Impact of Covid 19 on the Indian Stock Market and Mergers

Abstract

Purpose- The paper examines to study as to how Covid has impacted valuations considering various dimensions such as stock indices which are linked with various sectors.The purpose of this paper is to examine the impact of Covid-19 on determining the financial stability measures including the valuations on multiple aspects including stock market. The impact of Covid in India started with Lockdown which was initiated on March-2020.

Design/methodology/approach- The paper draws on observations which was done on a couple of factors which act as an indicator to draw some basic conclusions like – analysis of various M&A (mergers and acquisitions) which happened during the time, ratings conducted at country level to validate the estimated impacts and re-validation with real data, stock market indices (multiple) and also gold prices (indicator of stable assets), regression analysis using ANOVA tables were also done to analyze the future stock indicators. 

Findings- The findings indicate that except for a very limited sector like- pharmacy, telecom and some part of food products, most other sectors lost a huge market and a big dip in their valuations. The biggest retail company of India, Future group had to sell of its major business at almost half of their valuations during corona times to India’s biggest private sector company- Reliance Industries. In the stock market, 2 Indices have done fairly well being pharmacy and telecom sector as both are much used post Covid. The Industry post Covid had changed with major stress on using telecom or applications using voice like zoom or Google meet. Certain metals like Gold etc have also improved and continue to go up being the most trusted safe asset.

Research limitations/ Implications- The data used in the research is for a period of three to four months only. More research is required with a longer period to assess the detailed impact on the valuations.

Social Implications – In India, The lockdown was initially for complete and then gradually it started moving up. For first 4 months from march to july-2020, most of the business were either partially locked or completely locked. The research is able to conclude by way of ANOVA tables and regression analysis the impact of gold buying along with movement of stock indices used in India.

Originality/ Value – The paper provides evidence and the impact of covid-19 on the valuations using multiple parameters like stock indices, metal like gold, country ranking and ratings and the perceptions about drop in GDP in India and how in actual the market and valuations have behaved. Covid has impacted the global market including the valuations in a big way. The paper attempts to validate the valuations impact in India in the India Stock market and validates the global scenario. Stock Indices and GDP factors were taken as influencing factors / validations to studying the relationship between factors and impact on the valuations and market.

OBJECTIVE:

Covid-19 has impacted the Indian market and also valuation of various Indices used. While there has been some recoveries in certain sectors like Pharmacy or Telecom however all major sectors have shown a negative growth as compared to pre Covid levels. The valuations and market capitalizations of most companies have dipped. The research paper tries to identify the various capitalization Indices and determine the factors affecting the Indian valuations.