PSU Banks witnessed the bulk of the buying (up 3.50%) during the day. That itself should be a sufficient hint, indicating the vulnerability of the rally.

India is slowly but surely coming out of the lockdown but market fluctuations clearly indicate a growing dilemma. For investors, stock-picking decisions need to be taken not based on anticipation but based on how the actual situation is panning out on the ground.

As per the latest reports, Rajasthan has once again sealed its borders after the surge in the number of coronavirus cases. More shocking is the Delhi government's assessment; it expects the number of cases to increase to 5,50,000 by the end of July from the 29,000 cases currently.

Rate-cut benefits finally reaching borrowers:

In the meanwhile, policy intervention from the RBI has now started showing signs of an impact. RBI has slashed the repo rate by 2.5 percentage points to 4% since January 2019.

The banks are now transmitting those rates cuts to the borrowers. Private banks and PSU banks have cut their MCLR by an average of ~100 bps and ~80 bps respectively in the past 12 months. However, the pace of transmission of benefits is very slow which is quite frustrating for consumers.

The curious case of Parle-G’s record-breaking sales

Good old Parle-G reported a record number of sales in April and May during the lockdown. "We have not seen this kind of growth at least in the last 30 to 40 years," the company's top executive mentioned.

Parle-G gained a 5% market share in the highly competitive biscuit market during this time. It points to the consumer's preference for lower ticket consumption during the pandemic. The value packs of Parle-G were also preferred by government agencies and NGOs, working to distribute food relief packages.

Key takeaways:

With pandemic far from over, industries continue to face supply and labor-related constraints. On the demand side as well, consumers are relying on value-buying over luxury spending (with reference to the Parle-G sales figures).

With these troubles not going away anytime soon, it is futile to expect a V-shape recovery. The industries are going to require at least a couple of more quarters to overcome the lockdown blues.

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