The situation is only getting worse with increasing cases of coronavirus in India. The market hit a second lower circuit in about a week after going 10% down. The situation didn't improve much from there as Sensex and Nifty closed 13% down each with the volatility index going 6% up to 71.19. Financials were once again at the receiving end with Bank Nifty losing 16%.
As per the latest report, the total number of cases has risen to 415 in India with most of the country under government-imposed lockdown.
Amid this crisis, a section of market participants demanded extreme measures like banning short-selling and closing down the market for a few weeks. The demand met with a stiff resistance though, as general conclusion suggested that it is best to leave the market alone and let it find the right level. Interfering in its functioning could well be counter-productive which includes alienating FIIs and a reduced weightage of India in the MSCI EM (Emerging Markets) Index.
Economy: All the good work left undone:
Indian government had maintained an enviable track record in terms of adhering to the fiscal deficit target until last year. However, with a growing need for fiscal stimulus, the current fiscal deficit target of 3.8% is expected to be breached with a certain revenue shortfall and increased health care expenses.
There are increasing concerns over unsecured retail asset quality for HDFC Bank. As a result the stock has gone through unprecedented hammering, with concerns being raised over the higher exposure to unsecured loans in its portfolio.
The bank's management, in a recent interview, indicated that trends in the unsecured retail asset quality are stable. 80% of the unsecured loans made to salaried employees. Repayments in this segment continue to remain healthy as of now.
Consumption basket: Some gains while the rest are facing pain.
#Teji - Amid the current pandemic, consumers have started hoarding daily essentials–rice, wheat, sugar etc. It should help consumer goods companies to maintain their revenue growth, benefitting HUL, Nestle, Britannia and ITC.
A sharp dip in crude prices should aid margins of paint and adhesive companies like Pidilite.
#Mandi - On the negative side, in rural areas, the slowdown is likely to accelerate. Discretionary spending has taken a backseat with fear of salary cuts and job losses. Drop in the prices of eggs and chicken, is estimated to hurt around 50 lakh poultry owners.