But with the government announcing the next phase of vaccination, offering Rs 4,500 crore credit to vaccine makers Serum and Bharat Biotech, and also allowing 50 per cent vaccine supplies to the open market, among other measures, things look set to change.
There are reports that Prime Minister Narendra Modi will be meeting vaccine manufacturers on Tuesday at 6 pm wherein the Department of Biotechnology (DBT) will make a presentation and also coordinate with all the participants. All these developments should soothe investors’ nerves over the likely impact of Covid 2.0 on India Inc balance sheets.
Data showed as many as 186 BSE500 index stocks have fallen over 20 per cent from their 52-week highs. They included heavyweight Reliance Industries, which is off 20 per cent its 52-week high of Rs 2,368.80. Auto major Maruti Suzuki has fallen 22 per cent from its January 13 high of Rs 8,400. The largest public second lender, SBI, is down 22 per cent over its February 18 high of Rs 427.70. NBFC Bajaj Finance, which hit a high of Rs 5,921 on February 24, is down 24 per cent from that level.
Among others, Coal India is 24 per cent off its February 26 high of Rs 162.95 while DLF has fallen 29 per cent from its March 4 high of Rs 332.60. PFC, LIC Housing Finance, Zee Entertainment, Eicher Motors, Info Edge and Bandhan Bank are among the BSE100 stocks that are now in bear grip.
“The government decision to open up vaccination for all above 18 from May 1 and announcement of measures to incentivise vaccine manufacturers are steps in the right direction. This is positive from the market perspective. The market is likely to ignore the stress in the healthcare system and the pains from the second wave,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
“There is a big difference between first and second waves. In the first wave, the market was responding to the ‘unknown unknown’. Now, the market is responding to the ‘known unknown’. The vaccines give us a clear idea of the end game and the market which always discounts the future is likely to respond positively,” Vijayakumar said.
As many as 56 BSE500 stocks are 20-38 per cent off their March-April 2021 highs.
Among the stocks seeing brisk fall of late are shares of HEG, which are down 22 per cent from April 9 high of Rs 2,564. Shares of human resource company TeamLease have plunged 21 per cent over April 6’s high of Rs 3,884.10. Sundaram Fasteners is off 20 per cent from its April 1 high of Rs 839.
AU SFB has fallen 25 per cent over the March 30 price of Rs 1,356.35.
They included Indiabulls Real Estate (down 41 per cent), Edelweiss Financial Services (down 34 per cent), IFCI (down 33 per cent), Balmer Lawrie & Company (31 per cent), RCF (30 per cent) and The South Indian Bank (29 per cent).
Many Covid-hit plays such as multiplex owners PVR (down 36 per cent) and INOX Leisure (down 30 per cent), aviation stock SpiceJet (down 43 per cent) and hotel stocks Lemon Tree Hotels (down 42 per cent), Chalet Hotels (down 37 per cent) and ITDC (32 per cent), retailer Shoppers Stop (31 per cent), have fallen quite a bit from their one-year highs. Casino owner Delta Corp is 29 per cent off its 52-week high of Rs 201.95. Westlife Development, which runs McDonald’s fast-food restaurants, is down 25 per cent.
Analysts are now selective in picking stocks. Motilal Oswal said the restrictive measures will impact near-term economic recovery but noted that key government authorities and policymakers have ruled out national lockdown.
“We see the correction as a buying opportunity and advocate adding a balanced mix of growth, cyclicals and defensive names. We continue to be overweight on the BFSI, IT, metals, cement & capital goods, neutral on consumer, auto & pharma while staying underweight on energy, utility and infrastructure,” Motilal Oswal Securities.
ICICI Securities said the more infectious second wave in developed markets (DMs) like the US did not have any material impact on economic recovery. If anything, the US GDP growth forecast was raised to 4.3 per cent during the fourth quarter of 2020.
“We believe, India, with limited lockdowns in a few states, will show similar trends with the organised corporate sector getting impacted even less than the unorganised sectors. However, the spectre of rising Covid cases has prodded the RBI to continue its accommodative stance. We saw similar commitment by the US Fed and the ECB last month, which should keep global liquidity conditions comfortable,” it said.
The brokerage said consolidation phase for Indian equities since mid-February and the return of ‘time value of money’ (as earnings base continues to advance driven by cyclicals and depressed earnings) will result in lower valuations for headline index.
“We continue to be overweight on cyclicals such as banks, industrials and selective auto, defensives with high dividend yield (utilities), and sectors with improving earnings profiles such as telecom and pharma,” it said.
Nomura India said it was taking a more cautious view given the emerging headwinds and is increasing its weight on IT and pharma sectors and is reducing active weights on financials and cement.
“Overall, we are overweight on IT, pharma, metals, financials and infra; underweight on cement, autos and consumers. We remove Ultratech, Voltas and Just Dial from our model portfolio and add Marico, Dr Reddy’s, Apollo Hospitals, AIA Engineering and PNC Infratech. Our top picks are Infosys, Sun Pharma, M&M, RIL and Max Financial,” it said.
