Nifty Snapped a 4-day Winning Streak on Increasing State COVID Lockdowns

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Nifty snapped a 4-day winning streak on increasing state COVID lockdowns and subdued exit poll for BJP in state elections

India’s benchmark stock index Nifty 50 (NSEI) closed around 14631.10 Friday; slips almost -1.77% on increasing state COVID lockdowns, a subdued exit poll for BJP in state elections, and negative global cues. As per average exit polls, BJP/Modi may lose to incumbent/ruling party TMC in West Bengal, contrary to earlier expectations. Also, BJP may lose in Kerala, Tamil Nadu (NS: TNNP ), and Pondicherry, while may only retain Assam (as expected). In West Bengal, it seems that the earlier Modi wave succumbed to the present COVID tsunami in the last three phases of polls (total 8-phases).

The election result of a large and politically sensitive state like West Bengal may be viewed as a referendum for Modi’s pandemic crisis management as well as structural reform initiative, especially monetization of pubic assets including PSU banks. Even if Modi may be able to win in WB by a thin margin, the next election in a big state like UP may be an acid test for his political popularity. Modi may face tough times amid India’s terrible COVID situation, take a political popularity path instead of structural reform/deleveraging agenda which may derail deleveraging (monetization of PSU assets) and structural reforms initiative.

In India, high inflation, huge unemployment/under-employment is now a big political issue apart from COVID lockdown and scarcity of vaccines. If Modi is unable to manage the COVID situation properly, he may face a tough challenge in the 2024 general election, which may result in political and policy instability as there is no alternative credible national political leader seen at this moment; but still, 2024 is now far away. Modi admin has almost a 6-months window to import/scale-up domestic production of COVID vaccines as well as oxygen appropriately to deal with any 2nd wave (coronavirus tsunami). Modi was too much busy in regional politics/elections and political image building, both locally & globally (Chinese war game and COVID vaccine diplomacy).

Indian needs at least 2000M doses of COVID vaccines for at least 60-80% of its huge population of around 1400M. Now if Modi manages the COVID vaccinations effectively by importing and domestic production ramping up by the next few months, Modi may be forgotten & forgiven by the Indian public; otherwise, his decisive leadership appeal will be at stake in the 2024 general election (like Trump for mismanaging the COVID situation).

Although, still now the Indian Federal government has not indicated an all-out national lockdown despite India’s healthcare system has broken down and horrible scenes like patients are dying on the road for lack of oxygen- many Indian states are undergoing full/partial lockdowns. At a glance, almost 40% of India may be now under full/partial lockdown, which may cost around -1% GDP output per week; i.e. around -4% in a month. In lockdown 1.0, it was almost -2.5% in a week; i.e. -10% in a month, when 75% of the country was under full lockdown.

Overall, Nifty jumped almost +2.02% for the week (ended 25th Apr) as Nifty was boosted by an upbeat report card by ICICI Bank (NS: ICBK ) and signal of QE Lite 2.0 (GSP 2.0) for Rs.1T by the RBI coupled with some report (SBI (NS: SBI ) Caps) that in India the 2nd wave of COVID may peak around mid-May. The report also said the Indian government may be able to inoculate at least 15% of the population by Oct’21 amid higher domestic production and imported COVID vaccines, which will help to stabilize the horrible situation. Also, positive global cues helped on Powell ‘put’, Biden’s new stimulus boost, and upbeat report card from big techs.

On Friday, the Indian market was dragged by banks & financials, automobiles, FMCG, realty, techs, MNC, media, infra, energy, and metals, while supported by pharma. Nifty was dragged by HDFC Bank (NS: HDBK ), HDFC (NS: HDFC ), ICICI Bank, RIL, TCS (NS: TCS ), Kotak Bank, HUL, and Asian Paints (NS: ASPN ), while supported by Grasim (NS: GRAS ), Divis Lab, ONGC (NS: ONGC ), Sun Pharma (NS: SUN ), Coal India (NS: COAL ), DRL, IOC, and Wipro (NS: WIPR ) (upbeat guidance and M&A boost).

Bottom line:

India’s economic recovery will depend on the sustainable flattening of the COVID curve, which is getting parabolic day by day. To achieve workable herd immunity, at least 60-80% of the population needs to have SARS-n-CoV-2 (coronavirus) antibodies (herd immunity), either by artificial vaccinations or natural infection & subsequent recovery. As per official Indian data, so far only around 1.35% of the Indian population was infected with COVID and after death, around 1.11% recovered.
As per various reports, actual COVID infection in India may be almost 20/30-times higher than being officially reported as authorities are not doing any COVID test pro-actively; testing mostly those people, who are approaching for tests with some corona symptoms. There is no door-to-door testing for most parts of the country. Thus in that scenario and also by various serological tests previously (during 1st COVID wave), almost 40% (?) of people may have already acquired natural immunity to some extent. Indian COVID death toll is at least 10-times higher (as per ground report) than being reported officially.

In any way, India needs to accelerate its COVID vaccinations process so that it can vaccinate at least 40% of its population by 2023-24 for COVID stability. As of now, India fully vaccinated only 1.9% of its huge population (almost 1400M) till 28th April’21; i.e. in around 3.5-months (from mid-January to late April), which translates the vaccination rate to a mere 0.45% per month.

If India can accelerate the present COVID vaccinations rate to 0.50% or even 1% per month amid higher domestic productions and import, it will require 80-40 months to vaccinate at least 40% of its population; i.e. 2024-26. Thus unless India can dramatically accelerate its COVID vaccination process in the coming months, the economic recovery will be fragile amid COVID scarring and loss of public/consumer as well as admin/government confidence.

Technical View: Nifty and Bank Nifty Future (Updated)

Technically whatever may be the narrative, Nifty Future now has to sustain over 14850-15075-15125 and Bank Nifty Future 33800-34400 levels for a further rally; otherwise except some corrections as per below levels.


India50 ( Nifty 50 Futures )

Bank NIFTY Futures

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