This pattern is quite common in a bear market where every recovery rally gets wiped off by a powerful wave of correction. For example, during the financial crisis of 2008, the Nifty 50 experienced 4 distinct rallies and subsequent pullbacks ranging from 12%-25%. This was a 60% retracement from top to bottom!

Intraday, the Sensex lost 1.44% to close at 31,327.22 while Nifty lost 1.49% to close at 9,174.80. Britannia (up 3.89%), RIL (up 3.36%) and Cipla (up 2.15%) were the major gainers while Bajaj Finance (down 9.03%), Bharti Infratel (down 8.49%) and ZEEL (down 7.87%) were the major losers of the day.

Insurance: Changing dynamics Post COVID-19 World

Insurance premium collection dropped drastically in March 2020 due to the lockdown. Historically, March tends to be the strongest month for the life insurance industry, but volumes were severely impacted this year. 

For HDFC Life, individual Annual Premium Equivalent (APE) in March was down 28% YoY and also volumes declined by 38% YoY. SBI Life's APE declined by 42% YoY while the volumes were down by 44% YoY. IPRU's APE was down 49% YoY with volume declining at 38% YoY.

However, the current crisis will completely change the way the industry operates. Most insurance companies are likely to leverage digital outreach to carry out targeted marketing activities and reduce dependency on offline channels.

Medical underwriting practices are also expected to move completely towards telemarketing from physical screening. Already, 80% of medical examinations happen over the phone as opposed to 20% a few years ago

Key takeaways:

Setting aside the short-term impact, History repeats its renowned public interest in health insurance post-outbreak of pandemics or disasters. There is evidence of accelerated growth in Health Insurance post-SARS and MERS. 

Retail sector: Earning revival not insight

With the continuous lockdown and no revenues coming in so far, the Retail sector has been experiencing negative cash flow and stressed working capital requirements. This is putting a strain on their debt payment abilities.

Furthermore, the earnings cycle is not expected to revive any time soon, with malls likely to see an extended lockdown post-May 3rd. While a consumer's spending ability is expected to revive slowly, a change in consumer behaviour is possible after the lockdown.

Retailers are staring at an uncertain future. It will taste the strength of their business models and operational efficiencies. Only the players with stable balance sheets will be able to sustain these tough conditions. They will be the first to get off the block once the cycle revives. 

Teji Pick of the day

Alembic Pharmaceuticals Ltd (NSE: APLLTD)

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