With more than three lakh coronavirus cases being reported daily, there are risks but we are in the middle of a bull-market correction and any dips will get bought into, Ridham Desai, Managing Director, Morgan Stanley India, has told CNBC-TV18.
“The COVID situation is quite grim in India at the moment but we believe that economic impact will be limited. If we look at the stringency put in place compared to the last COVID wave it is much lower,” he said in an exclusive interview to the business channel.
The market had learned from successive waves across the world that much of the economic impact was temporary, Desai said. "Also, we are in a bull market correction, and we keep getting these corrections, and at lower levels, people will start engaging," he said.
There were definitely risks on the horizon but the underlying trend remained bullish, Desai said. The vaccine programme as well as the mini-lockdown measures in Maharashtra had helped bring down cases.
Maharashtra, which accounts for at least 13 percent of India's GDP, has been hit the hardest and has been reporting the highest infections in the country for weeks. On April 29, the state government extended the lockdown-like curbs to May 15 to break the chain of infections.
Mid & smallcaps
Commenting on the broader markets, Desai said small and midcaps had rallied quite significantly in the recent past and could now take a breather.
The underlying thesis remained the same—in a new economic cycle or profit cycle, which we are in, small and midcaps would outperform, Desai said.
Desai said a new economic cycle was about to start and financials would turn out to be better performers because of the expansion in credit growth.
However, there may be a little bit of pressure on margins because of the low-rate environment. The ideal environment for financials could emerge in 2022 but as that market was forward looking animal, it would start discounting everything in advance.
Desai said that whenever the cycle turns, saller entities do better and gain market share at a faster pace.
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