The recent times have been the worst quarter for Indian as well as for global economies. For many companies, earnings growth is most likely to be a washout. Some of the best companies, even consumer-facing businesses that were running tight sales throughout the pandemic (COVID-19), will not be able to protect their business from earnings slowdown in the first quarter. The market rebounded quickly after the sell-off. The excess global liquidity is far stronger than the economic reality at the moment. But the coming weeks could be more testing.
A report by Kotak Institutional Equities shows road-traffic congestion levels either flat or lower than the week prior. Analysts at Kotak said that they believe that different parts of the economy will recover at different speeds, and some sections of the economy may fall apart before reaching pre-COVID-19 levels. More high-frequency indicators are expected to be unveiled next week globally. As many states are re-opening businesses, the United States is also expected to come out with lower unemployment figures. Some improvement in manufacturing activity will also be reported from around the world in the coming weeks. But it is to be remembered that even though most of these may exhibit a recovery, we are still not out of the recession period yet, it may take a few quarters.
In the coming months more easing and another stimulus to support equities are expected. The stocks seem to overreact on the upside to news as a result of the side effects of excess liquidity. The launch of FabiFlu which is the local version of Favipiravir by Glenmark Pharmaceuticals made the share price skyrocket, but the earnings from this are expected to be only for a short period. Restrictions on H1-B visas may not badly impact the IT industry as most of such firms have implemented a work-from-home model for their employees. United Spirits is trying to support bars and restaurants, but in this difficult period, it will be tough for sales to increase this year.
The company Ruchi Soya came out of bankruptcy problems recently and since then they were performing well. The company was finally delisted, but this move to create some capital and move out helped them surpass the market capitalizations of a well-established company like Marico. Many investors invest in small caps and penny stocks which show some quick spike in share price but will quickly fall as well. Many investors are lured into such pits, only a few succeed in moving quickly in and out of these counters.