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Are markets looking at ground reality? | BNP Paribas Mutual Fund
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Are markets looking at ground reality?

Despite starting the week on a negative note, stock markets in India have been witnessing buying activity through the week. Intermittent optimism in the form of a probable medicine for the coronavirus or news partial opening up of lockdowns in Italy, United States and even boosted investor confidence. On the other hand, macro-economic numbers released during the week clearly indicate the sharp impact of the lockdown on the country’s economic activity.

Macro-economic Update

Numbers released during the week indicate that India’s manufacturing activity has witnessed an unprecedented contraction in April 2020 with the Covid-19 led nationwide lockdown bringing business and economic activity to a standstill. The country’s Manufacturing PMI (purchasing manager’s index) fell to 27.4 in April 2020 from 51.8 in March 2020. The latest reading pointed to the sharpest deterioration in business conditions across the sector, since data collection began over 15 years ago. Output collapsed to a life-time low of 11.1 in April 2020 from 53.5 in March 2020, new orders declined to 12.4 (from 52.5 in March 2020) and new export orders declined to 10.2 (from 46.9 in March 2020 and 54.2 in February 2020). The IHS (Information Handling Services) Markit Services PMI plunged to 5.4 in April 2020 from 49.3 in March 2020, an unprecedented contraction since the survey first began over 14 years ago, as the coronavirus-led lockdown made the sector come to a complete standstill causing a historic spike in layoffs and reinforcing fears of a deep recession.

India’s core sector output contracted 6.5% in March 2020, marking a sharp reversal from the 7.2% growth witnessed in February 2020. Additionally, it is the worst performance by the key infrastructure areas going back to 2005. According to CII (Confederation of Indian Industry), the lockdown has brought economic activity to a grinding halt. It revealed that 65% of the firms surveyed expect revenues to fall more than 40% in April-June quarter.

In the backdrop of such a climate, ICRA (Investment Information and Credit Rating Agency) has estimated that India’s GDP might contract by as much as 20% in the June quarter. The agency believes that the country should be able to overcome some lost ground in the remainder of the year but still close 2020-21 down by up to 2%.

Institutional Activity

Institutional activity continues to be mixed with foreign portfolio investors (FPIs) intermittently taking to buying Indian equities. So far this month, FPIs have net bought Indian equities worth INR 16,865 crore while domestic institutional investors have net bought Indian equities worth INR 2421 crore.

Source: 
www.nseindia.com  | bloomberg.com


Disclaimers: The material contained herein has been obtained from publicly available information, internally developed data and other sources believed to be reliable, but BNP Paribas Asset Management India Private Limited (BNPPAMIPL) makes no representation that it is accurate or complete. BNPPAMIPL has no obligation to tell the recipient when opinions or information given herein change. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. This information is meant for general reading purpose only and is not meant to serve as a professional guide for the readers. Except for the historical information contained herein, statements in this publication, which contain words or phrases such as 'will', 'would', etc., and similar expressions or variations of such expressions may constitute 'forward-looking statements'. These forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. BNPPAMIPL undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date thereof. The words like believe/belief are independent perception of the Fund Manager and do not construe as opinion or advise. This information is not intended to be an offer to sell or a solicitation for the purchase or sale of any financial product or instrument. The information should not be construed as an investment advice and investors are requested to consult their investment advisor and arrive at an informed investment decision before making any investments. The Trustee, Asset Management Company, Mutual Fund, their directors, officers or their employees shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages arising out of the information contained in this document.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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