Below is the Views On Weekly Market review by Shibani Sircar Kurian, EVP and Head of Equity Research, Kotak Mutual Fund
“The Indian equity markets gained in the week ending October 23rd 2020. We are now in the midst of the Q2FY21 earnings season. While expectations for the quarter are muted, the key focus would be on management commentary on growth trends and the path to normalisation going ahead. The decline in the daily COVID -19 cases in India and expectations of normalisation of demand in the festive season have been the key drivers of the market.
The key highlight of current pandemic has been that unlike the situation in Europe and USA which have seen worsening of data, the situation in India has started improving. The daily addition to cases has peaked out for the moment and with recovery rates inching up, the number of active cases has been declining. The case fatality rate remains under control and lower than world average. These trends bode well for the economy and reduce significantly the probability any further nationwide lockdown in India as we had seen in the months of March and April 2020.
Domestic growth recovery gathered momentum in September as evidenced by the high frequency economic indicators with broad-based improvement across most indicators. Some of these indicators include, power demand, e-way bills, GST collections, rail freight, exports and auto sales etc. all of which have turned positive on a YoY basis, while manufacturing PMI (Purchasing Managers’ Index) increased to its highest reading since January 2012.
Inflation in India as measured by CPI remained elevated at 7.3% YoY, in September ‘20, driven primarily by higher food prices. With CPI inflation remaining above RBI’s comfort zone, it is likely that the central bank would keep policy rates on hold even while keeping the policy stance as accommodative. RBI has clearly indicated that they would keep liquidity in the system more than ample in order to support growth. The Government on the other hand has to walk the balancing act between providing fiscal stimulus to the economy and keep an eye on the fiscal deficit. The central government has outlined measures to provide a boost to growth through consumption and investment. The key remains to see if there are any further policy related announcements aimed at boosting growth.”
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