View of Covid 19's Impact on Nifty Indices (NSE, India)

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Covid 19's Impact on Nifty Indices (NSE, India)

Dr. Preetha Chandran,

Associate Professor - Finance, CMS Business School,

Jain (Deemed-to-be University)

Article History: Received: 11 January 2021; Revised: 12 February 2021; Accepted: 27 March 2021; Published

online: 23 May 2021

Abstract

The Covid 19's economic and financial consequences were as devastating as its harm to human well-being. This article aims to look at the effects of the COVID-19 Pandemic on selected NSE Nifty Indices. According to the findings of the studies, a major global health crisis affects social life and the real economy and triggers price decreases in capital markets. Investors can decide their portfolios depending on the results of each capital market sector. According to NSE data, the Pharmaceutical and Banking sectors performed well in the stock market, while the FMCG and Media sectors fared the worst. This paper analyses the data gathered on the NSE platform for the fiscal year 2020-2021 and proposes the best sector and company for investors to invest in the stock market.

Key Words: Covid 19, Nifty Indices, NSE, Capital Market. 1. Introduction

Both BSE Sensex and Nifty 50 fell by 38% during last financial year 2020-2021. The total stock cap decreased by an enormous 27,31 per cent since the start of the year. Companies reduced, layoffs grew, and the management's salary was affected. Delays in payments, subdued debt inflation and the rise of weak loans have hindered economic growth and healthcare and the poor market conditions. During the lockdown, GDP growth slowed, the demand-supply chain tightened, discretionary expenditure declined, and CAPEX decreased, which culminated in household income fell, advertising expenditures, transport expenses decreased, and a ban on recruiting (Ravi, S 2020)

In the last financial year, the feel of Coronavirus played a significant role in market success. Many economies were inclined, especially those near to the centre. In the last year, sentiment levels in Thailand, Indonesia, Malaysia, and Hong Kong have stayed extremely low. Around the same time, India saw a wave of pessimism. Several initiatives such as repo rate reductions, regulatory easing by the extension of the moratorium and other steps to improve liquidity in the economy put together by the RBI and the Government of India. The recession led to lower disposable wages, decreased advertisement expenditure, higher transport costs and freezes. The size and effect of Coronavirus on the economy are difficult to estimate.

2. Review of Literature

2.1. Impact of Covid on World and Indian Stock Markets

The daily growth of Covid-19 cases negatively affected the stock market’s performance in the short run. Other explanatory variables like Gold price, Crude oil price, S&P500 Index and Exchange rates show the same significant signs in the long run but insignificant short-run effects (Ayoub Rabhi, 2020). The output of the Indonesian stock market during the Covid-19 period was characterised by numerous buybacks by issuers, according to George Taylor's study (2021). Because of the slump in capital market results, the stock prices of many issuers have plummeted. Public and foreign investors

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528 in individual securities, especially in the consumer sector and various industries, perform cash outflows from the capital market.

According to Hailu (2021), cumulative common infection events significantly adversely affect the overall research period. The regular cumulative death induced by COVID-19 was not a significant factor in understanding stock price fluctuations. A regular cumulative mortality rate, on the other side, has no discernible effect on capital markets in both developing and developed countries. In terms of economic status, the cumulative recorded cases significantly negatively impact developing-country capital prices. Changes in exchange rates are the most significant predictor of market fluctuations in developing countries. The global COVID-19 development is having a more significant impact on ASEAN equity markets than on the local COVID-19 conditions, according to Matthew S. Yiu (2021). The expansion of the COVID-19 in the ASEAN financial markets does not affect the 2020 pandemic. The recent Pandemic has a significant impact on the returns and uncertainty in financial markets in ASEAN.

Afees Salisu (2020) found that developing stock markets are more exposed to the uncertainty of pandemics and epidemics (UPE) than developed market stocks. To put it another way, developed capital markets are a more substantial buffer against UPE than developing equity markets. Incorporating the UPE indicator into stock valuation, especially during pandemics, is critical for investment decisions.

According to Mert Topcu's (2020) study results, the Pandemic's destructive impact on developing financial markets has gradually declined and has begun to taper off by mid-April. In terms of global distribution, the epidemic had an enormous effect on Asian emerging markets, although it has had the most negligible impact on European emerging markets. Ibrahim Cutcu (2020) identified that as the break dates produced either positive or negative consequences in different nations, the opportunities for break triggers grew either favourably or negatively. Countries may recommend early financial measures and the establishment of pandemic funds. Investors can also allocate a portion of their portfolio to safe-haven assets like gold.

