Stocks dip amid second wave fears

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BSE Sensex fell 1,145.44 points or 2.25% to close at 49,744.32, while the larger Nifty index fell 306.05 points or 2.04% to close at 14,675.70 . Indian indices are now 5% below their record level set after the Union budget on February 1. India’s volatility index, or VIX, rose 14.5% on Monday to hit 25.47, reflecting investor concern over further corrections.

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As of Sunday alone, India recorded 14,199 new cases of covid-19, continuing a recent upward trend in infections after several months of decline. The active workload stood at 150,055 on Monday, with a cumulative national positivity rate of 5.2%. India has now reported more than 11 million infections and 156,500 deaths.

“Growing economic restrictions due to soaring virus cases and weak global signals have hurt sentiment in the domestic market. The market rate of decline was compounded by a sharp rise in volatility, being a monthly expiration week for futures and options (F&O). Inflows from foreign institutional investors (FIIs), which led the rally, slowed due to global vulnerabilities from rising bond yields and inflation, ”said Vinod Nair, head of research at Geojit Financial Services .

Calling the situation serious, Maharashtra reimposed some restrictions and warned of a lockdown if cases continue to rise. After three months of decline, cases are on the rise again in the state, which bears the heaviest burden of covid-19 in India.

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The return path

According to Sonal Varma and Aurodeep Nandi, economists at brokerage firm Nomura, the resurgence through more virulent strains, especially in Maharashtra, poses a short-term risk to normalization of growth. “However, the resurgence of covid-19 remains relatively localized and the second waves in other countries have proven to be less disruptive economically. Short-term downside risks notwithstanding, we maintain our medium-term optimism, supported by fiscal activism, easy financial conditions, base effects and faster global growth, ”they said in a February 22 report. .

Brent traded above $ 63 a barrel on Monday and is up about 22% this year.

The Indian rupee closed at a one-year high of 72.50 against the dollar, up 0.21% from its previous close of 72.65, while the government bond yield of 10-year benchmark was 6.2%. “We believe that one of the reasons for the recent surge in yields could be short selling,” said Soumya Kanti Ghosh, group chief economic adviser, State Bank of India. Ghosh said that if rising bond spreads reflect the nervousness of market participants, the central bank will have to resort to unconventional tools to control the surge in yields.

“This is important because any further upward movement in G-Sec yields, even 10 basis points from the current level, could result in mark-to-market losses for banks, which could be a small blow of a rather exceptional year in the FY21 bond. the markets with the Reserve Bank of India assiduously supporting the management of government debt at the lowest possible cost in 16 years, which otherwise could have threatened financial stability, ”he added.

Data from the Union Ministry of Health shows that more than 86.3% of new cases come from five states. Maharashtra continues to lead in new cases with 6,971 reported on Monday, followed by Kerala (4,070) and Tamil Nadu (452). Eighty-three deaths have been reported in the past 24 hours; Maharashtra had the most deaths (35), followed by Kerala (15).

The health ministry said more than 75% of India’s population remains vulnerable to infection and there has been an increase in the number of daily cases in Chhattisgarh, Madhya Pradesh, Punjab and Jammu- and-Kashmir. Weekly cases in Maharashtra fell from 18,200 to 21,300 in just four weeks, while the rate of covid positivity fell from 4.7% to 8%. In the Punjab, the positivity rate has dropped from 1.4% to 1.6% in the past four weeks, while weekly cases in the past four weeks have increased from 1,300 to 1,682.

A study published in the Journal of Epidemiology and Global Health titled Exploratory Analysis of Demographic Factors and the Temporal Evolution of covid-19 in India suggested that highly urbanized states, including Maharashtra, Gujarat and Tamil Nadu, are vulnerable for the current pandemic, with data from India further showing that hyper-urbanized cities like Mumbai and Delhi are the hardest hit, requiring additional sustainability of health infrastructure amid challenges of the social environment.

“Different variants of the virus are floating around in different parts of the world. In India we have had a large number of laboratory confirmed cases; therefore, a lot of viruses are in circulation. The higher the number of viruses, the more likely it is that new variants will appear. In addition, the immunity after exposure is of questionable strength and duration. We still have a large population uninfected with the virus, ”said Lalit Kant, a scientist and former head of epidemiology and communicable diseases at the Indian Council for Medical Research (ICMR).

Union Health Secretary Rajesh Bhushan said last week that states with a high number of cases were not doing enough RT-PCR testing and that there had been laxity in adopting preventive behaviors.

Several countries are seeing a resurgence of cases, with the United States seeing the third wave of covid-19 and Europe a second wave. “The return to normalcy of daily life with trains opening at full capacity, inappropriate covid-19 behaviors, large-scale social gatherings and no-mask marriages, can all lead to a second wave, which , as experience from around the world shows, is always much worse and more devastating than the first wave, ”said Harsh Mahajan, senior vice president, NATHEALTH and founder and chief radiologist of Mahajan Imaging in New Delhi.

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