Global investors are betting that India’s catastrophic second coronavirus wave has passed, helping push the country’s stocks to record levels.
The Nifty 50 index, which tracks India’s 50 largest companies, reached an all-time high this week and rose 9 per cent from its low in late April when Covid-19 infections were rising.
The enthusiasm extended to other Indian assets, where the rupee rose 4 per cent against the dollar during the same period.
Demand for Indian stocks highlights investor relief from devastating second wave of infections It seems to have reached its climax. But he also stresses that traders are seeing little to disrupt the bumper profits of India’s big business, even though the country still reports more than 100,000 Covid-19 cases a day.
“To appreciate India from an equity investment perspective, investors will look beyond the current human catastrophe,” said Brijesh Vaid, Equity Portfolio Manager at BNP Paribas Asset Management India.
He added that it is possible that the country will emerge from the epidemic in the name of The fastest growing economy in the world and that “long-term core investors like us continue to view India as a growth market”. BNP Paribas will look into any major correction [as an opportunity] to overweight Indian stocks.
Some Indian companies have thrived during the pandemic, thanks in part to cost-cutting including layoffs. Profit margins through the end of 2020 were at their highest level in eight years, according to Edelweiss Financial Services, a brokerage.
The pie may have shrunk, but the allocation of profitability has shifted very sharply to. . . “High-end companies, which is reflected in market indices,” said Aditya Narain, head of research at Edelweiss. “This is a fairly global phenomenon but it was more severe in India.”
The second wave of Covid-19 overwhelmed health systems and caused severe shortages of oxygen and medicines. The economy, though not subject to a nationwide lockdown like last year, has been shaken by strict restrictions imposed at the local level, including in some of the country’s largest cities.
Infections are now declining in most parts of the country, including the capital, New Delhi, and financial hub Mumbai.
On Wednesday, authorities reported 133,000 new infections and 3,200 deaths the day before, down from daily highs in May of more than 400,000 and 4,500, respectively. The official figures are believed to be much lower.
Indian corporate earnings in the first quarter did not reflect the worst of the last wave, which rebounded in April. However, investors believe that any damage to earnings will be short-lived.
“You have a feeling that for a month or two there will be an impact and there will be a normal situation, and then earnings growth will rebound very sharply,” said Hemang Jani, equity strategist at brokerage Motilal Oswal Financial Services.
However, some warn that the second wave could have a more lasting effect than the first, especially in areas such as consumer demand.
“There can be a bit of reality checking for the markets, as people extrapolate [from] What happened last time. This time, Naren said, it goes deeper and plays with people’s psyche, adding that “no family is not affected.”
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