Moneycontrol Pro Panorama | Growing COVID cases and restrictions cast a shadow on business and markets

Dear Reader,

The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of.

Maharashtra’s lockdown measures deal a fairly severe blow to business. While the measures are largely a continuation of the weekend lockdown measures, not allowing e-commerce companies to fulfil non-essential orders is an additional restriction. Also, industries that don’t fall in the non-essential category have to curtail operations and meet certain requirements or shut down.

For instance, continuous process industries can operate with half their manpower, but not if they are oxygen-hungry operations, while other units who can house workers on-site or manage a bubble have been allowed to operate. Moneycontrol reported that Tata Motors has shuts its operations in Pune between April 15 and April 30.

Other auto companies may have to follow suit. As they make these announcements, their suppliers too will have to follow suit. That is lost industrial output and employment even if 15 days is a short period of time. But then, what’s the guarantee that we will be able to loosen restrictions after May 1, and may have to extend them if the curve does not bend sharply enough.

Meanwhile, the surge is spreading to other cities as well and the curve may follow the trajectory seen in Maharashtra. More states may be compelled to shut down economic activity to curb people movement, which will then have a domino-effect on the economy in the coming months. Yesterday, Rajasthan has imposed a 6pm to 6am curfew till April-end. We have analysed the likely effects of the second wave on the auto and consumer sectors in today’s edition.

Already, signs are that the economy is not in that great a shape, what with bank credit data raising this question: Is the economic recovery running out of steam?

But there are bright spots. Smaller cities and rural areas appear to be less affected and agriculture will continue to be a parachute for the rural economy, as long as monsoons play ball. Exports may not be as affected as global trade lines are open, and even in Maharashtra export-oriented units have been allowed to operate. Once this wave settles down, if can get our act together on the vaccination front, we may be able to prevent another surge from overwhelming the economy.

Sure, stock markets are wearing a gloomy look but as we have said earlier in this newsletter, it’s a reality check for rose-tinted valuations. Do read our take on what else could be affecting markets in: What will be the impact of COVID-19 second wave on Indian markets? Why, even IT stocks that have benefited from the digital shift across industries are under the weather. Infosys’s results saw its shares fall by 3.9percent as of 12.20pm compared to a 0.7percent decline in the Sensex.

Do read our research team’s sharp analysis of its earnings in Infosys – Will its valuation discount to TCS widen, post Q4 FY21?. While its results were decent, challenges on retaining employees is a concern for its business and a risk to manpower costs. But business continues to be healthy for Infosys which augurs well for continued earnings growth. As an aside, the good days are back for software industry employees. ​

Other investing insights in today’s edition:

Gillette India: A defensive stock for long term

DFM Foods: Ready for the next leg of growth

What else are we reading today?

The US National Intelligence Council paints a rather unflattering view of India's prospects

India should make a strategic investment in vaccine manufacturers

Investors brace for ‘major shift’ as momentum and value collide (republished from the FT)

Mutual funds score over ULIPs in making the most of the midcap stocks rally

Technical picks: Bajaj Finserv, DLF, Wipro and Marico (These are published every trading day before markets open and can be read on the app)

Ravi Ananthanarayanan

Moneycontrol Pro