpiceJet and GoAir.
Analysis of Impact on Companies in Aviation Sector.
A)Indigo Airlines and Spicejet Airlines
IndiGo is an Indian low-cost airline headquartered in Gurugram, Haryana, India. It is the largest airline in India by
passengers carried and fleet size, with a 60.4% domestic market share as of July 2020. The airline was founded as a private
company by Rahul Bhatia of InterGlobe Enterprises and Rakesh Gangwal in 2006. It took delivery of its first aircraft in
July 2006 and commenced operations a month later. The airline became the largest Indian carrier by passenger market
share in 2012. The company went public in November 2015.
SpiceJet is an Indian low-cost airline headquartered in Gurgaon, Haryana. It is the second largest airline in the country by
number of domestic passengers carried, with a market share of 13.6% as of March 2019. The airline operates 630 daily
flights to 64 destinations, including 54 Indian and 15 international destinations from its hubs at Delhi and Hyderabad.

25. Correction in Share Price of Spicejet Ltd
The share of Spicejet Ltd fell by almost 48% from January 1, 2020. Since last 1 year, the stock price have dropped by 60%
from its 52-week high of Rs.152.

26. Correction in Share Price of Interglobe Aviation Ltd
The share of Interglobe Aviation Ltd (Indigo) declined by 23% from January 1, 2020. Since last 1 year, the stock price
have dropped by 39% from its 52-week high of Rs.1,891.

27. 27Reasons for Fall in Share Prices of Aviation Stocks
Economic Slowdown
 Almost 75% of total revenue of Indian aviation companies come from domestic traffic.
 Amidst dampened economic activities, India’s GDP growth rate for FY2019-20 is declining consistently.
Quarterly GDP growth rates were 5.6% in Q1 FY20, 5.1% in Q2 FY20 and 4.7% in Q3 FY20.
 Thus, there has been a stagnancy in the passenger growth over domestic flights amidst current economic
slowdown in India.
Coronavirus Outbreak
 25% of total revenues come from International Traffic. The region-wise % share in overall international traffic is
as following :
China : 4% of International Traffic
Total Asia : 30% of International Traffic
Europe : 25-20% of International Traffic
 So, there has been a big shock for Indian airlines’ International Plans due to Coronavirus crisis spread across
many countries. A number of International flights to-and-fro China, Italy, Singapore, Iran etc are cancelled.
 So, Airlines are getting a big hit from Coronavirus outbreak.
Upcoming Impacts of Less Traffic
 Executed Dip in Traffic will be experienced due to cancellation of many routes and dampened demand amidst
coronavirus fears.
 The subdued traffic will result into more pressure on fares & subsequently on Yields of these airlines.
Decline in Passengers Growth
 There has been a muted Passenger growth in Jan-Feb 2020 = 2-3%
 Whereas, last year, the Passenger growth in Jan-Feb 2019 = 16%

28. 28Key Opportunities & Relief for Aviation Industry
Coronavirus Crisis – A Medical Emergency
 The recent coronavirus outbreak would have a short term impact on the aviation industry. Things are expected to
revive in next 1-2 quarters. However, the airlines need to remain flexible and nimble while dealing with the
situation.
 Once the Coronavirus gets under control, there would be a much faster upturn in the share prices of aviation
stocks.
Decline in Crude Oil Prices – Expected to offer Relief
 Crude Oil prices dropped by almost 33% from January 2020. Lower oil prices provide significant tailwinds to the
Indian economy as India imports more than 80% of its crude oil demand.
 Aviation sector is among the top sectors in India which are going to be benefited from the decline in crude oil
prices. Lower crude oil prices would result into lower fuel bills for Aviation companies.
 There would be an upsurge in the profitability of aviation stocks like Air India, Spicejet & Indigo (Interglobe
Aviation) due to lower Crude Oil prices.
 $1 reduction in crude oil price per barrel leads to 7% growth in the EBITDA of these aviation companies. Thus,
the lower crude oil prices would offer a great relief to aviation companies to support their profit growth amidst
current slowdown and coronavirus outbreak.

29. Conclusion:
India faces a huge decline in government revenues and growth of the income for at least two quarters as the coronavirus hits
economic activity of the country as a whole. A fall in investor sentiment impacts privatization plans, government and
industry. The economic impact of COVID-19 is very disturbing. No one has been spared of its ill effects. Economies of
about 100 plus countries have been destroyed out of which some of them have asked for monetary help from IMF.
Businesses across the world namely hospitality, entertainment, aviation etc have seen a major negative impact. Various
sports events such as IPL and Olympics have been postponed. Schools and colleges have been closed. The virus has also
disrupted the functioning of various online giants such as Amazon. Countries such as USA, Italy and Spain are suffering the
most since their death toll is very high. India faces a huge decline in government revenues and growth of the income for at
least two quarters as the coronavirus hits economic activity of the country as a whole. A fall in investor sentiment impacts
privatization plans, government and industry.
The lockdown in India will have a sizeable impact on the economy mainly on consumption which is the biggest component
of GDP.
A global recession now seems inevitable. But how deep and long the downturn will be depends on the success of measures
taken to prevent the spread of COVID-19, the effects of government policies to alleviate liquidity problems in SMEs and to
support families under financial distress. It also depends upon how companies react and prepare for the re-start of economic
activities. The country is facing an extra ordinary challenging time in this financial year. India has to urgently find a way to
cushion the demand side shocks induced by potential lockdowns and other ongoing containment measure.Developing
countries like India has more fragile economic and social fabric and the present situation will create more suffering for the
unorganized sectors and migrant labour. Borrowing the words of former RBI governor C Rangarajan “Government of India
must provide lifelines to businesses - extend loans and tax waivers to small businesses and the self-employed to retain staff -
- give direct support to severely affected industries and provide more funds to states, tax waivers to households etc.”