India stocks rebound on easing curbs, falling COVID cases: Report
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Mumbai: The stock markets in the country are reported to have returned to resilient mode on the heels of falling new COVID cases, related deaths and easing of lockdown curbs. The markets were murky after the country began to re-impose restrictions to arrest the spread of the pandemic.
The resilience can be attributed to the decline in daily confirmed cases of Covid-19 and the eventual possibility of reopening of lockdowns across states, a report by Kotak Institutional Equities said.
The disconnect between the human tragedy and the markets largely comes on the back of difference in the behaviour, which for humans is emotional and for the markets is clinical, the Kotak report said.
"The resilience of the broad market and 'rotation' among sectors are not surprising in the context of declining confirmed daily and overall active Covid-19 cases and (2) likely gradual easing of restrictions across states over the next few weeks," it said.
The market has been quite rational over the past few weeks displaying both resilience and rotation. India's Covid-19 daily confirmed and overall active cases have declined sharply over the past 1-2 weeks in many states, which may set the stage for the easing of lockdown restrictions across states.
"We draw comfort from the fact that (1) positivity rates have started to decline across states but testing has sustained at high levels. The pace of vaccination is disappointing though and we can only hope that a likely ramp-up in vaccine supply from July mitigates the risk of a third wave," said the report.
Comparing the economic impact of the current lockdowns in states ( over April-May 2021) with the national lockdown during the same period last year, the lower overall economic impact of the second wave attributes to the partial nature of lockdowns with no restrictions on manufacturing and limited restrictions on services and also, staggered nature of lockdowns across states.
However, the report noted that the second wave has made a higher impact on rural India in relation to the first wave. Rural India was largely unaffected in the first wave.