Govt assures availability of over 2 billion doses of vaccine this year: BFSI, auto and cement could see renewed buying interest

Market Outlook

Over two billion doses of COVID-19 vaccines will be available in India between August and December this year, said Dr VK Paul, member of Niti Aayog – the government’s topmost think-tank.

Experts say this is a positive news from markets stand point and should help calm the nervous investors. The announcement can help renew buying interest in BFSI, autos & cement.

Of the two billion doses, the bulk of 750 million (75 crore) doses would comprise of Covishield, said Dr VK Paul, Member, Niti Aayog. The vaccine is currently being produced by the Pune-based Serum Institute of India (SII).

The Nifty50 has fallen by about a percent in the truncated week, and news about vaccine dosage could support investor sentiment in the near future.

“This is really great news though the timeline is slightly long spreading over almost 8 months; however, this may not have been possible given the requirements of huge quantity and limited manufacturing capacity,” Kunj Bansal, CIO, Karvy Capital aid.

“This development is positive from an economic point of view as well and would have been great for the equity market. Since the equity market has already been quite positive on sentiments despite the second corona wave, this development will probably only add a marginal further positivity. We should see buying interest quickly returning in underperforming sectors like Auto, BFSI, and Cement,” he said.

The Centre has also reached out to global manufacturers to ramp up the vaccine supply. The government will enable foreign vaccine makers to obtain expeditious approvals from national regulators.

COVID-19 vaccination drive from the age group of 18 to 44 years kicked off from May 1, but it soon ran into troubles as states started complaining of a shortage of vaccines.

India has authorised two jabs for emergency use – Covishield, developed by Oxford University-AstraZeneca and produced by the Serum Institute of India, and Bharat Biotech’s Covaxin.

“Immediate supply of vaccination and improved supplies in the coming months shall reduce the overhang of the impact of the COVID wave,” Mayuresh Joshi, Head of Equity Research, William O’Neil India said.

“Also, global vaccine maker floating tenders adds to the vaccination drive it certainly reduces the vaccination concerns that the Street has and the perceived risk attached to it,” he added.

The vaccine availability could also help India attract FII flows as well, suggest experts. Foreign investors have pulled out more than Rs 6100 cr from the cash segment of the Indian equity markets so far in May. In April, FIIs were net sellers for more than Rs 12,000 cr.

“With additional doses now being available, India will be at the forefront in attracting global inflows,” Umesh Mehta of Samco Securities said.

“The US is in overbought conditions so meaning full correction can be expected and therefore IT and Pharma will be under pressure but Auto and financials will find renewed interest going ahead,” he said.

Bigger Worry:

After a flat April, the Nifty50 has remained under pressure as bears took control of D-Street pushing the index below 14,800 levels amid rising concerns of lockdown that could hurt the economy as well as earnings of India Inc.

The availability of Vaccines is a short-term positive but the implementation of the said deadline will be watched. Additionally, ongoing geopolitical concerns (Gaza conflict), selling by foreign investors (FIIs) as well as earnings cut due to extended lockdown a bigger worry, suggest experts.

Global firms have already slashed India’s GDP forecast for FY22 saying the second COVID wave may dent the recovery in the economy and credit conditions. Moody’s was latest to slash the growth forecast to 9.3 percent from 13.7 percent earlier.

Moody’s has estimated the general government debt burden to reach 90 per cent of GDP in fiscal FY22, and 90.8 percent in FY23. The general govt fiscal deficit has been estimated at 11.8 percent of GDP in FY22, up from the 10.8 percent forecast earlier.

Analysts back home also see this as a big risk to the economy amid lofty valuations.

“Impact on aggregate demand and increased outlay by the Centre & States to tackle the burgeoning health crisis leading to wider fiscal deficit have the potential to spook the party and trigger a sharp correction,” Ajay Bodke, Independent market analyst said.

“Market is trading at lofty valuations having discounted a rich 35% and 25% earnings growth in FY 22 and FY23 respectively. These aggressive estimates are bound to get slashed severely in wake of the prolonged lockdowns in most of the States,” he said.

Bodke further added that a benign global environment looks set to change with rising fears of inflation taking hold in the US leading to heightened risk aversion towards EM equities including India.

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