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Below are Quote on Indian equity markets remained largely range bound over the last week by Shibani Kurian, Senior EVP & Head- Equity Research, Kotak Mahindra Asset Management Company

“Indian equity markets remained largely range bound over the last week. The Covid situation in India is no doubt grim and hence the health issue is something that could keep markets volatile in the near term. There is no denying that the human pain and tragedy that the second wave of Covid -19 has unleashed in India is tremendous. The second COVID wave has seen the 7 day moving average of cases at ~ 3.7 lakhs daily. Almost 50% of cases are from 5 large states i.e. Maharashtra, Karnataka, Tamil Nadu, Andhra Pradesh & Kerala. On positive side, Active cases are declining in regions that saw early waves. States such Delhi, Maharashtra & UP are seeing a plateauing out of the daily cases curve and improvement at the margin.

Economic activity has slowed down significantly in month of May with many of the high frequency indicators slowing down to level of activities as last seen in month of September 2020. Many states have either initiated lockdown or have night curfew in order to control COVID cases. However, there has  not been a nationwide lockdown imposed as yet. In the midst of this Covid crisis, we must note that the contraction in economic activity is however lower as compared to levels seen last year with services being impacted more than manufacturing. The manufacturing PMI rose slightly to 55.5 in Apr-21 but services PMI fell to 54.0 MoM in Apr-21.

The pace of vaccinations has come down in India over  the past few days due to various supply issue but this is expected to pick up by May end. The Government has approved the Russian Sputnik-V vaccine and current two vaccine manufacturer are expanding their capacities which should address some demand-supply gap. India has vaccinated almost 40% of 45-plus age people with first dose. As this number scale up, pressure on health care infrastructure and death rates should come down.

Corporate earnings season for Q4FY21 is underway. So far the earnings reported have been largely in line with consensus expectation. Earnings have been led by strong performance in the banking and commodities sector. Management commentary for month of April is positive but companies are facing demand as well as supply challenges on account of localised lockdown. Hence, the impact of the lockdowns would be felt in Q1FY22. Foreign Institutional Investor turned cautious and become net seller in month of April after six continuous month of buying. On the other hand Domestic Institutional Investors (DIIs) have turned net buyers of Indian equities.

RBI announced measures to support growth and ensure adequate liquidity in the system.  The measures announced were intended to provide adequate liquidity to sectors impact the most due to second wave of COVID-19. The focus of monetary policy clearly remains to support growth even while inflation remains within the tolerance band of the Monetary Policy Committee.

Going forward, market will likely track the pace of vaccinations, trajectory of active cases curve and management commentary of companies. Roll-back of localised lockdown and trend of inflation in many global commodities like crude oil and steel will be other key factors to watch-out by investors.”

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