Financial Market faces heat because of lack of demand-supply mismatch

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The entire planet is on a standstill against the novel coronavirus. Ever since its inception, it has pretty much wreaked havoc on the entire economy. As the entire market is slowly and painstakingly moving towards the coming week, the Indian market has a tough road ahead.

A see-saw effect is expected in the stock market as a weak fourth-quarter GDP figure is expected. It is quite evident that there is a lack of triggers as the market has been on a sideways slope in the last few weeks. The market has been on a downward trajectory as risks keep mounting due to COVID-19 related stress as has been observed in the corporate results so far.

The third-quarter GDP had grown 4.7%, but the Q4 figure is expected to shrink in March as manufacturing and export activity has contracted for the most part. If the GDP were to go down, then in the next policy meet in June, RBI would further cut interest rates.

RBI’s 40 basis point cut in the repo rate was not taken lightly. Also, there has been a further extension in the moratorium on loan repayments to 31st August. Bond yields saw a little contraction, but the equity markets saw a sharp fall. Bank Nifty slipped 2.6% on Friday, which portrays how badly financials have been affected.

Colgate Palmolive (India) Ltd.’s March quarter results still opposed expectations.  Havells ltd was hit quite hard mostly due to supply-chain disruption from China. March quarter for Bajaj Auto’s showed an increase in Ebitda margins. But the coming quarters are quite unpredictable. L&T Infotech Ltd’s results were positive.

The lockdown has greatly impacted diagnostic firms, but Dr. Lal Pathlabs Ltd has got more expensive valuations than others.

The financial sector saw twin blows of low growth and a potential rise in slippage. This is has been evident in how the stock has reacted.

Both financial and banking stocks have been facing the heat. The Bank Nifty has been struck as banks face low growth potential because of the extended moratorium on repayment of loans.

The Bank Nifty also showed very poor results in the broader Nifty 50 in 2020. There was a 26% fall in the Nifty 50 since January, it has lost 46% so far. There’s no telling when the economy recovers till a cure is found for the pandemic.

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