Why are analysts & economists unruffled by Covid second wave

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Why are analysts & economists unruffled by Covid second wave


NEW DELHI: As the re-emergence of Covid-19 cases has turned financial markets nervous, economists and brokerages are not that worried this time around. While it may indeed slow down the recovery for Covid-battered sectors and delay afull-blown economic recovery, analysts say things are unlikely to become too bad, and the nation should be able to deal with it much better.

India’s daily Covid count on Wednesday crossed the 50,000 mark for the first time since November 6. The total number of active cases in the country stood at 3.95 lakh and 251 deaths on Thursday. This has happened as India marked the first anniversary of the Covid lockdown. Analysts said they do not foresee fresh nationwide restrictions similar to the ones imposed last year, but admitted that the recovery for Covid-battered sectors may get delayed now.

Kunj Bansal, CIO at Karvy Capital, said he is staying away from sectors such as hospitality, hotels, travel, multiplexes, not only because of India seeing a second wave, but also because even earlier while travel and hotels seemed to be picking up, multiplexes had not.

“The consciousness about the coronavirus not having gone away was always there. That is where we do see challenges that whatever little pickup was happening may kind of take a knock again. As a result, these opportunities may not make a good investment option right now,” he said.

Stock performance

In the last one week, hotel stocks such as Lemon Tree, HLV, Indian Hotels andEIH have fallen 5-10 per cent. ITDC plunged 12 per cent.

Aviation stocks SpiceJet declined in excess of 15 per cent while Jet Airways has dropped about 10 per cent in the last one week. InterGlobe Aviation was flat.Multiplex owners PVR and Inox Leisure have fallen about 5 per cent each. Westlife Development, which operates quick service restaurant chain McDoland in south and west India, has plunged 15 per cent. Jubilant Foods, which operates Domino’sand Bruger King India, have fallen up to 5 per cent.

Cases, not just Maharashtra specific

Kotak Securities noted that while Maharashtra is getting most of the attention, cases are rising across India. Out of the 16 most populous states in India, only three are in a better condition today compared with February. While cases are up 3.7 times in Maharashtra from February levels, they are up 2.9times in Gujarat, 2.9 times in Andhra Pradesh, 3 times in Madhya Pradesh and4.9 times in Punjab.

“We have not seen a similar increase in the number of deaths, but that is to be expected given that an increase in death lags an increase in new cases by about10-14 days. The positive rate in most of these states is much lower than what it was during the September 2020 peak,” the brokerage said.

State of economy: Good, so far

That said, the economic data so far have been healthy. Daily vehicle registrations have averaged 69,500 units in March so far, which is 87 per cent of pre-Covid levels, against 81 per cent till last week. Week-on week registrations have improved on expected lines and are expected to pickup further pace as we approach the month and the fiscal year end.

ICICI Securities said e-way bill generation for March began on a strong notereaching 3.2 crore.

Power demand has remained buoyant in March as average peak power demand in the first 17 days of the month was at 181.2 GW against 159.7 GW YoY. NPCIdata shows that FASTag-driven monthly vehicle volumes for February, 2021, at various toll plazas (159 million) were up 7 per cent MoM and at 144 per cent ofpre-Covid levels.

GST collection for February came in at Rs 1,13,143 crore, up 7.4 per cent YoY.This marks five straight months wherein GST collection has been above the Rs 1lakh crore mark, ICICI Securities said.

Second wave hit to be lesser than the first

Nomura India said three factors may help India achieve its vaccine pivot point much earlier. First, serological studies suggest that some portion of the domestic population has already been exposed to Covid. Secondly, a number of new vaccines have been reported to be in the offing, including those from Johnson & Johnson, Sputnik V and Covovax.

Besides, “as private hospitals get involved, the pace of vaccinations should pickup. In our baseline, we assume that India will vaccinate 30 per cent of the population by end-2021 and attain its vaccine pivot point sometime in Q3. Hence, while rising virus cases are a risk to near-term activity, this should become less of a threat in the coming quarters,” it said.

Hiren Ved of Alchemy Capital said the second wave may hinder the movement of people again, though it is not going to experience anything like the lockdown that India experienced in the early part of the pandemic.

“The confidence comes from the fact that we now have our own domestic vaccines. Hopefully by July-August, most of us will get vaccinated. Therefore, the recovery should take hold,” Ved said.



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