A Mixed Bag

While the world is moving towards easing the lockdowns, the new wave of infections and the failure of the economic stimulus package in India to bring about any cheer have continued to keep the markets on the edge.

Uncertainty and lack of clarity existed over the previous fortnight as well with India opting for Lockdown 4.0. Though Prime Minister Narendra Modi announced about extending the nationwide lockdown, he also mentioned that by dividing the country into red, orange and green zones, the current ongoing phase of nationwide lockdown will largely see ease of restrictions so that manufacturing facilities as well as offices can resumes operations. Additionally, the Indian government also announced a set of stimulus measures aimed towards reviving the dull economic environment leading to positive economic growth. 

But when closely taken into consideration, the stimulus measures announced are mainly for long-term benefits and have thus disappointed markets as experts believe it won’t aid to revive the upward trend for short-term. As a result, domestic benchmark indices Sensex and Nifty fell by 4 per cent and 3.55 per cent respectively during the fortnight. Despite the implementation of lockdown, a rise in Covid-19 cases in India has also raised concerns.

Globally, most countries have started to ease out lockdown restrictions by reopening of restaurants, clubs, salons, etc. thus encouraging citizens to resume their daily activities as prior to lockdown but with caution. Thus, for the last few weeks, European indices such as FTSE 100 and DAX were up by 2.61 per cent and 3.22 per cent whereas CAC 40 fell by mere 0.56 per cent. The previous fortnight also witnessed DJIA increasing by 1.36 per cent, S&P 500 gaining by 1.90 per cent and NASDAQ bouncing up by 4.27 per cent on hopes of successful vaccine for Covid-19. Despite seeing some minute indications of the second wave of Covid-19, Shanghai index gained by 1.35 per cent while Hang Seng rose by 2.18 per cent. Nikkei was seen climbing up by 4.15 per cent on growing hopes of economic restart as number of new Covid-19 infected cases in some of the country’s important cities see a downtrend.

As for the domestic sectoral indices, the previous week has been equally uncertain as the stimulus announcements brought some relief to a few sectors while experts believe it will put burden on banks and NBFCs. As a result of fears for the banking sector regarding increasing rise and probable defaults, Bankex index fell by 9.19 per cent. It was followed by indices such as Realty, Power, FMCG and Healthcare dropping by 3.21 per cent, 2.37 per cent, 1.65 per cent and 1.57 per cent respectively. On the contrary, Auto index, IT index and Metal index gained by 0.73 per cent, 0.51 per cent and 0.11 per cent each. SmallCap index fell by 2.76 per cent while MidCap index decreased by 2.45 per cent.

Considering the last few weeks, trading data showed that FIIs were net buyers to the tune of Rs 9,557.18 crore so were DIIs to the tune of Rs 406.29 crore. During the fortnight, gold price increased by 3.16 per cent from Rs 46900 for 10g of 24k gold to Rs 48380 for 10g of 24k gold. For the same period of time, WTI Crude price rose significantly by 20.64 per cent to USD 31.96 per barrel from USD 26.49 per barrel and subsequently Brent Crude price increased by 11.88 per cent to USD 34.65 per barrel from USD 30.97 per barrel.