2.2 Performance of Key Sectors of the Economy during Covid 19

Financials are heavily weighted in most global indexes so that a recovery might lead to solid returns for the economy. The BSE Bankex index has lost 2.14 per cent in the last year. After a lengthy downturn, residential real estate and total capital formation troughed out in 2020 and could rise with lower interest rates. The Pharma sector will continue to do better in 2021 with the best performers of 2020. Pharma seems to be in good form with constant domestic demand, especially in the chronic segment. In the United States, the generics sector currently has the lowest level, and the prices and margin deflation have slowly improved over the last two to three years. With the increasing rural population, demand stays stable and tends to be driven by higher customer numbers. An increase in farm income could help provide a systemic lift for the business (Raj, S 2021)

Kailash Babar (2021) identified that the Real Estate sector would take three years to recover. According to his study of 400 multinational companies employing 10 million employees, occupiers are looking at offices to improve staff wellbeing, teamwork, and talent attraction. 90% of multinational companies see real estate as a competitive tool for their sector to facilitate broader change. Approximately 67 per cent of Indian respondents believe Covid19 would influence the medium-term trajectory of their real estate strategy. Real estate sectors worst hit by the Pandemic. Housing sales impacted significant cities during the April-June 2021 quarter. Already, property

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529 registrations in Mumbai have dropped due to the second wave of COVID-19 Pandemic (Anarock, 2021).

All the previous research focused on the various companies' stock performance during the Pandemic period. An investor needs complete information on which sectors are performing well and which ones not doing well. Here, the researcher focuses on the Sector-wise understanding of the Nifty Indices during Pandemic and recommends that the investor suggest the sector for the investment even during the crisis.

3. Methodology

To identify the right sector for investment, secondary data from the NSE website is collected and analysed. To assess indices' performance, Nifty Auto, Nifty Bank, Nifty FMCG, Nifty Infra, Nifty Energy and Nifty Media identified to collect the data based on its popularity among the investors. The data of the mentioned indices collected from April 2020 to March 2021. Each month, the mean value is identified for a sector and compared with other sectors. In each sector, companies with a high and low level of return for one year, three years and five years also calculated to better understand the investor.

4. Discussion of Collected data

Table No.4.1 Nifty Different Sector Performance (April 2020 to March 2021)

S.No. Nifty Sectors Percentage of Change during (April 20 to

March 21)

1 Nifty Auto (NIFTYAUTO) 78.54

2 Nifty Bank (NSEBANK) 62.40

3 Nifty Pharma (NIPHARM) 59.24

4 Nifty Infrastructure (NIFTYINFR) 57.82

5 Nifty Energy (NIFTYENR) 53.18

6 Nifty Media (NIFTYMED) 44.54

7 Nifty FMCG (NIFTYFMCG) 25.76

*Source - Compiled from NSE Data (in per cent)

The above table shows that Nifty indices performance in the last financial year. It shows that nifty auto outperformed all other sectors in the economy. Nifty FMCG is greatly affected by the covid 19. the Nifty bank is also doing well during the pandemic period. From the above table, one can interpret that the automobile sector, bank, pharmaceutical industries, infrastructure industries have done significantly well during the Pandemic. The media and fast-moving consumer goods industries were worst affected by covid 19. The investors invested in media and FMCG sectors may be realised little profit while comparable to other sectors in the stock market.

Table No.4.2 Nifty Indices Performance Monthly-Wise (April 2020 to March 2021) Nifty Sectors Mar

21 Feb 21 Jan 21 Dec 20 Nov- 20 Oct 20 Sep 20 Aug 20 Jul 20 Jun 20 May 20 Apr 20 Ave Nifty50 2.154 7.922 -0.358 8.176 14.323 14.323 -2.220 4.967 6.293 6.573 0.755 16.35 6.605 Nifty Auto (NIFTYAUTO) -3.02 3.64 6.74 3.40 14.61 -1.89 0.86 7.70 8.34 8.05 5.38 24.73 6.55 Nifty Bank (NSEBANK) -4.31 13.87 -2.23 5.59 23.88 11.42 -9.69 9.77 1.26 10.74 -10.39 12.49 5.20

