While India takes care of its poor; the market pins its hope on the RBI
The finance minister's most awaited package did a good job of taking care of the needs of the poorest of the poor section of the society. The FM announced a package of Rs 1.7 lakh crore under the PM Gareeb Kalyan Scheme. It includes Rs 50 lakh insurance cover for healthcare professionals, direct cash transfers for both Jan Dhan account holders and MGNEREGA (Employment Guarantee Workers). It also provides for full EPF contribution for next 3 months for people working in units with less 100 employees, where 90% earn less than Rs 15,000 per month. It also utilizes an existing Rs 31,000 crore welfare fund to support construction workers.
The bigger cue for the market, however, will be the Monetary Policy Committee's policy announcement, which is scheduled in the first week of April. For now, powerful short-covering drove the market for the second consecutive day as the Sensex gained 4.94%, while Nifty closed above 8,600. Amongst the frontline stocks, IndusInd Bank(up 44.67%), Bharti Airtel (up 9.69%) and L&T (up 9.44%) were the major gainers, while GAIL (down 3.24%), Adani Ports (down 2.90%) and Sun Pharma (down 2.69%) were the major losers of the day.
Implications of the ban on HCQS exports on drug manufacturers
The Indian government has banned the export of Hydroxychloroquine Sulfate (HCQS) as part of its efforts to fight the COVID-19 outbreak in India. The move could benefit Dr Reddys as it already sells HCQS in the US in partnership with a US firm that does not source the API or formulation from India. However, Ipca Labs and Zydus Cadila will be unable to supply APIs and formulations to the US as they do not supply from an SEZ unit and will, therefore, be unable to sell to the US till the restriction is lifted.
Which sectors are the most resilient to this?
In case the virus situation deteriorates further and the lockdown extends, a scan through the Nifty 500 stocks suggests that utilities, pharma, diagnostics, consumer goods and agrochemicals are the sectors where earnings impact will be lower and stock prices are likely to be the least hit.
Mounting losses at private airlines
With the suspension of operations, the combined losses for private airlines could reach up to Rs 6,500 crore in the upcoming quarters. Severely curtailed operations are resulting in low revenues but high fixed costs. Despite cost-cutting measures such as salary cuts, companies still have to deal with other fixed costs such as lease rentals and other corporate expenses. Indigo, however, is helped by its deep pool of cash reserves (Rs 9,400 crore as of December 2019) and can sustain losses for the next 3-6 months.
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