Just a spoke in the Growth Wheel - All is well still - Will be back in track in Q2 & Q3 of 2021-22

All was going on well till mid of February when Covid made a big comeback into India and now has started to slightly taper down albeit slowly.   This surge will stunt economic growth as demand drops and people start to become cautious again and start to increase their savings rather than spending.  Jobs are once again in the spotlight with hospitality and entertainment sector ensuring many of them vanish leaving earnings to drop significantly.   Good news is that there is no full lockdown similar to last year.  Lockdowns now are only regional ones now, those too ensuring economic activities are not stunted to a large extent leading some scope for earnings to happen.  A bold step by the Government is implementing vaccination for all adults of 18+ from 1st May, this is the only way to contain the virus added with following Covid protocols by all citizens of India.  Industry which saw smart recoveries in Q3 & Q4 of 2020-21, will take a hit in Q1 of 2021-22 and look for revival in Q2 once the pandemic is contained.  Reserve Bank of India (RBI) Industrial outlook survey of the Manufacturing Sector for Q4 2020-21 was released on 7th April 2021, which was projecting quite an optimistic picture for the industry for Q1 of 2021-22.  Will that be realised?

                   Source : RBI

Q1 of 2021-22 will show a subdued growth in contrast to RBI projections due to unprecedented covid surge.  Indian corporates proved their resilience in Q3 & Q4 of 2020-21 but it will be a difficult task in Q1 & Q2 of 2021-22, recovery should start from Q3 of 2021-22.

Stock Markets

Recovery of business and hence stock market was quite upbeat in Q3 & Q4 clocking an upward swing of 20%, in contrast the months of April & May 2021 till now has seen a see-saw swing and expectations are bears will rule the market.     

                                                         Stock Market Movement 

Corporate results for Q1 2021-22 is expected to be subdued and markets will factor in the same in Q1.   Should expect a flat or depressed market for 2021-22 albeit some short term volatile movement and rallies 

Rupee Movement 

Q3 & Q4 saw Rupee strengthening or holding ground due to better corporate and stock market performance.  

Q1 2021-22 (April) saw a sudden depreciation of the Rupee due to Covid surge and domestic stock market weakness.  However uptick in stock market movement & general US Dollar weakness (Dollar Index) helped Indian Rupee to move towards appreciation mode.  My prediction is Indian Rupee will be under depreciation mode till business sentiment moves up and Covid fears subside in Q3 2021-22.  When Rupee depreciates it will be time for RBI to intervene in the markets and ease out the Rupee a bit and to ensure cost of inputs especially oil do not spiral out of control consequently sending inflation into a tail spin, which is the last thing the country wants which is already reeling under pandemic stress.  

Oil Prices

With economies opening up crude oil is back in focus.  In Q1 2021-22 there is a 2% appreciation in Crude WTI from $ 61.45 to a barrel to $ 62.78 per barrel

Projection is crude will continue to marginally raise over the next two quarters in line with economic activity pick up

Conclusion

There will be a economic slowdown in Q1 2021-22 & part of Q2 also.  Q3 & Q4 of 2021-22 will bring in recovery and all will be well soon