Published on 27/06/2020 11:59:47 AM | Source: Kotak Mutual Fund

The focus of the equity market has shifted from survival to revival with the lockdown now being lifted in most parts of the economy By Shibani Sircar Kurian, Kotak Mahindra

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Below is the Quote On weekly market by Shibani Sircar Kurian, Executive Vice President, Fund Manager & Head- Equity Research,Kotak Mahindra Asset Management Company

“The focus of the equity market has shifted from survival to revival with the lockdown now being lifted in most parts of the economy. The market sentiment has improved and has been supported by a gradual resumption in business activities. Capacity utilisation and supply chains have started moving and the high frequency indicators are pointing to better trends from the lows of March and April 2020. Some part of the improvement is likely to be pent up demand and some is normal demand . It is however difficult to distinguish between the two and the sustainability of the improving trend of economic indicators would be crucial for the markets.  

Recovery in rural India appears to be outpacing urban trends, with a larger percentage of COVID cases being concentrated in the top cities. The monsoon season is off to a good start and consequently, the summer crop (Kharif) sowing has picked up early. The monsoon coverage in July would be crucial for the Kharif crop. Increased government spends on rural segments, hike in minimum support prices (MSP) as well as improvement in cash flows post the rabi (winter) crop harvest has all led to improvement in rural demand.

While the economy appears to be gradually coming back to normalcy, there are few challenges. Corona-virus cases across India continue to rise with the change in strategy from saving lives to focusing on livelihood and the opening up of the country. Supply of labour also remains a challenge with the migration of labourers from the urban centres to rural areas.

Global equity markets remained volatile over the last week on the back of the fear of second wave of Corona virus cases. However, hopes of continued monetary and fiscal stimulus remain alive. The central banks the world over have infused liquidity in order to support their economies. The rhetoric around the US Presidential elections remains high and the outcome would likely be monitored closely by the markets.

From here on, for India, the pace of return to normalisation would be the key along with trends of the corona-virus case curve. Border tension with China would also remain a monitorable.”