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530 Nifty Pharma (NIPHARM) 2.89 -1.99 -5.77 9.09 5.30 -4.49 6.26 -0.62 11.65 2.22 4.73 29.97 4.94 Nifty Infrastructure (NIFTYINFR) -0.55 11.94 0.57 6.60 9.43 1.58 -2.61 0.32 3.99 6.58 3.34 16.63 4.82 Nifty Energy (NIFTYENR) -3.24 16.30 -4.51 4.13 8.51 -0.33 -3.71 1.93 6.34 10.23 -0.72 18.25 4.43 Nifty Media (NIFTYMED) -4.91 -1.51 0.07 9.70 5.93 -8.32 -1.57 22.36 -4.34 14.05 1.56 11.52 3.71 Nifty FMCG (NIFTYFMCG) 7.67 -2.05 -3.09 7.75 7.78 -1.38 -2.46 -0.90 2.69 2.62 2.19 4.94 2.15

The above table shows the monthly average return of different sectoral indices from April 2020 to March 2021. The nifty auto has a monthly average of 6.55%, nifty bank with 5.2%, pharma with 4.94%, media with 3.71% and FMCG with 2.15%. The FMCG sector is worst affected by Pandemic; hence, it has a lower return on FMCG companies' stock values. The nifty auto and bank companies have provided a good return on investment to their stock values. Especially from September 2020 onwards, the FMCG sector is experiencing a negative return on investments. The nifty auto and bank companies have consistently provided a good return on investments.

Fig 4.1. Nifty Auto Return

The above diagram shows that the performance of the print automobile companies during the last five years. Last year the Tata Motors was having more than 250% of return on its share value. It is highest among all the automobile companies. Exide industries witnessed a low level of growth during the

Bajaj Auto Eicher Motors Hero MotoCor p TVS Motor Atul Auto AmaraRa ja Batteries Tata Motors Mothers on Sumi Exide Inds. 1Y 42.76 69.23 28.56 74.72 7.28 35.41 258.08 170.84 18.61 3Y 36.7 -21.77 -22.27 -3.74 -59.87 -10.78 -5.61 1.08 -30.64 5Y 52.87 27.16 -3.44 103.48 -63.12 -18.45 -19.93 95.19 23.66 -100 -500 50 100 150 200 250 300 R e tu rn in Pe rc e n t

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531 Pandemic, along with Atul auto. Among all industries, the automobile sector is witnessed outstanding growth during the Pandemic. Almost all the automobile companies how gave away outstanding return on investment to their shareholders.

Fig 4.2. Nifty Pharma Return

The above chart depicts the success of Nifty Pharma during the last five years. The pharmaceutical industry saw a phenomenal rise last fiscal year as a result of the Covid 19. Among the various pharmaceutical companies, Divis Lab had the highest return on equity with 71.86 per cent last year and 272.76 per cent over the last five years. Biocon has also developed at a similar rate over the last five years. In comparison to the last fiscal year, both pharmaceutical companies performed well. The NSE data demonstrates this.

Fig 4.3. Nifty Bank Return

Cipla Divis Labs Dr. Reddys Cadila Healthca re Aurobin do Pharma Lupin Torrent Pharma Biocon Sun Pharma 1Y 58.55 71.86 37.5 89.92 48.94 40.42 13.23 15.29 52.86 3Y 57.58 234.85 161.08 56.88 64.67 56.62 99.43 23.36 46.48 5Y 70.03 272.76 78.15 88.99 28.36 -25.82 95.61 271.17 -13.03 -50 0 50 100 150 200 250 300 R e tu rn in Pe rc e n t

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532 *Source - Compiled from NSE Data (in per cent)

The above diagram depicts the success of the Nifty Bank over the last five years. The bank sector grew dramatically last fiscal year due to numerous stimulus initiatives announced by the Finance Ministry of India and the Reserve Bank of India. Among the various banks, ICICI Bank has the highest return on its share capital, 76.69 per cent in the previous year and 190.08 per cent over the last five years. HDFC Bank has seen similar development over the last five years. Among public sector banks, the State of India's share valuation increased by 107.04 per cent in the previous fiscal year. It is among the best of all public-sector banks.

Fig 4.4. Nifty Energy Return

-100 -50 0 50 100 150 200 HDFC Bank ICICI Bank Kotak Bank Axis Bank IndusIn d Bank City Union Bank SBI RBL Bank PNB Bank of Baroda 1Y 49.5 76.69 43.81 65.46 98.58 25.27 107.04 54.49 20.26 67.61 3Y 37.87 92.09 34.67 23.8 -52.97 -4.37 43.98 -63.79 -58.56 -48.14 5Y 143.12 190.08 140.97 39.61 -16.37 103.98 95 0 -52.58 -52.29 R e tr u n in Pe rc e n t

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533 *Source - Compiled from NSE Data (in per cent)

The above diagram depicts Nifty Energy's success over the last five years. The Energy sector grew strongly last fiscal year because of various stimulus initiatives announced by the Finance Ministry of India. Among the various companies, Adani Green has a decent return on its share capital with 371.02 per cent in the previous year. Tata Power has seen similar development over the last five years. Other than Adani Green and Tata Electricity, none of the energy companies performed well in the previous fiscal year. The NSE data confirms this.

