INDIA ONLY MARKET AMONG TOP 10 TO SEE RED IN APRIL
Only market among top 15 to see a fall; world m-cap has risen 4.2% in April
India is the only nation in the top-15 to see an erosion in its market capitalisation this month. Record daily coronavirus infections, poor healthcare infrastructure, and stringent restrictions across the country on movement of people prompted investors to prune their bullish bets on the country.
As on Friday, India’s market capitalisation had declined 2.5 per cent for the month to $2.67 trillion, even as world market capitalisation rose 4.2 per cent to a new record of $112 trillion. Monday’s fall has further dented India’s market cap by about $50 billion.
Countries such as the USA, France, Sweden, and Germany have seen their market cap jump between 6 per cent and 9 per cent, data compiled by Bloomberg showed.
The MSCI All-country World Index, a gauge for the performance of the world market, hit a record high on Friday.
“It seems like our markets have decoupled from global counterparts due to rising coronavirus cases in India,” said Ajit Mishra, vice-president (research), Religare Broking.
Typically, most global markets move in lockstep. However, India’s worsening Covid-19 crisis has sparked a major underperformance.
Experts say investors are increasing their wager on markets that handled the outbreak better and are seeing a normalization of economic activity. India, meanwhile, is caught in the middle of a strong second wave of Covid-19 with case count hitting a fresh high every day.
Experts say while the second wave in most countries has been much larger than the first one, it remains to be seen how soon India can contain the spread, with a slower rate of vaccination.
With more state governments imposing restrictions on movement, India’s gross domestic product (GDP) is estimated to take a 100-200 basis points hit. India’s high public debt levels and deteriorating fiscal situation due to the pandemic has also sparked concerns of a rating downgrade.
“India is rated at the lowest investment grade by all three rating agencies. The wide fiscal deficit leaves little room to absorb further adverse shocks without compromising credit ratings, increases risks of the private sector being crowded out, and slows debt portfolio flows from abroad. We believe India is not an outlier, as most countries saw a one-off jump in 2020, before debt stabilised at the new, higher levels. That said, any lags in policy execution and implementation of growth-supportive reforms to boost sustainable growth could lead to widening macro stability risks. In our base case, we do see a risk of a downgrade in India's sovereign rating by one of the three rating agencies in the next 12-18 months,” said UBS in a note this month.