Stock markets in India traded a four-day week on a positive note, although monthly futures & options (F&O) expiry did introduce a bit of volatility in the markets. Although there have been no positive developments domestically, market sentiment was boosted by positive global markets. Global shares traded on a positive note following developments overnight regarding the use of Gilead Sciences' antiviral drug Remdesivir as a potential new treatment for COVID-19 patients. Supporting these gains were expectations that India will ease the lockdown following in the steps of Italy, New Zealand and some US states that have lifted some of the restrictions. Lending further support to the positive sentiment in the market was China’s report stating that manufacturing activity in the country expanded slightly in April 2020. Buying was also triggered after Foreign Portfolio Investors (FPIs) turned net buyers of Indian equities on April 29. FPIs bought shares worth a net Rs 722.08 crore on April 29, 2020, as per provisional data released by the stock exchanges. Domestic Institutional Investors (DIIs) bought shares worth a net Rs 78.67 crore on April 29, 2020, as per provisional data.

However, the government has extended the lockdown by another two weeks till May 17, 2020. Additionally, due to a complete standstill in economic activity, India has been subject to a slew of rating downgrades. Moody’s Investors Service downgraded India’s growth estimate to 0.2 per cent while Fitch revised its growth expectation to 0.8 per cent. Fitch Ratings said that India’s sovereign rating of BBB- could come under pressure with a deteriorating fiscal outlook arising from weaker growth due to the outbreak and the lockdown. Domestic rating agency CRISIL has nearly halved its GDP forecast for India to 1.8 per cent for FY21 while projecting total losses of Rs 10 lakh crore due to disastrous lockdowns to control the COVID-19 pandemic. India Ratings has slashed its growth expectations for the economy to 1.9 per cent for the FY21, down from 3.6 per cent in March. The last time India experienced such low levels of growth was during FY1992 at 1.1 per cent.

The current gains in the equity markets indicate that investors are currently focusing on the contagion and cheering any signs of respite in terms of medication. The economic fundamentals and worries over growth seem to have been side-lined for the moment.