Coronavirus outbreak: Cash-rich companies find favour in testing times

Healthy net cash position acts as an insurance against the demand downcycle

The benchmark indices are down 28 per cent over the last month and the downward trend, which started towards the end of February, is expected to continue. The disruption caused by the Covid-19 pandemic has brought business to a standstill and this is well reflected in the high-frequency data, such as auto sales which have fallen through the roof.

The sudden disruption has led to a sharp correction in valuations. While the trailing price-to-earnings ratio for the Nifty is at a six-year low, the same on a price-to-book value is the lowest in the last 11 years. Though valuations across