The equity markets globally continued to maintain their bullish mood which was led by easing of lockdown conditions in certain parts of the world. Further, the US approval of drug “Remdesivir” and Israel’s claim of having found the treatment for COVID-19 lifted the sentiments worldwide. Back home, Indian markets have been an underperformer this week as coronavirus cases in India continue to rise.
Further, the widely expected economic stimulus package is not yet announced which has raised fears of a prolonged slowdown. Moody’s revised India’s growth forecast to 0% for FY21 and cautioned that the country’s sovereign rating could be downgraded if fiscal metrics weaken materially. All of the above things plus weak manufacturing and core sector data led to sell-off in Indian markets as both Nifty and Sensex ended lower by 6.2% each.
Cyclical sectors like Metals, Banking, Consumer Durables and Realty were the top losers this week and defensives like Pharma ended flat and FMCG ended with losses of 6.6%. FII were net buyers this week but that was largely due to GSK selling 5.7% stake in HUL which saw buying interest from FIIs.
The resumption of economic activity in certain parts of the world is definitely encouraging for equity markets worldwide. This along with the progress of drug development of COVID-19, trade talks between US and China would be key factors for the investors. On the domestic front, rising number of cases is not a good sign for the economy or markets. Therefore, while we maintain our negative bias on the markets in the medium term, the short term trend would depend upon the developments on the above global factors. Key economic data like CPI, IIP and WPI and earnings announcement from companies like Nestle, Maruti, Havells, Kotak Mahindra Bank and result reaction of ICICI Bank (Covid-19 provisions has impacted profit growth) would be actively tracked.
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