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The second wave of Covid infections has increased financial risks to households and small businesses, Moody’s has said. This, in turn, Moody’s said may hurt bank profitability going ahead. “New loan forbearance and liquidity measures by the central bank, and government’s plans to set up an asset reconstruction company to take over stressed loans, along with modest recapitalization of public sector banks, will mitigate, but not eliminate, sector risks,” Moody s said. India’s financial sector, the rating agency said, is the main driver of potential event risk to the sovereign. Structural inefficiencies, it believes, continue to constrain growth potential and limit resilience to shocks. If implemented effectively, government reforms that target these challenges would be credit positive. However, the relatively low effectiveness of previous reforms informs our medium- to long-term growth view. ....
Barclays has pegged India’s economic growth for fiscal 2021-22 (FY22) – as measured by gross domestic product (GDP) – at 7.7 per cent in the bear-case scenario, if the country is hit by the third wave of the Covid pandemic going ahead. The economic cost, it believes, could rise by at least a further $42.6 billion, assuming another round of similar stringent lockdowns are imposed across the country for eight weeks later this year. After factoring in recent developments, Barclays has pegged the economic cost of the latest shutdowns at $8 billion per week in May, up from $5.3 billion per week in last two weeks of April, and well above the $3.5 billion a week estimated early in the second wave. “We believe these economic losses will remain steady at $8 billion a week through the month of May, but expect them to ease from June,” Barclays said. ....
Indian equities are likely to outperform their emerging market (EM) peers in 2021, says the latest report by Morgan Stanley and bets on domestic cyclical stocks followed by rate sensitives. The research and broking house, however, has kept its December 2021 target for the S&P BSE Sensex unchanged at 55,000 levels (base case; 50 per cent probability) for now – an upside of around 10 per cent from the current levels. “Our unchanged BSE Sensex target of 55,000. This level implies that the BSE Sensex would trade at a forward P/E multiple of 17.5x and a trailing P/E of 21.2, ahead of the 25-year average of 19.7x. This premium over the historical average reflects a higher confidence in the medium-term growth cycle in India. We are overweight on India in a global emerging markets (GEMs) context,” wrote Ridham Desai, head of India research and India equity strategist at Morgan Stanley in a coauthored report with Sheela Rathi and Nayant Parekh. ....