Notwithstanding the improving mobility, key economic indicators have lost momentum of late. Rural India, once considered a safe haven, has also been hit hard, and economists now say there is at least one month more before Covid-19 cases peak in India.
Yet, there are hopes that the economic activity may improve with Unlock 4.0 kicking in. A 17 per cent jump in the BSE Sensex since June 1 reflects that optimism.
Analysts on Dalal Street bet on businesses under the essentials and digital themes. They also like low-ticket consumer durables and cement stocks besides a few battered sectors such as multiplexes and quick service restaurants.
Unlock 1 to Unlock 3
Angel Broking said post Unlock 1.0 in June, there was significant improvement in economic activities from May till mid-July. However, the imposition of localised lockdowns in July by states led to growth tapering off from the last week of July.
“States resorted to partial lockdowns in July and August. And that resulted in a perverse result of increase in cases, as short lockdowns have the undesired impact of large conglomerations before the designated lockdown date,” said Soumya Kanti Ghosh, Group Chief Economic Adviser at SBI.
Ghosh said daily Covid cases in India have jumped to 80,000 per day currently from 50,000 per day in early August.
He felt if the states were to increase test capacity to match their test positivity, the total number of cases could hypothetically increase by up to 50,000 over current levels on a daily basis. This, he said, implies the peak is still at least a month away, if not more!
Economists also says rural India continued to take a bigger hit, with 26 of 50 worst affected districts in August — where the maximum number of new cases were recorded — were from India. Rural areas in Andhra Pradesh have been the worst hit, while those in Maharashtra, Karnataka and Uttar Pradesh are showing increasing spread of the virus.
Economists said rail freight revenues have improved of late, but the growth in vehicle registration has declined. UPI transactions in both value and volume terms have surpassed pre-Covid levels, but first-year premium collection has fallen for the life insurance sector.
Demand for personal loans has risen during this phase and new stock investors have pushed daily market volumes higher. The demand for small cars has also increased, as suggested by the rise in sales for Maruti’s mini and compact categories of cars, economists said.
Overall, the combined amount of state GST, allocated integrated GST and cess stood at Rs 1.69 lakh crore for states, which was 33 per cent lower than last year’s collection for the same period, SBI’s Ghosh said.
What to look ahead on Dalal Street
Analysts says since states cannot impose lockdowns without prior consultations with the Centre under Unlock 4, economic activity may recover fast from here on. Angel Broking said while rural, essential and digital themes have played out along the expected lines on Dalal Street, there is a clear case for further upsides in these themes, given the revenue visibility and strong growth prospects.
“We expect the recovery to be uneven going forward with different sectors charting out different recovery paths. While we expect demand for personal vehicles and low-ticket consumer durables to rebound at much faster rates, given the pentup demand, it may take some time for demand to come back for sectors like aviation and retail,” it said.
Cement demand is also expected to rebound strongly due to pentup demand and the government’s focus on infrastructure and rural housing, the brokerage said.
Edelweiss said sectors such as travel, tourism, multiplexes, QSR, consumer finance and aviation are some of the emerging themes in Unlock 4.0. “This would present opportunity for companies like Inox, PVR, VIP, IRCTC, Jubilant FoodWorks, Titan, Westlife Development, Page Industries, Bata, Relaxo, ABFRL, SBI Card, Bajaj Finance and InterGlobe Aviation in the coming months. We believe these segments have seen maximum pain and shakeout in industry, which will immensely benefit survivors in the coming month,” the brokerage said.