“The concerns around economic recovery getting delayed is taken care of…this will arrest the downfall and the market can look at retracing its steps to record highs,” said Daljit Singh Kohli, chief investment officer at Stockaxis.com.
The second wave of Covid-19 infections in the country had triggered fears that India’s economic recovery will be hamstrung due to the return of localized lockdowns in major states like Maharashtra, Delhi, Rajasthan, Madhya Pradesh and Karnataka. The benchmark indices had corrected close to 6 per cent from record highs hit in mid-February.
While the vaccination for all adults will open from May 1, the government has also allowed states to directly procure vaccines from manufacturers in the country. This is likely to boost production of Covid jabs in the country.
However, not all expect the bounceback in the market to be rapid as investors will still have to grapple with the fact that lockdowns in states like Maharashtra, Delhi, Karnataka and possibly in Uttar Pradesh and Telangana will continue given that cases in these states are rising relentlessly.
With the vaccination pace likely to take a few months to pick up pace due to capacity constraints, analysts believe the June quarter earnings will likely be below expectations, thereby bringing down full year’s earnings forecasts.
Economists suggested that the announcement by the government gives greater clarity on the economic recovery as it will minimize the need for extended lockdowns in states and diminish the probability of a third wave of infections in the country.
Currently, only adults over the age of 45 years are allowed to be vaccinated. Brokerage firm Nomura Securities India had estimated that even at its current underwhelming rate of 2.5-3.0 million jabs per day, India could inoculate around 40 per cent of its population by the end of this year.
That estimate is likely to be revised higher in the coming days as a larger section of the adult population will now be able to queue up at vaccine centers to get their Covid shots, analysts said.
“We can see the Nifty go back to over 15,000 or 15,200 levels going ahead,” Kohli added as he expects the bounceback to be broad-based.
Shares of cyclical sectors and banks that had seen selling pressure in the past few weeks due to the second wave are likely to be at the forefront of the bounceback in the market.
Market participants expect the Nifty Bank index to see sharp upside in the coming days as several short positions on the index are likely to be covered in the wake of the vaccination news, which will drastically reduce uncertainty around asset quality of banks.
Today, the Nifty Bank index ended 2.4 per cent lower. It has fallen close to 18 per cent since hitting its record high in mid-February. The Nifty50 index ended 1.8 per cent lower at 14,359.45.
