Moneycontrol Pro Panorama | It's time to get a grip on the second wave

Dear Reader,

The stock market will have risen for four consecutive days if today’s 370 point gain in the Sensex (at 12.58pm) holds when trading ends. This is even as a ring of lockdowns is being imposed across the country, either new or extensions of existing ones, to arrest the spread of the virus. The market’s apparent indifference to the likely economic havoc caused by these lockdowns and the hardships suffered by families is puzzling some observers.

After all, the second wave is halting activities in several states and is expected to have a severe effect on economic growth in the second quarter. Worse, it’s spreading rapidly in rural areas that have always suffered from weak healthcare systems which makes them more vulnerable to the disease. The risk of a hit to the rural economy is one of the concerns we have highlighted in today’s edition. This is not just about the risk to rural demand, which was a major source of strength for companies in the first wave, but also to the workforce that runs factories that are situated near rural areas. For instance, Hero MotoCorp said its plant, which has been shut since May 1 is extending the shutdown by another week. But the stock continues to be an attractive one for investors, says our research team, in today’s edition: Hero MotoCorp: A fundamentally strong business available at reasonable valuation.

There has been a deceleration in cases in cities such as Mumbai that were adversely affected initially, which may be giving hope that the worst will be soon be behind us for other places too. There may also be hope that because industries and essential goods and activities are being allowed to function, the hit to companies may be less. Most of this optimism centres around hope that there is no long lasting demand destruction because of the second wave.