about 1 year ago
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The Covid cases are spiking up across India. Yesterday, the country recorded a single day jump of almost 17k positive cases and mortality rate is also not really improving.

The US got stricter on the H1B visa norms and no visas will be forthcoming till end of this year. Petrol prices are up for the straight 20th day today; China and India are engaged in brinkmanship politics on the border; growth rates are headed southwards; supply chains are disrupted; no news really which makes you feel good.

Yet, as though in defiance, cocking a snook at every negative news, the stock markets seem to be on their own growth trajectory – over the past five weeks, four weeks, the market has ended with gains; more than anything else, there seems to be a sense of muted and cautious optimism. And despite the visa ban, we see the same defiance in action - IT stocks were the outperformers today, followed by PSU banks.

You see the national news and then you see the business news; there seems to be absolutely no connection between the two. So does the market know something good, which we all cannot see presently? If the stock market is the barometer of the economy, how come we are not seeing growth?

The market is always future looking – it has discounted the pandemic though we all are still fighting it. As per the market, the worst is probably behind us and yes, it is going to take a while to emerge out of this but the market feels that it will be quicker than expected. The perception is that Q1 is written off – that too is discounted but what it is counting on is things getting better, with pent up demand and agriculture pushing up growth. The market is probably banking on good monsoons too – this is expected to give the demand push in rural India.

This apart, the lockdown is in the process of being lifted even more, starting 1st July and the market is hoping things will return to some more bit of normalcy. The new normal of masks and social distancing will dictate the work place and people will learn to live alongside the virus. There is also the feeling that the new drug from Glenmark and availability of Remdesivir will bring down deaths. The vaccine hunt is also progressing and consensus is that Oxford will be ready to serve by October. Thus there is a sense of hope that we will emerge out of this.

Also many people are working from home, having some time to look at investment options. Many do have liquidity at hand and with no other avenue as such to park funds – realty is too risky and illiquid, gold prices are too high and FDs have become a joke, leaving only the option of equity. Retail investors are buying blue chips as they feel these are safer, more liquid and more importantly, easy to track and understand.

Bottomline – markets are up simply because compared to the present, the future looks much better.

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