The market at best is mirroring the global sentiments, ignoring the domestic issues. Despite being amid the humongous rally, it is surprising how domestic, as well as international institutions, turned net sellers from midway of April. Foreign Institutional Investors (FIIs) ended the month with net selling of around Rs 7,100 crores while Domestic Institutional Investors (DIIs) loaded off Indian equities worth Rs 1,403 crore in April.
As a matter of fact, the share of institutional volumes as a % of the total volume has declined to as low as 36%, signalling that weaker hands are driving the rally. Active institutional participation in May could propel Nifty to the level around 10,500 while lack of interest from them could encourage short-selling, resulting in a choppy and volatile series.
Sensex closed 3.05% higher intraday to close the April series at 33,717.62 while Nifty closed above 9,850, rising 3,21% for the day. Tata Motors (up 19.32%), UPL(up 16.49%) and ONGC (up 13.33%) were the major gainers while Sun Pharma (down 2.76%), HUL (down 1.65%) and Cipla (down 1.12%) were the major losers of the day.
Bumper Rabi season: If farmers are not benefitting, who else is?
India witnessed a bumper rabi season this year. However, Mandis across the country remained under lockdown, resulting in lower commodity prices, adversely impacting farmer's income.
Despite an overall increase in food grain production, their arrival into the market has declined by over 70% since the last year.
The government is trying to aid farmers by procuring crops at the minimum support price. However, the delay in procurement has caused a deep financial crunch for farmers. They also face the untimely risk of rain and hailstorms destroying the crop.
As per an estimate, realizations in maize, cotton and soybean have dropped by more than 20% since the last year. Although the situation is challenging for the farmer community; companies sourcing Agri commodities as raw material stand to garner major benefits.
Labor shortage: Could it be a long-term phenomenon?
With industries limping back to normalcy, economic activities are expected to pick up the pace. However, the availability of laborers is one area that will have to be fixed quickly.
Since the beginning of COVID-19 crisis, 40-50% of the labour workforce from construction sites has flocked back to their native towns and villages. However, with Rabi season nearing its end, the majority of laborers could be willing to return, if travel restrictions are lifted.
A few of the workers held up at construction sites may want to go back home. As a result, their contractors believe that labour cost could rise temporarily. However, normalcy should return once the issue is resolved within one-two months after the end of the lockdown.