It has been an interesting week on the bourses, as stock markets in India and overseas witnessed sharp gains despite the prevailing volatility and risks from the pandemic. Stock markets in India opened the week on a positive note echoing the rally in other global stock markets, amid a few glimmers of hope that the coronavirus pandemic could be slowing. However, profit selling emerged at higher levels after rating agency ICRA on Tuesday said that it was expecting the coronavirus to impact India Inc. on multiple counts. The rating agency expects the virus to have multiple ramifications on the economy ranging from a domestic demand slowdown and supply chain disruptions to foreign exchange rate fluctuations, among others. ICRA Ratings on Tuesday sharply cut the country's GDP forecast amid the COVID-19 crisis and expects the economy to grow at just 2 per cent in the current fiscal. It voiced the concerns of many when it said that the nationwide lockdown which has been in place since March 24, 2020 to contain the coronavirus outbreak has had an impact on industries while their operations have come to a standstill.
"The Indian economy is likely to witness a sharp contraction of 4.5 per cent (de-growth) during Q4 FY20 and is expected to recover gradually, to post a GDP growth of just 2 per cent in FY21," ICRA said.
There seems to be no respite from the selling pressure by foreign portfolio investors (FPIs). In March 2020, FPIs sold debt worth Rs 60,376 crore, making it the largest-ever monthly sell-off by overseas investors. According to the National Securities Depository data, available since 1992-93, FPI selling has never crossed the INR 40,000-mark, except in 2018-19, when debt securities worth Ra 42,357 crore were sold.
Macro-economic indicators are only further endorsing widespread concerns over an economic slowdown. India's Services PMI fell to 49.3 in March 2020 from 57.5 in February 2020, after rising for 5 consecutive months as services sector growth contracted in March 2020 after registering the strongest rise in business activity for over 7 years in February 2020. Meanwhile, headline inflation for the December 2019 to February 2020 period stayed above the upper tolerance band of the inflation target band set by the central bank due to a spike in vegetable prices. So far, the impact of COVID-19 on inflation is ambiguous relative to that on growth.
Market, investors and pretty much most individuals across the globe are taking each day as it comes. The future remains uncertain. Thus, we need to stay disciplined and follow the rules, whether investing or otherwise.