First Wave & Its Impact
During the primary wave of the Covid-19 pandemic, a number of measures had been taken by the Central Bank and the federal government to pump in liquidity and enhance financial exercise. The general package deal which got here out toRs 20,97,053 crore, included the Rs 1.92 lakh crore stimulus from measures that had been introduced by Modi authorities such because the Pradhan Mantri Garib Kalyan Package value Rs 1.7 lakh crore. An enormous chunk, in reality the most important, value Rs 8.01 lakh crore of the financial package deal, belonged to the varied measures adopted by the Reserve Bank of India in February, March and April 2021 to inject liquidity.
Therefore, within the first wave, from March 2020 to November 2020, Nifty index made a backside of 7511 and excessive of 13145.85.
|Phases of Lockdown||Dates||Nifty50|
|No lockdown (No COVID)||1 January to twenty March 2020||11560.4|
|Lockdown (Phase 1)||23 March to 14 April 2020||8453.38|
|Lockdown (Phase 2)||15 April to 30 April 2020||9263.35|
|Lockdown (Phase 3)||1 May to 18 May 2020||9194.79|
|Lockdown (Phase 4)||19 May to 31 May 2020||9188.19|
|Unlock part (Unlock)||1 June to twenty July 2020||10116.45|
|First Wave of COVID an infection||23 March 2020 to 30 November 2020||10740.42|
|Second Wave of COVID an infection||1 February 2021 to 16 April 2021||14879.08|
Second Wave & Its Impact
Currently, India is witnessing the second wave of coronavirus an infection, which is extra hostile because of the excessive demise charge as in comparison with the primary one. The first wave of the COVID-19 spreadwas subdued in India in the course of the first week of November 2020. Subsequent to going through the brunt of the disaster and resultant lockdown final yr, the restoration sample in company earnings continues to be sturdy. However, because the second wave wreaks havoc on the economic system, its restoration and revival are more likely to be delayed. In the occasion of this, the organised/company sector could also be impacted a lot much less as in comparison with the unorganised sector.
The anticipation that Indian economic system wouldn’t take as huge a success because the earlier yr has additionally been mirrored within the rupee, which has been in a position to recoup majority of final month’s decline. Another level is that the benchmark authorities bond yields have additional eased about 11 foundation factors after the central financial institution introduced its model of quantitative easing in April.
Moreover, overseas institutional buyers (FIIs) have continued their shopping for spree of Indian equities. The constant shopping for curiosity by FIIs is pushed by considerable liquidity, improvement of vaccines, slight indicators of financial restoration and expectations of stimulus packages coming in from developed nations. The adjustment within the MSCI Index has aided the emotions. Even robust company earnings at house additional raised beneficial sentiment within the Indian markets.
During the primary wave, it was broadly noticed that greater than 43% of the FII Investments had been within the Banking & Financial Service sector adopted by FMCG, Oil & Gas and Pharmaceuticals sector They had been main sellers in Telecom and Metal & Mining. The second wave appears to be a redoing of what occurred within the months from March-June 2020. However, it isn’t the identical from the market standpoint. When the pandemic initially broke out, there wasn’t a lot consciousness about it because it was a very unknown and unprecedented disaster that had struck the world bringing it to a halt. How the disaster would impression world governments and central banks and to what extent economies would contract no person may predict.
But now the impression will be estimated to some extent. Instead of saying a nationwide lockdown or a worldwide lockdown, governments are relatively prepared with a localised response each time required. Moreover, having been via it the primary time round, firms at the moment are higher outfitted to take care of the results and proceed working as they’ve labored out the procedures for functioning underneath a lockdown, have lower pointless prices, streamlined enterprise operations and, in a number of circumstances, raised capital. The present staggered, state-level restrictions positioned on non-essential providers as a substitute of a blanket nationwide lockdown point out that the general impression of the second wave is far more likely to be restricted in comparison with the primary wave.
“The stock market is currently supported and supplemented by global sentiments and liquidity. Though India is witnessing a surge in Covid-19 cases, several of the developed nations are seeing a consistent decline. Hence, this is significantly supporting the Indian markets. Also, the gains are justified by central bank stimulus both at home and abroad. This is coupled with signs that the current second wave in India is peaking and building optimism around the fact that India’s economic growth in the long term will emerge intact from the crisis,” mentioned Palka A Chopra, Senior Vice President, Master Capital Services.
Covid-19’s impression on the stock market was utterly reverse within the second wave as in comparison with the primary one. The Indian stock market has been constantly posting sturdy weekly gains despite rising circumstances and declining financial exercise.
The main optimistic indicators are that there is no such thing as a large-scale lockdown like final yr which led to a curb on the financial actions. The improvement of the vaccine is one more reason which brought about the stock market to not fall and performed an vital function within the revival of the markets and GDP of the nation.
Good incomes season additionally had a serious impression as a lot of corporations reported robust monetary outcomes. Many blue-chip firms have witnessed an increase of their worth on the stock market attributable to higher outcomes.In view of the sturdy earnings season and commentary, buyers are hoping that many of the shares will proceed to carry out properly sooner or later, properly past the second Covid-19 wave. The earnings commentary of most firms is optimistic leading to extra shopping for within the economic system. As per Bloomberg (Quint), the typical month-to-month correlation between returns on India’s Nifty 50 and the S&P 500 rose to about 85% final yr, in contrast with a 70% correlation over the long term.
Predictions for the Third Wave
If the vaccination drive isn’t successfully ramped up in opposition to the coronavirus and COVID-19 appropriate-behaviour isn’t noticed strictly, there’s a looming chance of a 3rd wave in one other 6-8 months. Though laxity on folks’s half could make the third wave inevitable, its timescale can’t be predicted as to when it might happen.
If sturdy measures are taken, the third wave could not occur all over the place or certainly wherever in any respect. It relies upon a lot on how successfully steerage is carried out at a neighborhood stage in states, districts and cities.
The third wave could come as a impolite shock to some service-oriented firms engaged in journey, tourism and hospitality companies. Restaurants, accommodations and related institutions have already confronted big losses in the course of the ongoing disaster and have barely recovered from the primary two waves. Another wave could possibly be a demise knell for a lot of such companies. While journey, tourism and hospitality sectors will foremost really feel the warmth of the third wave, different vital sectors like commerce, development, actual property and retail will begin going through losses if the scenario doesn’t enhance.
Therefore, warning is warranted extremely as a lot concerning the pandemic – and the results of its interaction with an ill-prepared and overwhelmed healthcare system – nonetheless stays unknown.