Analysts suggest extreme caution as Indian stock markets crushed 

Indian stock markets started a week with losses. Benchmark indices S&P BSE Sensex and NSE Nifty 50 dropped, startled by the fears that a rise in Covid-19 infections will hinder economic recovery. 

The country has experienced a record jump in coronavirus infections. At the same time, the death rate has risen to record levels. These circumstances have fuelled fears of more rigid restrictions that will undermine economic development. 

Sensex dropped more than 1,400 points. Meanwhile, Nifty lost 2.7% and traded around 14,200. 

What’s more, in early trade, the Indian rupee plunged by 52 paise to 74.87 against the dollar. 

A selloff across sectors caused both domestic benchmarks to sink. However, financial services stocks have been the worst hit. 

In just the first 30 minutes of trade, investors lost Rs 5.27 lakh crore of wealth. 

Broader markets have also contracted. HDFC twins, ICICI Bank, Reliance Industries, Kotak Mahindra Bank, Axis Bank, and State Bank of India were the most significant slumps on Sensex. On the other hand, Infosys, HCL Tech, and Dr Reddy’s Laboratories posted slight gains. 

Ravi Singhal, Vice Chairman at GCL Securities, stated that the second wave of the virus is more deadly than the first one. He advises investors to stay away from new investments and let the pandemic situation be restrained. He believes that it is better to show caution in such a situation and have a conservative approach. However, looking from a long-term perspective, he opts for Pharma and the IT sector.

European stocks edge to new records in early trade

The European stock markets started a new week positively ahead of ECB’s Governing Council’s meeting on Thursday.

The Dax rose 0.30%, the Cac 40 gained 0.20%, whereas the FTSE 100 posted a 0.05% gain and the FTSE Mib climbed by 0.14%. The Euro Stoxx 50 rallied by 0.13%.

It is not likely that the Governing Council of the ECB will modify any of the main parameters of its current monetary policy. However, it is very likely that its president, Christine Lagarde, will be asked at the press conference when the organization intends to reduce the pace of monthly asset purchases in secondary markets. Recently, under the asset purchase program, the ECB accelerated the pace of net purchases to prevent long-term bond yields from rallying in the eurozone.

Two opposing forces determining the behavior of the markets

In recent weeks, two opposing forces have been determining the behavior of the markets. Analysts believe that they will continue to be very present in the minds of investors. 

On the one hand, it is the optimism generated by the excellent performance of vaccines in countries where the immunization process of the population is well advanced. The United Kingdom and the United States are among them. This optimism has driven the leading western stock indices to repeatedly set annual highs in recent weeks and, in many cases, historical highs. At the close of the New York Stock Exchange session, the Dow Jones rose 0.48% or 164.68 points to 34,200.67 units. The index remained comfortably above 34,000 points it exceeded yesterday for the first time in history. The S&P 500 also reached historical figures, rising 0.36% or 15.05 points to 4,185.47 units. Whereas the Nasdaq composite index, which brings together the most important technology companies in the market, increased by 0.1% or 13.58 points, up to 14,052.34 units.

On the other hand, in other parts of Europe and developed countries such as Japan or Australia, the vaccination process is long delayed. This condition is putting the objective of reopening these countries during summer at risk. In fact, Johnson & Johnson, one of the vaccines with which the continental European countries thought to accelerate the immunization process of their population, became highly questioned. The rarest case of blood clot issues has been detected in six women who were vaccinated with this vaccine. 

Asia-Pacific stocks hit 1-month highs

Asian shares recorded a one-month high today. Expectations of monetary policy remaining accommodative supported the stock market. Furthermore, there is a belief that the coronavirus vaccine rollout will help ease fears for another wave of infections. 

MSCI’s index of Asia-Pacific shares outside Japan hiked as high as 699.70 first time since March 18. 

After the previous increase of 0.1% at 696.46, the index climbed by 1.2% last week. So far this year, it increased by 5.1% and is on track with its third straight yearly earnings. 

Rodrigo Catril, National Australia Bank’s senior forex strategist, stated that the highly supportive monetary policy boosts risk assets. 

Australian shares closed unchanged from Friday’s close. Meanwhile, New Zealand’s benchmark index grew by 0.6%, and South Korea’s KOSPI climbed by 0.1%. Japan’s Nikkei corrected its losses and ended flat.

Chinese shares started in negative territory. However, they recovered losses, with the blue-chip index gaining 2.2%. Hong Kong’s Hang Seng index grew by 0.6%.

Analysts estimate 30% growth in revenue of Alibaba

Alibaba scored a rise of almost 8% last week after an announcement of a record fine China imposed on it for violating antitrust rules. 

The company presented a 21.8 times more than its expected earnings for 2021. This is a figure well below its main competitors in online commerce like Amazon, and JD.com. The American companies Overstock.com, Wayfair, Etsy and the Asian LightInTheBox follow this list. 

The Asian company recorded about $73,191 million in sales, which represented a growth of more than 30% with respect to the results obtained in 2019. This figure will continue to increase during this fiscal year.

Online sales in China achieved year-on-year growth close to 30% in the first two months of the year. Zeping Zhao and Martin Bao, analysts at the investment firm of Industrial and Commercial Bank of China, believe that this figure indicates a strong recovery as the country enters the post-pandemic era. They forecast that Alibaba’s total revenue will grow 57.3% in 2021.

In terms of profitability, they expect that the increase in investment both in the local consumer service and in other businesses will drag the adjusted net margin to 17.7%.

The FactSet, a financial data and software company, estimates a growth of over 30% for 2021, reaching 141,719 million dollars in sales. By 2022 this figure is forecast to exceed 171,950 million.

Wall street futures trade moderately after Friday’s highs

Wall Street futures are trading lower on Monday. Dow Jones futures are down 0.24%. Meanwhile, S&P 500 futures are trading with a decrease of 0.27% and Nasdaq futures dropped by 0.32%.

Investors will be attentive to the results of IBM and Coca-Cola throughout the day. Netflix presents its results on Tuesday. American Airlines and Southwest will be the first major cyclical companies dealing with the evolution of COVID-19 to publish their results.

What to expect this week

This week starts quietly, since no important data will be published on Monday.

In addition to ECB’s meeting, the Governor of the Bank of England, Andrew Bailey’s speech, is scheduled for Tuesday. Besides, Japan will publish its inflation rate year on year on Friday. 

On Friday, the consulting firm IHS Markit will release the preliminary readings for April. It will comprise the advanced indices of sector activity, known as PMIs, in the United Kingdom, the United States, Germany, France, and the Eurozone.