Indian investors may need to brace themselves for a possible long hot summer of volatility as the covid-19 pandemic continues to roil global markets. Despite a strong opening by the Indian market on Wednesday and almost cross the 9260 levels on the Nifty 50, the markets sold sharply as investors fretted over the increasing cases in the pandemic.
The heavy selling towards the latter part of the day saw major levels of 8900 breached which acted as crucial support levels for the market. In the coming days, the Nifty 50 movements could even get choppier if the market sustains below the 8900 levels for a few days.
The escalating covid-19 pandemic has infected about two million people across the globe slowing global economies and shutting factories.
PRODUCTIVITY LOSS
India’s extension of the 21-day lockdown by another 19 days will result in several man-hours lost as well as the loss of production and GDP growth. In fact, economists have already scaled back India’s FY21 GDP growth target considerably. In a report, analysts at Nomura Financial projected that India’s growth rate could be about -0.5% in FY21.
These deep cuts will have a huge bearing on Indian companies’ earnings growth for FY21. Fact is, analysts have not yet been able to get a pulse on the likely impact of the coronavirus because the event is still unfolding. While the government has announced relaxations from April 20 onwards, the extent the Indian companies will re-open production remains to be seen.
PUBLIC FEAR COULD LINGER FOR LONGER
Besides, some individuals may continue to harbour public fear which means certain service-led businesses will find it difficult to revive soon. Further, analysts have noted that discretionary spending could crater in the first quarter, and until a solution to the coronavirus is not found either through an effective therapy or vaccine, the markets are likely to remain extremely choppy.
Individual investors should continue to remain on the fence. Defensive sectors such as FMCG and pharma have run up significantly in this up move, which means that they could correct further if the market turns volatile. Investors looking to invest now may want to exercise caution while sparing only spare negligible sums to accumulate some good stocks.
