COVID IMPACT ON Q1 & Q2 AND 2023

 
Today we came up with an analysis of the pattern of the 2nd wave of covid on India and outlook for the impact on the capital market with a slight hint towards 2023. After reading this one will get an idea about the H1 outlook and what should be expected. We never wrote anything on political framework or neither on any government but after creating the telegram group for Covid Pan India and going through a couple of reports related to the pandemic impact on India, today we are compelled to write the same. The way medical associations are  raking up the number for the seriousness of the covid 2nd wave and the expected impact of the 3rd wave it is being found that we have a long way to go.

 The government at the centre has already faced stringent criticism and this is where we are scared up. We all know that the state governments have failed miserably at the local level and the foolish announcement that India is covid free.  

 Till now we are managing the tears of our loved ones death who are within the age bracket of 50+ but now it is below 18 years who are at the risk in the 2nd & 3rd wave. We are scared that when the 3rd wave will strike when younger ones and kids will be impacted. In a report the Andhra Pradesh Covid Command and Control Centre Chairman K S Jawahar Reddy said in a statement, "The major strains identified from the samples of south India (AP, Karnataka, Telangana), from the positives of the April month data, are B.1.617 and B.1, which are very infectious and also spreading in the younger age groups apart from the adults.

The lockdown story is also being manipulated since most of the labour is now in rural India where the infection is more and spreading wildly followed by a broken healthcare system. The health care facility in rural India is one of the weakest and it is better not to open ourselves enough on the same. The urban system has collapsed due to the pressure of rising numbers of patients.

 The number of dead patients is a falsified number since those who are dying in hospitals are only being counted for the same. Those who are dying in-home, auto-rickshaw, on-road while travelling and searching for medical assistance are hardly being accounted in the health numbers counted at the end of the day. The number of death is quantified by many folds.   After making the telegram group it is well clear that we could understand the pattern of a struggle for beds, medicines, oxygen suppliers and most importantly the open Black-market. In fact, we were surprised with the way this black market of supply for oxygen and medicines and even getting beds. India had one of the lowest allocations for the health care industry compared to developed and even among emerging economies. But the black market has lead to a massive loss of wealth and portrayed an ugly picture of the government at every level irrespective of state or centre.

  The impact on the market and Indian economy due to these  covid variants will be impactful where we will find GDP cut down being announced. This will be a gradual process of readjustment and in many places might be a shock given by foreign brokers on GDP cutdown projections. The lockdown process will bring down non-food inflation but food inflation is where the threat is envisaged. As rural India is impacted and the virus is spreading like wildfire the Agri product output and its supply is the place where inflation might creep up. No stimulus packages can buy out death and particularly in rural India.

The 2nd wave and the 3rd wave expectation would now place halts on industrial expansion for a few more months. Non-consumer sectors like cement, infrastructure, automobiles have already got their 1st quarter into a toss and further the upcoming monsoon places brakes on economic sectors which is a normal sequence hence H1 of Fy-22 is not screwed but not good.  We have more hidden problems in terms of the BFSI segment and particularly for the small NBFC who will face more hardship as rural India is under wild toss. We don't know about the delinquency which will come forward from this impact on the NBFC sector.  A significant impact will be on Insurance companies where death toll will take up the industry in terms of claims.  Pay cuts are now going to be unbearable for anyone hence consumption will slow down across many sectors. Rural India is severely impacted due to covid and hence the consumption demand will take a significant slowdown as we are yet to identify who died –the consumer or the sole bread earner for the family.

 The government at the centre is already facing problems of its positional value as they have lost West Bengal despite such a high voltage campaign and further the Panchayat election of stronghold places like Ayodhya, Varanasi, Gorakhpur and Lucknow in the recently held Uttar Pradesh local body elections have been lost.  Well, when we analyse the pattern of Impact of the 2nd wave we find UP have been one of the most severe impacts with rising numbers of death due to the covid. The fear is that in 2023 the centre will head for an election and we have just exact 2 years left which will take time forgetting 140 cr people to get vaccinated.

 Further, in between, there will be many state government election and panchayat elections where under the current situation one can guess the results that can come up. All these have an impact on the market slowly in the coming days.  We must not forget that Donald Trump lost due to his severe negligence and mismanagement in handling covid 19 1st wave.

The capital market is now losing hopes of some positives vibes as the current situation does not portray a very rosy picture. If the vaccination and government are able to control and meet the healthcare support system then it can survive otherwise we don’t have a very rosy ride for the capital market.

 Coming to the investments well one can take a contrarian call on few sectors that will be sliding off in the coming Q1 and Q2 to make wealth in H2 of FY-22. Well H2 will play a big role provided the 3^rd wave is handled well and the 2^nd wave is controlled well. Markets of the US and EU will rise and will grow as they well planned the vaccination and have been able to control the damage. Hence shifting of inflows and hunger for those markets might grow in the short term. As long we don't show a positive act from our end we should be prepared for these movements.