COVID -19 and Indian Financial Markets: A Review
COVID-19 is aptly stated as a Black Swan event that has stifled the global economy. As coronavirus wreaked havoc, Gross Domestic
Product (GDP) contracted globally, the unemployment rate soared high, and economic recovery still seems a far-fetched dream. Most
importantly, the pandemic has set up turbulence in the global financial markets and resulted in heightened risk elements (market risk,
credit risk, bank runs, etc.) across the globe. Such uncertainty and volatility has not been witnessed since the Global Financial Crisis of
2008. The spread of COVID-19 has largely eroded investors' confidence as the stock markets neared lifetimes lows, bad loans spiked and
investment values degraded. Due to this, many turned their backs on the risk-reward trade-off and carted their money towards traditionally
safer investments like gold. While the banking sector remains particularly vulnerable, central banks have provided extensive loan
moratoriums and interest waivers. Overall, COVID-19 resulted in a short-term negative impact on the financial markets in India, though it
is making a way towards a V-shaped recovery.
In this context, the present paper attempts to identify and evaluate the impact of the pandemic on the financial markets in India. Relying on
rich literature and live illustrations, the influence of COVID-19 is studied on the stock markets, banking and financial institutions, private
equities, and debt funds. The paper covers several recommendations so as to bring stability in the financial markets. The suggestions
include but are not limited to, methods to regularly monitor results, establishing a robust mechanism for risk management, strategies to
reduce Non-Performing Assets, continuous assessment of stress and crisis readiness of the financial institutions, etc. The paper also
emphasizes enhancing the role of technology (Artificial Intelligence and Virtual/Augmented Reality) in the financial services sector to
optimize the outcomes and set the path towards recovery.
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