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What We Are Seeing (WWAS) 1.072
It’s said that pictures say more than a thousand words. The enclosed 1.072 version of “What We Are Seeing” will bring to you few charts and pictorial research.
Market Update – June 2021
It was an emotionally stressful month for India with record Covid cases totalling almost 400k daily. Shortage of oxygen, ventilators, medicines, and hospital beds led to distress and panic. Amidst negative press on rising Indian cases, concerns on this second wave of the pandemic led to a nervous equity markets during the first half of May. However, with the government pulling its socks, help from private sector, international aid and support from all quarters; the situation started to come under control. Falling cases from the peak numbers helped pick up the sentiments. Experience of US, UK and other countries of sharply dropping cases post mass scale vaccinations and strong international equity markets also helped positiveness. The sharp revival in the second half of the month helped Nifty 50 close up 6%, while the BSE Midcap and BSE Small cap 250 index ended up 7% and 9% respectively. Strong earnings reported by Indian corporates for Q4 FY 21 also helped keep interest levels high.
On the covid front, the number of cases has come down drastically in the country, especially in major cities like Mumbai and Delhi. From a peak of 400k cases a day, India has seen a sharp fall to 200k cases a day by end of May. The US has hit a big vaccine milestone, with half the adult population fully vaccinated, according to CDC records. In India, vaccination numbers are expected to hit 4mn a day in June, almost double of the current run rate and then rise further to 5mn in July and even higher thereon. This has given rise to optimism of a very high percentage of Indian population being vaccinated by the end of 2021. The Indian government expects fresh supply of over 2bn vaccines doses by December 2021, enough to have the entire country vaccinated.
Markets have been very strong over the past few months. Interest from retail investors has only increased and has provided lot of strength to the markets during the Wave 2 of Covid in India. Foreign flows into India have lagged emerging markets on concerns about the impact on Indian economy due to Covid Wave 2. With news flow regarding the pandemic ebbing, we expect the focus shifting back to growth rebounding as well as earnings. Institutional flows also look like returning with zest.
Q4 FY21 earnings have been encouraging and broad based. Companies across sectors have reported very strong financial numbers. The partial lockdowns in Q1 FY22 will surely have some impact. However, a quick opening from June onwards may offset the slowdown, as the underlying demand continues to be very strong. Some risks are also emerging on the inflation front, given the sharp jump in commodity prices. Here also, we expect additional supply to mitigate any further sharp increase in commodity prices.