Thinkpad: That Sinking Feeling…

Hope it’s been a safe week for you.

The gloom is spreading. New infections crossed the 2 lakh-a-day mark this week, with little reason to believe that it will settle much lower in the immediate term.

Social media timelines are filled with people looking for hospital beds, oxygen cylinders, plasma from recovered patients. Doctors, overwhelmed, are appealing to people to stay home. Administrators are struggling to maintain some balance between lives and livelihoods, announcing localised lockdowns to slow the spread of infections. Alongside, defying any and all explanation, pictures of large gatherings with no social distancing in sight continue to pop up with alarming frequency.

The health emergency is the immediate concern but attention is shifting to the economy as well. The silver lining there is that the extent of impact appears moderate so far.

Pranjul Bhandari of HSBC says their models imply a loss of close to 0.6% of the country’s gross value added in the quarter ending June as a result of the 15-day lockdown announced by Maharashtra. If the curfew is extended beyond 15 days, the cost will be higher, she said. Nomura’s Sonal Varma had earlier cautioned that the sequential momentum between the January-March and April-June quarters may turn negative, even if the year-on-year growth holds strong.

Beyond numbers, Madan Sabnavis at CARE Ratings warned the impact of uncertainty will start to feed into demand and then supply even if governments try to restrict the expanse of lockdowns.

Credit Suisse’ Neelkanth Mishra looked at relatively brighter side of things. According to him, the rapid spread will also mean that the period of high infections will be less protracted. Their calculations, using percentage of those infected and those vaccinated, suggest that 40% of the population will have antibodies by end-April. The GDP impact, assuming that states other than Maharashtra stick to limited containment measures, could be less than 1% for FY22, Mishra said.

For markets and investors, the rising Covid number presents a risk but there are other concerns on the horizon, too, like inflation. BQ’s Niraj Shah in his series ‘Navigating Through Uncertainty’ is trying to answer questions that are top of mind for many.

Taimur Baig of DBS says investors should remember that the Covid-19 wave being seen right now may not have consequences as dire as the last time. “A year ago, investors knew very little about the disease, the world didn’t have the wherewithal…and we were a year away from a vaccine rollout.” Baig sees inflation as a bigger risk right now. You can read / watch that conversation here.

Ridham Desai of Morgan Stanley appears a bit more cautious. He says if things get worse, the market correction could deepen. Describing himself as a “committed bull”, Desai said there are lots of things happening in the market for those with a shorter-term horizon, “and they need to create those opportunities as they come along”. You can catch his detailed views here.

Meanwhile, in a small bubble away from the Covid-19 crisis, IPL has hit TV screens so your daily escape is sorted for the next two months. That is if you can bear the bad uniforms, the fake crowd noise and some very annoying advertisements, with a special mention of the Coinswitch Kuber ad which has left many of us wanting to throw a rock at the TV. Don’t. Your TV is your best friend as you prepare to lockdown again.

Till next week.

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