As Cases Spike, Is Indian Stock Market Dipping in Caution of a Second Wave of Coronavirus?

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As Covid-19 cases rise again in India and experts point towards chances of a second wave, especially in states like Maharashtra and Madhya Pradesh, stock markets have started materialising the sense of fear.

A cautious trade by global investors ahead of the US Federal Reserve meet is also among the reasons why markets fell most in over two weeks, ending lower for the fourth consecutive day amid high volatility.

Indian benchmark indices ended in negative territory on Wednesday amid selling seen in across the sectors. At close, the Sensex was down 562.34 points or 1.12 per cent at 49,801.62, and the Nifty was down 189.20 points or 1.27 per cent at 14,721.30. About 2,115 shares declined, and 138 shares are unchanged.

All the sectoral indices ended in the red with Nifty PSU Bank index falling 4 per cent. BSE Midcap and Smallcap indices shed 2 per cent each.

Economists at Nomura believe that the second wave of Covid-19 in India can lead to near-term growth concerns and delay market expectations on the timing of policy normalisation. "However, we expect only marginal negative growth effects, because government restrictions are less stringent, the goods sector continues to chug along and households and businesses have adjusted to the new normal,” Sonal Varma and Aurodeep Nandi, economists, Nomura said in a note on March 16.

To get perspective on what Indian markets looked like when the first wave hit, there were only four initial public offerings worth $2.08 million in June quarter, according to an EY report.

All the IPOs were in the Small and Medium Enterprises (SMEs) segment and the median deal size was $0.38 million.

Sandip Khetan, Partner and National Leader of Financial Accounting Advisory Services (FAAS) at EY India, had said the experience in the last three months was unprecedented.

As per the report, in the SME market, there were four IPOs versus 14 and 11 in Q2 2019 and Q1 2020, respectively.

Prime Minister Narendra Modi on Wednesday said it was crucial to contain the "emerging second peak" of coronavirus with steps such as setting up of micro-containment zones and enforcement of restrictions amid a surge in cases across the country.

Speaking at a meeting with chief ministers, PM Modi said: "If we don't stop this pandemic right now, then there could be a nationwide outbreak. We have to immediately stop the emerging second peak and take big and decisive steps."