Migrant crisis, interest on interest, and selling FPIs: Three things Teji Mandi investors should know on April 22, 2021
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Panic on Streets

With strict restrictions and the return of partial lockdowns, a large number of workers are looking to leave the cities. As a result, India is likely to witness a migrant crisis similar to last year.

As per the data from TeamLease Services, few sectors are already seeing a labour shortage. The impact of the migrant crisis could be severe on the construction and manufacturing sectors. It includes real estate, infrastructure, textiles, healthcare, pharmaceuticals, power and energy.

Before the second COVID-19 wave, the situation was improving gradually. And labourers were returning back to their workplaces gradually. However, if the current situation is not handled effectively, it can very well turn into a severe migrant crisis similar to last year.

Interest on Interest

As per the emerging report, the Ministry of Finance could ask the banks to bear the cost of reimbursing the compound interest on loan moratorium period. The banks are also given an option to adjust the amount against the future liabilities of the borrowers.

The Supreme Court had ordered the banks to waive off the compound interest charged during the six-month moratorium period. The top court had overruled the decision to waive off compound interest only on loans of up to Rs 2 crore and suggested including all the accounts irrespective of the loan amount.

Earlier, there were indications that the centre could take up this bill, exempting banks from reimbursing the interest on interest. It could have been a huge saving for banks. But with the impact of the second COVID-19 wave, the centre is once again staring at a revenue crunch in the coming months. In this situation, it looks that the banks will eventually have to bear this burden.

FPIs Turn Net Sellers

Foreign Portfolio Investors (FPIs) have turned cautious on the Indian market with the rising COVID-19 wave. The FPIs have taken out Rs 4,852 crore from the Indian financial market on net terms in April so far.

This is the first time in the last six months that the market is likely to witness an outflow of foreign funds. From October 2020 to March 2021, FPIs had been consistently buying in the Indian market, lifting Nifty to 15,000 after it crashed to the level of 7,500 last year.

Post-September last year, the recovery was swift in India with all economic indicators showing signs of improvement. It was truly reflected in FPI numbers. However, the market has turned volatile owing to a continuous surge in COVID-19 cases. It has adversely impacted the investor sentiments.

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