Harsha Upadhyaya (L), CIO-equity, Kotak AMC
Given that we are in the midst of an unprecedented crisis, it is very difficult to predict where the market is headed and when will the economy hit the recovery path. Across businesses, the ‘D’ factor is in play. First is, demand destruction, where hospitality and aviation sectors have been the worst hit. The second ‘D’ is deferment. In the case of under-construction projects, given the labour migration, the concern is when will the projects restart? The third ‘D’ is down-trading. It is quite likely that people will down-trade as there is uncertainty around jobs and income sustenance. So, whether it’s demand destruction, deferment or down-trading, every industry will see its profitability getting impacted. Today, the market believes that there will be a gradual recovery in the second half of FY21 but that too might change if the lockdown is extended. Hence, it is fair to assume that FY21 earnings will be substantially weaker than consensus estimates as different sectors will see different recovery timelines. As a consequence, the market will remain volatile over the next three to six months.
Ambareesh Baliga, Independent market expert
Though there are concerns around a few COVID hotspots, including Mumbai and Delhi, India has managed to contain the spread of the disease. Over the past seven weeks, we have seen that the numbers being reported are still benign. The regulator and the government have been proactive in working out a stimulus package. Also a calibrated opening up of industries across states should help the economy get back on track over the next few months. Despite supply chain, labour and working capital issues, we are probably in a much better position than other emerging and developed economies. Global investors have very few pockets to invest and despite weak growth, India will stand out. We will have 30-40% savings on our Rs.8.5 trillion oil import bill, giving the government enough ammo for a fresh stimulus. Hence, the market has discounted the worst possible scenario, and I believe things should only get better from here-on. If we manage to contain the epidemic and the lockdown ends, the benchmark indices will rise with intermittent corrections. It’s unlikely that we will hit the lows seen in the last week of March.
