Stocks across Tokyo, Hong Kong, Singapore and Seoul fell 0.7-2 per cent with countries such as Brazil and India setting new records of infections and deaths. This has shadowed the optimism around rising vaccination rates in the US and Europe. The SGX Nifty was down 1.6 per cent on Wednesday evening and had touched a low of 14,016.8 during the day, pointing at more weakness ahead for Indian markets.
On Wednesday, the Nifty ended down 63 points, or 0.44 per cent, to close at 14,296.4 and Sensex ended down 243.6 points, or 0.51 per cent, to close at 47,705.8.
Credit Suisse Wealth Management said the Indian equity market could see some further profit booking in the coming weeks. The wealth management firm said this correction is likely to be very sharp but would not last long.
“While we remain a little cautious over the next few months, we expect a sharp recovery in the second-half of this fiscal year supported by the vaccination drive, full opening up of the economy and expectation of a good monsoon,” said Jitendra Gohil and Premal Kamdar, analysts at Credit Suisse Wealth.
India’s benchmark Sensex has fallen over 9 per cent from record highs hit in mid-February.
Concerns over rising bond yields and strengthening of the US dollar have somewhat abated but worries over a sharp rise in coronavirus cases and macro slowdown have resurfaced.
The national case count is about three times than the peak of 98,795 daily infections recorded during the first wave of the pandemic in September 2020.
JP Morgan in a note said markets are likely to remain under pressure in the near term. It estimates that India’s reported daily case count can peak in the first week of May at between 3.5 lakh to 5 lakh cases a day.
“Vaccinations are rapid, but will not be enough to dent the second wave,” said JP Morgan. The brokerage said a continued rise in case counts can lead to more regional lockdowns but if infection rates start to decline within three weeks, the risk might be short-lived.
Harsha Upadhyaya, chief investment officer-equity at Kotak Mahindra Asset Management Company, too advised caution.
“Currently investors seem to be expecting no national lockdown and restrictions that will be more localised. The adverse impact is likely to be less on the economy compared to the same quarter a year ago,” said Upadhyaya. “Unless there is a change in this assumption, it will not be a panic situation,” said Upadhyaya.
Credit Suisse Wealth recommended investors use market weakness to buy shares. JP Morgan suggests adding financials at current levels or on further fall in the market, preferring
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Money managers point out that India has seen outflow of about Rs 12,500 crore so far in April which is far less than record outflows seen in March 2020 — the initial phase of Covid-19 when foreign investors pulled out Rs 58,600 crore from Indian equities.
Derivatives data show that traders have added short positions but, according to analysts, the quantum does not reflect panic.
