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Don’t fear the second wave, the worst is priced in by markets: Experts

The world has learned much from the first wave and so it is prepared to tackle the second or the third wave of coronavirus. India is not an exception and that is why markets have bounced back from the recent selloff, say experts.

April 19, 2021 / 12:20 PM IST

The Indian market underperformed global peers for the week ended April 16 as daily COVID cases topped 2 lakh, forcing states into partial lockdown and tighter curbs. The Nifty and the Sensex closed with losses of about 1.5 percent.

However, US markets hit a fresh record high on strong economic data. “S&P 500 and the Dow broke closing records, as investors took strong economic data and bank earnings as signs of momentum in the US pandemic recovery,” said a Reuters report.

Indian markets are unlikely to revisit March 2020 lows as the government and people are better prepared this time. The market may take comfort from the ongoing vaccine drive and head higher after some consolidation in the near term, as worst seems to be factored in, experts say.

Reuters report showed that the government will import Russia's Sputnik V vaccine starting this month to cover as many as 125 million people.

In the past, global markets have also gone through a similar trend. Yes, there was an initial decline but as things stabalised bulls regained control.

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COVID-19 Vaccine

Frequently Asked Questions

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How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

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Data from Nirmal Bang show that other countries have seen the end of market decline in the initial few weeks. Apart from the second wave, the trend in the global market will set the direction for the next few weeks.

In the US market the second wave started in mid-October and it peaked in mid-January 2021. The equity markets saw some fall in the first 15 days but then by January, it was up by 8 percent, data shows.

Nirmal Bang

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In India, the second wave started in the third week of March. The Nifty50 has already fallen about 5 percent from the record highs but experts say the worst is factored in.

“Globally, when the major economies were impacted by the second wave of the pandemic, there was negativity only for a couple of days and post that markets bounced back to new levels,” Sumeet Bagadia, Executive Director at Choice Broking told Moneycontrol.

“Also, the world has learned much from the first wave and so it is prepared to tackle the second or the third wave of the pandemic. India is not an exception and thus we have seen a bounce back from the recent selloff,” he said.

Indian markets are oscillating in a broad trading range between 14,250 and 14,300 on the downside and 14,850-14,900 on the upside.

“The Nifty index has formed a Hammer candlestick pattern on the weekly chart at the lower end of the range which suggests that the temporary corrective phase could be over and we may witness a rally all the way to the upper end of the range which is 14,900,” Aditya Agarwala, Senior Technical Analyst, Yes Securities, said.

“Moreover, RSI has formed a positive divergence on the daily chart ie price- making a lower low, while RSI making a higher low, which is an indication of downtrend losing steam and a resumption of an upmove. Therefore, assuming no more major shocks now, we could conclude that the worst may be priced in,” he said.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Kshitij Anand is the Editor Markets at Moneycontrol.

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