Why didn’t the Covid-19 crisis in India prompt a stock market selloff?
India reported more than 300,000 confirmed covid-19 cases and more than 4,000 deaths in a day. However, the country’s benchmark equity index has been progressing in line with the stock indices in the region.
Some of the asset managers believe that one of the factors of India’s stock market’s good performance could be due to less stringent curbs on activity.
You can also observe the surprisingly muted stock market reaction to India’s virus disaster in net outflows of foreign investors. They totaled around $1.5 billion in April compared to $8.4 billion last March.
After four straight weeks of outflows, they became net buyers of Indian equities.
More limited lockdown measures state governments implemented have prevented a drop in economic activity as it happened last year. However, there is still the risk that the outbreak may prompt a sharp intensification in restrictions again.
What measures did the country apply, and how did it affect the economic condition?
Abhishek Gupta, Bloomberg’s India Economist, stated that currently, India is taking state-level confinements on non-essential services. It is not a blanket nationwide lockdown. All of it suggests that compared to the last year, the impact is likely to be limited.
According to Arvind Chari, chief investment officer at Quantum Advisors Pvt., a national lockdown is not priced into the markets. Yet, a sharp drop in stocks would produce an opportunity to allocate more to that asset class. Equity valuations have become expensive over the last year, he said.
Now, companies have better equipment to resume operations. They know the procedures to handle the lockdown. They have minimized the costs, smoothened operations and also, raised capital.
As for Manish Kumar, chief investment officer at ICICI Prudential Life Insurance Co., global sentiments and liquidity backs the market. Despite the surge in coronavirus cases in India, most developed nations are seeing a drop in infections. That is boosting Indian markets.