Fig 4.5. Nifty FMCG Return

The coronavirus pandemic hit at a period when India's fast-moving consumer goods (FMCG) companies were still experiencing a demand slump. The Pandemic affected their activities even further, as these companies focused their attention on ensuring that their product portfolios and supply chains were disaster-proof. Although most FMCG companies lost, others, such as Britannia Industries Ltd and Tata Consumer Products Ltd, benefited from increased home food consumption.

Adani Green GAIL BPCL HPCL Indian Oil Corp. NTPC ONGC Power Grid RIL Tata Power 1Y 371.02 70.9 39.71 32.29 32.96 19.72 44.44 37.32 29.46 234.98 3Y 0 -10.86 10.76 -20.19 -40.24 -20.17 -39.76 10.64 95.84 23.93 5Y 0 43.03 43 37.54 -2.46 -5.19 -16.84 58.1 296.11 44.28 -100-50 0 50 100 150 200 250 300 350 400 R e tu rn in Pe rc e n t

Nifty Energy Return

Britanni a Nestle India Tata Consum er Colgate-Palmoli ve Dabur India Emami Godrej Consum er

ITC HUL P&G

1Y 13.7 4.31 81.04 18.36 20.48 172.94 59.38 28.33 19.1 33.84 3Y 27.84 80.87 124.4 41.29 46 -4.96 18.39 -25.17 58.02 47.14 5Y 137.06 181.36 439.65 87.29 84.8 -10.46 83.53 -0.31 185.75 107.6 -100 0 100 200 300 400 500 R e tu rn in p e rc e n t

Nifty FMCG Return

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534 Fig 4.5. Nifty Infra Return

The diagram above depicts the success of the Nifty Infra companies during the last five years. The infrastructure sector grew strongly last fiscal year due to numerous stimulus initiatives announced by India's Finance Ministry. Among the various companies, Ashok Leyland has the best return on its share valuation, with 129.95 per cent in the previous year. In the last five years, Grasim Industries has also experienced similar development. The NSE data demonstrates this.

Fig 4.6. Nifty Media Return

-50 0 50 100 150 200 250 300 ACC UltraTe ch Cem.

RIL L&T DLF Grasim Inds. MRF Ramco Cement s Ashok Leyland Asian Paints 1Y 55.37 79.55 29.46 64.04 77.57 161.4 27.65 67.84 129.95 77.48 3Y 27.97 56.4 95.84 2.03 16.94 24.19 1.96 10.91 -30.74 115.67 5Y 28.8 102.06 296.11 65.04 105.54 60.76 131.37 90.29 8.99 194.02 R e tu rn in Pe rc e n t

Nifty Infra Return

Zee Ent. Sun TV

TV18 Broadca st TV Today Networ k Dish TV India Inox Leisure PVR NDTV Zee Media Corp Jagran Prakash an 1Y 16.02 33.24 57.64 52.18 153.61 41.21 26.17 63.4 55.45 44.74 3Y -67.68 -39.95 -39.17 -35.38 -82.92 1.49 -18.03 62.99 -75.78 -66.87 5Y -57.31 33.32 -11.08 -14.71 -87.21 48.22 38.25 -33.32 -54.52 -68.21 -100 -50 0 50 100 150 200 R e tu rn in Pe rc e n t

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535 Media securities have underperformed about other sectors. The Nifty media index highly influenced by the stocks of Sun TV and Zee, and as these two companies gain momentum, the index would climb. The index has risen in the last year, though not enough to outperform the benchmark returns, owing to weak results by Sun TV and Zee. The industry, which involves networks, multiplex outlets, and print media, was initially negatively affected due to the lockdown and subsequent decrease in advertising revenues.

5. Summary of Findings and Recommendations 5.1 Findings

The following are the major findings from the study.

• During the Pandemic, the automobile, banking, pharmaceutical, and infrastructure sectors performed admirably. Covid 19 has the most impact on the media and fast-moving consumer products sectors. Investors in the media and FMCG industries could have made little profit compared to other sectors of the capital market.

