Indian equities resilient amid 2nd Covid wave on fall in daily cases

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Mumbai, May 25 (IANS) Even as the country goes through a severe second wave of Covid-19 the stock market has been largely resilient. A report by Kotak Institutional Equities said that the resilience can be attributed to the declined in daily confirmed cases of Covid-19 and the eventual possibility of reopening of lockdowns across states.

It noted that the disconnect between the human tragedy and the markets largely comes on the back of difference in the behaviour, which for humans is emotional and for the markets is clinical.

“The resilience of the broad market and ‘rotation’ among sectors are not surprising in the context of declining confirmed daily and overall active Covid-19 cases and (2) likely gradual easing of restrictions across states over the next few weeks,” it said.

The market has been quite rational over the past few weeks displaying both resilience and rotation. India’s Covid-19 daily confirmed and overall active cases have declined sharply over the past 1-2 weeks in many states, which may set the stage for easing of lockdown restrictions across states.

“We draw comfort from the fact that (1) positivity rates have started to decline across states but testing has sustained at high levels. The pace of vaccination is disappointing though and we can only hope that a likely ramp-up in vaccine supply from July mitigates the risk of a third wave,” said the report.

Kotak also sees moderate economic impact of the current lockdowns in many states in the first half of FY22 and recovery from the second half.

It said that there are two differences between the economic impact of the current lockdowns in states over April-May 2021 and the national lockdown in March-May 2020. First one being the lower overall economic impact of the second wave given partial nature of lockdowns with no restrictions on manufacturing and limited restrictions on services and also, staggered nature of lockdowns across states.

Further, it noted that the second wave has made higher impact on rural India in relation to the first wave. Rural India was largely unaffected in the first wave.

–IANS

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