Here's how the Covid-19 second wave may impact your investments

Focus of investors has shifted to rising Covid cases in the country, which have jumped to over 3.40 lakh daily cases in the last 24 hours. As a result, panic dragged the benchmark equity indices BSE Sensex and NSE Nifty down by nearly 2% for the week ended April 23.

Many states have already announced various degrees of restrictions on the movement of people depending on the severity of the situation in their regions. For instance, the Uttar Pradesh government had on Tuesday announced that there would be a weekend lockdown in place in the state till May 15. The lockdown came as an addition to an already existing night curfew in the state.

Delhi is also under complete lockdown for six days till April 26. There is similar kind of restrictions in various parts of the country.

According to a report by the State Bank of India, the ongoing curfews and lockdowns imposed by several states will lead to a loss of Rs 1,50,000 crore for the country. Of the total loss estimated at Rs 1.5 lakh crore, Maharashtra, Madhya Pradesh and Rajasthan account for 80% of the loss.

I believe the ongoing loss is definitely going to impact the economy again in this quarter and we may see downgrades to India’s growth as well as earnings projection in FY22.

The central government has also relaxed norms for vaccination by allowing vaccination for all above the age of 18 from May 1, increasing supply by permitting the import and providing financial aid to local manufacturers. Now, it is important to see the pace of vaccination in the country as it is important for the normalisation of economic activity.

On the other hand, India Inc has started announcing financial results for the March quarter. There is no major disappointment so far due to a low base in the same period last year. Analysts see more than 100% growth in net profit in Q1FY21. However, it is important to see the commentaries from banking and domestic-consumer companies about the likely impact of the recent surge in a Covid infection on their businesses going ahead under the second wave.

Valuation of benchmark equity index NSE Nifty is hovering at around its record high levels. Therefore, the upside looks capped considering the ongoing disruption in the economy and outflows by foreign institutional investors in April. Therefore, any earnings downgrade and more restrictions may impact the equity market and your investments.