Medical Crisis end is needed to solve the financial crisis: Nilesh Shah, MD, Kotak Mutual Fund

Nilesh Shah, Managing Director, Kotak AMC Ltd, talks about the current fall in domestic market amid coronavirus, what is needed to control it and steps that the RBI and government should take to save India during an exclusive interview with Anil Singhvi, Managing Editor, Zee Business. 

Edited Excerpts: 

Q: This fall is unique in itself. Is this the first time when you have seen such a fall in your career or you have seen such falls earlier as well?

A: This is the first time when such a combined impact of the medical and financial crisis has been seen. The 2008 fall was a financial crisis in which financial sector problem entered into the real economy while the 2020 crisis is a medical problem in which the problems associated to the real economy is entering into the financial economy. Thus, this is the first time in which both, the medical crisis or medical epidemic and the financial crisis, are seen together. At the same time, I would like to draw my old experience of the mid-1990s when there were reports related to the plague outbreak in Surat was out. It was a time when Social Media and Television were not quite powerful or popular and that’s why news supply was limited, but, the similar lockdown was witnessed in Surat city and fear was prevalent among people. If I remember right then Mr Raut, the Municipal Commissioner of the city, along with the citizens of Surat did a wonderful job in the city by converting the then dirtiest city of India into the cleanest city. He also controlled the plague epidemic and its spread through a lockdown. I think the same thing should be repeated across India at present. 

If the medical crisis is solved then there are many ways to solve the financial crisis but the existence of medial crisis will not allow us to end the financial crisis. 

Q: How we will get a sense that this health crisis has come into control or is about to end and how it can be linked with the market?

A: Even I am a new student in it and saying whatever is coming in my mind and they include we should get a medical cure for it and Google search suggests that the world is trying to find a vaccine for it. Coronavirus patients are being treated by using a combination of malaria, rheumatoid arthritis and HIV drugs at Sawai Man Singh Hospital, Jaipur. A similar study on chloroquine and electromedicine has been done in France. Interestingly, USFDA in recent past gave immediate approval to a plant of an Indian company and removed its restrictions because they need chloroquine. Thus, the first thing is to get a medical cure so that people impacted due to coronavirus are cured. The second thing is there should be a preventive cure in the form of vaccine and more than 20 companies are trying to prepare a vaccine but it is hard to say that when it will succeed. So, the medical cure will come first and the preventive medical cure will reach us at a later stage. The third thing is that these lockdowns and shutdowns may help us in restricting its spread to a certain level. Interestingly, China has achieved it in Wuhan by locking down its citizens. Thus three things are required, medical cure, a preventive medical cure and to restrict the spread of coronavirus and its elimination. 

These three things can fill confidence among the citizens, market investors and the government that coronavirus is coming under control and will not have any impact on the economy. 

Q: Reports suggests that after the US and Italy, India is likely to be an epicentre for coronavirus or centre for attraction and you are talking about confidence and comfort. So what action the government and the RBI should do to have a control on the pandemic?

A: It is expected that the government and RBI, together, will take some steps to deal with the crisis and maintain its economy. RBI has already performed an OMO of Rs 10,000 crore for the gilt market and LTRO of Rs 30,000 crore. It has also maintained liquidity conditions in the banking system. Now, it is expected that it will cut down the interest rates and then intervene in CPSB and corporate bond market as the US Fed has done. It should also give some relaxations in accounting if there is an increase in NPAs in the banks. It should also go for loan moratorium and loan lease settlement. So, several things are expected from the Reserve Bank of India and it is believed that it will take right steps at right time in the same way as they did during the 2008 crisis and saved the economy.

Watch Zee Business live TV below:

Similar expectations are there from the government that it will also provide some fiscal stimulus like other countries to support its economy. Other countries had more space than ours but it should utilize the existing space to save its economy.