We are now into Day 13 of the nationwide lockdown. From the Stock Markets perspective we are also in a three day weekend which is good in a sense as there has been no Stimulus News from the Government and the Economy continues to be in a complete lockdown as such the trading is biased towards negativity. Globally however bad newsflow could be peaking

  1. The most impacted countries Italy and Spain have seen a clear flattening of the curves with new cases now starting to trend down, death rates stabilizing and coming down and recoveries picking up. For example in Spain as on yesterday the net increase in active cases yesterday adjusting for recoveries and deaths was just around 260. Similarly in Italy the net figure has been coming down. I expect that within the next 3-4 days we will start seeing more recoveries than cases in these two countries
  2. On the other hand countries that were slower to implement measures like United Kingdom and France have seen cases still trend up but likely to stabilize soon. USA has become the biggest country in terms of infections. The most impacted New York state also saw stability setting in terms of number of new cases over the last two days. However its still spreading in other parts of the country
  3. In India despite the Tablighi issue we have seen that Number of new cases have stabilized over the last three days even has testing has picked up. Lets see if the curve flattens

Last 3 days #COVID2019 cases in #India ( Ministry of Health figures come with a delay)

3rd April 560

4th April 576

5th April 605

  • Despite potentially getting through the Covid crisis with less damage to human life than other countries the big risk is that the complete lack of preparedness on how to deal with the Economic fall out subsequent to the implementation could keep us back post the lock down. For example while essential products like food and medicines were kept out of the lockdown ban overzealous officials shut down packaging material factories and did not allow them to be transported. For many medicines the inputs come from Chemical Companies whose plants were shutdown. This has severely disrupted the supply chain. The government has now allowed the manufacture and transport of these products but still we see issues on state borders
  • Job losses have started and could become permanent without a workable Fiscal Stimulus Package. Without going deeply into every industry lets see the example of just one industry i.e. Hospitality, tours and tourism. Hotels & Travel sectors with all linkages + restaurants comprise 4.2 Crore jobs in India. The overall contribution to the GDP is around 9% of GDP All under shutdown and in deep stress Without government aid many will not survive and we are already seeing layoffs. A subset of that is Airlines. The Indian Aviation Industry contributes nearly $72 Billion to India’s GDP It directly and indirectly employs 16 Lakh people. Job losses here could be very severe as many costs are fixed especially Aircraft Lease Rentals
  • The main issue facing India could be the lack of experts in the Finance Ministry who can gauge the issue and respond. It is only if they can get out of the artificial “Fiscal Deficit” mindset for atleast this year that they can act. For example when the Sovereign Bond Issue came up in the 2019 Budget I had pushed for it and it was a brilliant time with low rates and low spreads, however Conservatives within the Finance Ministry and RBI scuttled the move. If that money had been raised today  we would not be so bothered about excessive government borrowing from the domestic markets
  • The other idea which is workable at this stage is that RBI Monetizes the deficit to the extent of 1% of GDP i.e. Rs 200000 Crores. This will not be inflationary as demand conditions in the economy have collapsed and now it will take a long time for capacity utilizations to reach a level where they become inflationary. Globally also we should see a deflationary cycle as growth rates plummet.

Overall the newsflow is mixed at this stage. The stimulus package is still awaited and so is an effective treatment regime for Covid19.  Many existing drug trials are on where results will be known over the next few weeks. Typically Stock Markets will bottom on reducing bad news rather than actual good news. As such if we see a continued reduction of bad news then a pull back rally could start which could be very strong. India’s Market Capitalization to GDP ratio has now gone below the March 2009 levels although still higher than 2003-04 levels. We are near the bottom for sure, exact trends will be known over the next few days.


  1. Excellent updates Sandipji,

    What will be payable of Govt to different companies and MSME all together ? I think if they focus on this issue too will solve so many problems.

    Thank you

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