Here's How The Pandemic Has Affected The Stock Market Globally

Aug 02 2020 11:02 AM
Here's How The Pandemic Has Affected The Stock Market Globally

The impact of COVID-19 is resonating throughout the world in all the spheres of society: from healthcare to trade, everything has been drastically affected by it. Evidently, the stock market is no exception. The global stock market has seen a tremendous fall in the last few months. In India, the virus has wreaked its havoc at a time when the country itself was undergoing one of the worst slowdowns with the Gross Domestic Product (GDP) of approximately 5%. As India remains in the top 5 worst Corona-struck countries, it is inevitable that there is a dire prevalence of the economic conditions it will be going through.

How The Virus Has Impacted Different Sectors

There are many ways in which the pandemic has affected the stock market. Some of them are given below.

Trade With Other countries

In the world of global capitalism, trade between different countries has been an integral part of commerce. With the outbreak of the pandemic, however, the trade sector has seen a great downfall. Businesses have been affected because of the rupture in the supply chain from different countries. This is due to the reason that the department of logistics and distribution are people-intensive work. A consequent result of this is the fall in imports and exports and thus an anticipated blow to the stock market. 

Tourism Crisis

Tourism constitutes over 50% revenue to the Indian economy. In the post-Corona period, tourism has been severely hit by the pandemic. Not just for India but all the countries whose economy depends a lot on tourism are facing this financial setback. With airline services, rail services, restaurants, hotels seeing an unprecedented loss of revenue, what with people avoiding crowded areas, to say that the tourism sector is facing its worst-ever crisis will not be an understatement. This has led to the falling of stocks’ prices of different hotel brands and likes.

Unemployment Factor

Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva remarked that it is a crisis like no other: “Never in the history of the IMF, we have witnessed the world economy coming to a standstill. We are now in recession. It is way worse than the global financial crisis.” The impact of this unprecedented crisis is visible in the employment sector. Many people throughout the world have lost their jobs. Every business in this period of crisis has been forced to cut down on the number of its employees. Fewer jobs mean fewer savings and subsequently, withdrawal of investments from the stock market.

Natural Gas and Oil

Since many people in the lockdown are not fuelling their vehicles, the global fall in the demand for natural gas and oil has fallen a great deal. The price of a barrel of crude oil has dropped from $55 in February to around $41 in July. The same has been the case with natural gas.  

Despite all these misfortunes, one should not be dissuaded from making an investment plan. An investor should look for alternative options even in such dire economic situations. The best thing would be to proceed with patience and investing in sectors that are getting back on track with a faster pace. Also, this can serve to be a great opportunity for a beginner who is thinking to make his first-ever investment in the stock market. And obviously, the basic requirement for this is opening a Demat account. 

How Does the Investment Scenario Look During The Pandemic?

It is understandable that an investor or a potential investor might be dissuaded to invest in the times of a global financial crisis. However, if an investor is assured that he can manage with his savings as well as keep with him the surplus to invest, he should not be discouraged by the falling stock market. 

Investing during the pandemic might not be a bad idea after all. SOURCE: pixabay.com

Since investments give the best returns in the longer period of time, one should continue investing the money and wait for this crisis to get over for the market to once more catch its pace with the world. Moreover, due to the pandemic, the shares of many companies have seen a fall in their price and thus act as an added impetus to invest. 

Therefore, one should better start investing or reinvesting, especially with the assistance of a Demat account, and understand Demat account meaning closely if starting investment for the first time. 

What Is A Demat account?

The Demat account meaning is as simple as it is convenient to have one. Demat account stands for an account in which an investor or a potential investor can keep all his shares, bonds, mutual funds, government securities, etc. in an electronic format. The Demat account uses the technique of dematerialization in which a physical share certificate is converted into electronic form. The Demat account meaning can be best rendered in its resemblance to a bank account. Through such an account, shares can be easily bought (credited) and sold (debited). After understanding Demat account meaning, an investor can start investing in shares through his Demat account.

Benefits Of Having A Demat account

With the Demat account meaning being understood, one should also note that a Demat account comes with numerous benefits which will help an investor in his investment goals in the following ways:

 

  • A Demat account can be opened without any charge or at most with a charge which is negligible.
  • It can be maintained with zero balance. That is, an investor does not necessarily have to keep a certain amount of shares to keep the account running.
  • A Demat account keeps the shares safe and avoids the risk of their being damaged or lost - a benefit that is absent in the physical form of shares. To understand the Demat account meaning correctly, you should also understand the safety features it offers. 
  • A physical share is converted into electronic form by the process called dematerialization. However, this process can also be reversed i.e. an electronic share can be converted back into the physical format. This method of reconverting shares from physical to electronic form is called rematerialization.
  • A Demat account can be accessed from anywhere. What this implies is that since the account facility can be accessed through the digital network, one can use it from literally anywhere via their smartphones, laptops, computers, or tablets.
  • Shares stored in a Demat account can be used as collateral to access loans.
  • It gets updated regularly and all the incomes or gains can be reflected faster than in the physical format.
  • An investor can freeze his or her Demat account for a specific duration when not wanting any activity with his shares and then can refreeze it.

 

The Demat account meaning thus gets all the riper with these benefits. Investing during the pandemic with the help of a Demat account can provide both effectivity and efficiency to one’s shares than a physical format can. Hence, investing during the period of the pandemic will only seem not beneficial if one thinks from the immediate point of view. In the longer run, it can still provide sufficient returns with the market gaining momentum after the crisis is over. Therefore, with the understanding of long-term goals and Demat account meaning along with an optimistic outlook one can still be a prudent investor in times such as these.   

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