Covid second wave: How stock market investors are reacting to rising infections

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Concerns over the second wave of coronavirus have pushed bulls on the backfoot. As a result, the domestic equity market nosedived over 2% on Monday, after the country reported a record 1,68,914 Covid-19 infections overnight, overtaking Brazil to become the second-most affected country globally. It is the highest single-day rise so far, taking the total tally of cases to 1,35,27,717, while the total number of fatalities stood at 904 as of April 11.

The 30-share index Sensex plummeted over 1,300 points to 48,215 in the early trade, while the broader Nifty50 index dropped 412 points to 14,422.

Commenting on the fall, VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services said, “Since the second wave of the pandemic is turning out worse than expected, there is profound uncertainty about its impact on the economy and markets.”

Since the situation is the worst in economically significant Maharashtra, it can impact the market’s assumption of around 11% GDP growth and above 30% earnings growth. This is not the first time when the Indian equity market reacted negatively to the rising Covid cases. Under the first wave, the 30-share index cracked over 35% between February 12, 2020, and March 24, 2020. The index tanked to 26,674 from 41,565 during the same period. However, India reported the only a handful of new cases during the period. Meanwhile, Sensex lost nearly 4,000 points, 2,900 points and 2,700 points on March 23, March 12 and March 16 last year.

Among the important dates, when the Janta curfew was imposed on March 22, India reported 66 new cases with 3 deaths. Likewise, when prime minister Narendra Modi announced the nationwide lockdown on March 24, the country reported 37 new cases.

As we proceed during the year, the BSE Sensex again lost 2,000 points on May 4, when the country’ posted 3,932 fresh cases. The previous financial year stood highly volatile for the domestic equity market due to uncertainty over Covid. Thereafter, it again lost over 1,000 points on May 18. The reaction by the stock investor came after the Indian equity market reported over 5,000 new cases for the first time ever.

It further plunged 1,114 points on September 24 and 1,066 points on October 15 last year. India reported 85,919 new cases on September 24 and 60,439 on October 15. After a high of 97,859 in terms of new Covid cases under the first Covid wave, fresh cases hit a low of around 9,000 in January this year.

In the latest movements since March this year, Sensex again tanked 871 points on March 24 and 870 points on April 5 this month. On March 24, new cases again crossed 50,000 under the second wave. On the other hand, fresh cases stood at nearly 97,000 on April 5.

Going ahead, Fitch Ratings has said the second wave of infections poses increased risks for India’s fragile economic recovery and its banks.