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Equities have been a slam-dunk for investors ever since they were lifted in early-2020 out of a pandemic-induced crash, by the generosity of governments and central banks. Even a China-sized problem or an impending tapering of bond purchases by the US Fed is not worrying markets for long. After rising by 1.6 percent on Thursday, the broad market is up today by 0.4 percent at 1.05pm. The Sensex has crossed the 60,000 mark milestone.
Some of the reasons are global as US markets closed with smart gains on September 23, recouping losses made in the wake of nervousness over an early Fed taper and an implosion in China’s troubled property developer Evergrande. Those fears have been swept under the carpet now. But they have not gone away. There is silence on the status of the repayment due on Thursday on a dollar-denominated bond series and news reports were talking about China’s government telling local authorities to prepare for the fallout from an implosion of Evergrande. Maybe, the weekend could bring some clarity on the way ahead.
There is reason to be positive on the domestic front, however. The post-second wave recovery is consolidating and there is anticipation of a robust showing in the second half. Improving mobility data has brightened the prospects for a recovery in the services sector as well, which was laid low by the second wave. Accenture’s robust results have brightened the mood for IT stocks and it’s no surprise that they are leading the gains among sectors, up by 1.4 percent.
Most importantly, we can be cautious yet a bit more optimistic about the progress being made by India’s vaccination programme. Our Herd Immunity Tracker
update shows we are now in a position to fully vaccinate with two doses all eligible adults in four months from now. That’s a realistic estimate based on the current rate of inoculation and if supplies improve further, as expected, then it could be sooner even. Still, the fear of a third wave remains, as the seven-day level of cases remains at the 30,000-mark.
While the going has been great for equities, one can’t say the same about those who have stayed away from the stock market—either due to risk-aversion as seen among middle-income earners or pensioners or out of ignorance. They have been hit hard by the surge in inflation while fixed deposit rates have dropped to near mid-single digit levels, delivering negligible or even negative real rate of returns on certain tenures.
The focus on giving growth enough room to recover means rates are likely to remain low for some time to come. Is there a case for giving relief to depositors, especially in the vulnerable age categories? We concurred with the suggestions made in a SBI research note
, which referred to how low rates may be a reason why so much money is entering the stock market. There are ways in which the vulnerable among savers in bank fixed deposits can be protected even while ensuring that business gets access to cheap capital. Do read.
Investment insights from our research team
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