Maharashtra lockdown to shave off 0.3% growth; opportunity for long-term investors to buy: Experts

Market Outlook

Few countries have escaped a second wave of the COVID-19 pandemic and it is India’s turn now as active cases topped 1,00,000 as of April 5, which resulted in some knee-jerk reaction in Indian markets on Monday.

Of the 1,00,000 new COVID-19 cases, 57,000 came from Maharashtra. The Maharashtra government on April 4 announced new restrictions under its ‘Break the Chain’ campaign to curb the spread of novel coronavirus infections which will last till April 30.

The S&P BSE Sensex closed below 50,000 while the Nifty50 breached the 50-Days Moving Average on the downside. However, experts feel that these knee-jerk reactions are good for investors who were sitting on the sidelines to get into markets and buy quality stocks.

The economic impact of the lockdown in Maharashtra could dent up to 0.3 of growth, according to estimates from CARE Ratings. Maharashtra is the largest state in the country in terms of GSDP or gross state domestic product and has a share of around 15% in GVA or gross value added. GVA was defined as output minus intermediate consumption.

“The decline in output by around Rs 40,000 crore in the case of Maharashtra would lead to a dip in GVA growth by 0.32% at the overall domestic economy level,” the report added.

The Indian market has been consolidating after hitting fresh record highs back in February 2021 largely on account of rising US Treasury Bond yields, a spike in crude oil prices, and a surge in COVID cases across the globe.

The Nifty50 is down by about 5 percent from the recent record high of 15,430 levels hit in February 2021. There were many retail investors who missed out on the buying opportunity in March 2020 when Nifty & Sensex fell in double digits.

Investors who are waiting on the sidelines should not wait for a big dip which is unlikely to happen as markets are much more stable in 2021 and vaccine lends hope.

“Large market corrections provide good investment opportunities to both existing and new investors. Investors always wish to buy low, but when the markets fall, they panic and hardly act in expectation of further fall,” Piyush Nagda, Head – Investment Products at Prabhudas Lilladher told Moneycontrol.

“March 2020 was one such rare opportunity. At present, with rising COVID cases, the state goverment has announced partial lock-down and markets have given a knee-jerk reaction. Investors waiting in the wings should look at benefiting from it. Systematic and staggered investing with a long-term approach can help in benefiting from market volatility,” he said.

In the last 24 hours, India had registered more than 1,00,000 cases which resulted in a lockdown in Maharashtra, and if cases spread then other states might also follow suit.

Much of the rally seen in FY21 was on the back of economic recovery, and in case that takes a hit then earnings growth will also not be able to revive in a way which D-Street is factoring.

According to the data released by the government, over 7.91 crore vaccinations were done to date and the government is using all its resources to ramp up the vaccination drive in the country.

“Investors who are sitting on good profits can look at partial profit booking unless they have built the portfolio for really long term and want to hold on to quality stocks. Also, to initiate any new position, investors should wait for some time as the volatility arising from increasing COVID-19 cases might remain,” Gaurav Garg, Head of Research at CapitalVia Global Research Limited told Moneycontrol.

“Overall, we may expect the market to trade in the range of 14,000-15,350 in the coming sessions. Investors should wait for some time to let the volatility go down a bit and then the investors who wish to invest for the long term may utilise the opportunity to invest in the quality picks,” he said.

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