• The nifty auto has a monthly average of 6.55 per cent, the nifty bank has a monthly average of 5.2 per cent, pharma has a monthly average of 4.94 per cent, and media has a monthly average of 3.71. FMCG has a monthly average of 2.15 per cent. The Pandemic has hit the FMCG market, resulting in a lower yield on FMCG company stock prices. The profitable auto and banking companies gave a strong return on investment with their stock prices. The FMCG sector is experiencing a negative return on investment, especially from September 2020 onwards. The profitable auto and banking companies have continuously given a strong return on investment.

• The Pharma field saw a significant rise over the last fiscal year because of the Covid 19. Of the various Pharma companies, Divis Lab has a decent return on its market capital, with 71.86 per cent in the previous year and 272.76 per cent in the previous five years. Biocon has seen similar development over the last five years. In comparison to the last fiscal year, both pharma companies performed well.

• ICICI Bank has the highest return on its share capital, with 76.69 per cent in the previous year and 190.08 per cent over the last five years. Among public sector banks, the State Bank of India's share increased by 107.04 per cent in the previous fiscal year.

• The energy sector grew strongly last fiscal year due to various stimulus initiatives announced by India's Finance Ministry. Adani Green has a decent return on capital, with a return of 371.02 per cent in the previous year. In the last five years, Tata Power has undergone a similar transition. Except for Adani Green and Tata Electricity, none of the energy companies recorded a profitable fiscal year.

• The Pandemic hit when India's fast-moving consumer goods (FMCG) companies were still experiencing a demand slump. Although most FMCG companies lost, others, such as Britannia Industries Ltd and Tata Consumer Products Ltd, benefited from increased home food consumption.

• Numerous government stimulus measures supported the growth in the infrastructure sector last year. Among the different companies, the return on equity (ROE) at Ashok Leyland is 129.95%. Grasim Industries has been stagnant in the last five years. In absolute terms, in the prior year, all of these companies performed well. The NSE data shows this.

• Media stocks have underperformed against other industries. The Nifty media indices are that because of the momentum of Sun TV and Zee companies. The index has performed well over

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536 the last year but still lags the benchmarks. Network companies, multiplex, and print media suffered initially owing to the decline in sales.

5.2 Recommendations

Recommendations to the investors to invest in a sectoral stock.

• As a rule, investors maintain an optimistic and conservative mind-set. The rising number of COVID cases would be of great concern to the markets worldwide. The idea is to invest in the general retail, healthcare, and chosen banks and BFSI. Long-term investments such as Hindustan Unilever, Biocon, Cipla, Asian Paints, Dabur India, Britannia Industries, and HDFC Life Insurance preferred for investments (Surbhi Jain, 2020). In the long run, the FMCG sector seems to be good, even though in the short run, it is not doing well.

• Because healthcare is a vital field globally, the pharmaceutical market expected to expand to get its drug regulatory approval in the Chinese industry (Nitin Shahin, 2021). It will be wiser to invest in blue-chip companies like Sun Pharma, Cipla, and Lupin.

• With the introduction of high-speed internet and mobile phones, the IT and technology market was still rising. Investors seeking long-term growth and inflation security should consider investing in this field. Some stock recommendations in blue chips include Infosys, TCS, and HCL Technologies, whereas, for mid-caps, LT Technology and Sonata Software favoured over time.

• FMCG, IT, Pharma, FMCG, and financial services also generated long-term value and capital. There are going to be some IPOs, and some of them have been fantastic, such as the D-Mart IPO. There have been a handful of insurance companies or wealth management companies. However, apart from those, it is more of the same. A new discovered hope or revamped optimism is about people calling out on upfront revenues both in terms of the application and development sort of opportunity or the digital transformation opportunity in IT.

6. Conclusion

In this paper, the researcher investigated the relationship between COVID-19 and the performance of the Nifty indices. Data were compiled monthly from April 1st, 2020 to March 31st, 2021, from the NSE website. On the one hand, crises may be seen as threats. COVID-19 has had the most considerable effect on the FMCG and media indices while being a significant contributor to the development of the pharmaceutical industry. Before making any stock market decisions, rational investors maximising gains can pay close attention to insider dealing. On the other hand, since stock investors with much liquidity will chase advantage in the share market, crises can cause income and wealth inequality.

Future research directions could involve an in-depth examination of each crisis and its impact on the different stock indices. Investors must understand which securities should be held or acquired and which should be sold right away.

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