India stock analysts turn to cash and volatility


  • Markets
  • Thursday, 09 Apr 2020

Stable market: A statue of a bull is displayed at the Bombay Stock Exchange building in Mumbai. Market volatility has fallen from a record high over the past few trading sessions although volumes are thinning. — Bloomberg

MUMBAI: As analysts struggle to assess India Inc’s corporate earnings and debt-servicing capabilities amid the nationwide lockdown due to the coronavirus pandemic, they have begun relying on alternative indicators to inform their investment recommendations.

Equity analysts speaking in interviews with Bloomberg highlighted measures ranging from volatility and cash levels to daily infection numbers and techical charts. So far, the drop in analyst price targets for the NSE Nifty 50 Index has trailed the actual slump in the stock gauge.

Market participants appeared more optimistic on Tuesday as China reported no new coronavirus deaths for the first time and other global hot spots showed signs of slowing infections. India’s broader S&P BSE Sensex Index posted its best day since 2009 and the measure was little changed as of noon Mumbai time yesterday. Volatility has fallen from a record high over the past few trading sessions although volumes are thinning.

Nifty companies will start announcing earnings for the quarter ended March 31 from mid-April. The lockdown imposed on March 25 has slowed down an economy already set for its weakest pace of growth in 11 years, and a panel of Indian government ministers on Tuesday advised the country’s prime minister to partially lift stringent curfew measures. A total of 5,351 people in India have been infected with 160 deaths, according to data compiled by Johns Hopkins University.

Here is some of what analysts are watching for signs of a turning point for India stocks:

Volatility

The India NSE Volatility Index is inversely related to the Nifty, “clearly showing if Vix declines we could see some reversal in the correction, ” said Amar Singh, head of advisory at Angel Broking Ltd. “Ideally below 40 would be a great sign of relief.”

Singh said that investors should also watch for a further appreciation in the rupee. “Once it starts trading below 74 levels, we might see a likewise bottom in the equity market.”

Dip in infections

Manishi Raychaudhuri, head of Asia-Pacific equity research at BNP Paribas, said signs of containment of the Covid-19 outbreak, particularly in developed economies, is a key factor being watched. “The number of daily incremental infections (particularly their day-on-day change) is an important data point, ” he said.

BNP Paribas has not changed its an end-2020 target of 44,500 for the Sensex, implying a nearly 50% surge from the current level. The French bank is recommending defensive sectors such as consumer staples as well as those benefiting from a decline in commodity prices and an appreciation in the US dollar such as IT services exporters. — Bloomberg

Article type: free
User access status:

   

Did you find this article insightful?

Yes
No

Across The Star Online