21-day lockdown must be backed by stimulus measures: Brokerages

In an effort to limit the spread of the coranavirus (Covid-19) in India, Prime Minister Narendra Modi announced a 21-day nationwide ban on Tuesday, limiting the movement of citizens to a minimum. Urging citizens to stay inside, Modi said the country will have to pay the economic price for the global pandemic that has infected 421,413 people worldwide and 562 in India.

Most brokerage firms believe that a 21-day lockout is the best pill needed to ensure that the economy remains healthy over the long term. As they see the economy suffer a huge blow in the short term, they expect a strong recovery if the foreclosure, supported by timely fiscal and monetary measures, effectively curbs the spread of the virus.

Here’s what the major brokerages have to say about foreclosure:

Edelweiss Securities

This is the great HEF crisis – human, economic, financial – for India, which is much more serious than the global financial crisis (GFC). The more than 30% drop in the markets reflects the uncertainty of the HEF, and we believe that economic turmoil, profit declines and more fundamental resets will follow. We expect market volatility to continue with short-term calls to markets and stocks, especially levels, with issues more tied to investment faith and beliefs than playbooks. Growth and earnings will be reset and extrapolated as the virus is brought under control.

JM Financial

Perhaps learning from the demonetization experience, the foreclosure should be supported by an economic package and monetary policy support for the sectors of the economy most affected by the economic disturbance. That said, it should be noted what seems most important: i) fiscal policies, ii) monetary policies, iii) policies aimed at “flattening the curve” and iv) flattening the curve.

Motilal Oswal

Given the nature of the crisis and the resulting containment measures, forecasting corporate profits for fiscal year 21 has become difficult, as estimates of existing profits face strong downside risks. In this scenario, it is prudent to examine the end assessment metrics. Nifty is trading at a rear P / E of 14.7x, its lowest level in six years, while the rear P / B of 1.9x is at its lowest since the global financial crisis. Market capitalization relative to GDP is 49%, again the lowest since the GFC.

Emkay Global Financial Services

The preparatory phase of Sunday isolation and various state governments extending the restrictions gave the population decent preparation time. This increases the likelihood of the lockout being effective by 21 days. From a market perspective – so we think the actual spread of the disease in India will become less relevant in the future (unless the numbers really explode significantly, say beyond 50 to 60,000), l emphasis is now shifted to the extent of the disruption caused by the 21-day lockout. Sentiment in the global capital market would depend on a sustained decline in the number of new daily cases in the United States and Europe.

Geojit Financial Services

The temporary shock to the economy due to the nation’s 21-day lockdown will be enormous. But if we come out of this lockdown successfully, the economic recovery can be brutal. The choice in this crisis is limited. That is why the Prime Minister has declared that if we do not make this 21-day lockout, we will return to 21 years of age. Effective and efficient implementation of the foreclosure will require massive support from the central government, including income support for poor households, abstention from the NPA classification and reimbursement of NDEs.

Kotak institutional actions

The government’s decision to implement a full lockdown (except essential services) nationwide for 21 days starting March 25, 2020 could help slow the spread of the Covid-19 epidemic. We hope that the government and the RBI will provide the fiscal and monetary support necessary to counter the inevitable economic downturn. We believe that the recent bold political and social measures should be supported by bolder economic measures.


Leave a Comment