Lockdown: Most Buzzing Word in the Stock Market Right Now

Lockdown Most Buzzing Word in the Stock Market Right Now

In the last few weeks, the Indian equity market swung and inched higher aligning to global cues. The domestic indices moved in synchronization with the developed market peers like the US despite the rising COVID casualties. Recently, the country has reported 7,964 new coronavirus cases in the last 24 hours, registered the record cases in a day since the first case reported in January month. However, a trend worth to observe is that stock markets in most countries, irrespective of COVID-19 casualties and stimulus package from their respective governments have proved to be more resilient. Dow Jones Industrial Average (DJIA) is one such example that has witnessed the strong recovery from its lows of March 2020.

On the contrary, the Indian stock market has underperformed in comparison to its global peers dramatically over the past few months. However, in that time the US market outperformed the emerging markets by a huge margin. The major reason behind the underperformance is the extended nationwide lockdowns within the country and lack of near-term stimulus from the government to put the economy back on the track.

Lockdown Status will Decide the Course of Domestic Indices

Given this tug-of-war between bull and bear, there is a possibility of seeing the continuation for a few more months. In the midst of this, Lockdown 5.0 will decide the future course of domestic benchmark indices – NIFTY & SENSEX. In such times, the quarterly earning reports are pseudo-event however the commentaries come through the management of companies help to assess the future prospects.

As the current situation is more global rather than country-specific, there is a possibility to see the Nifty50 catching on global markets and move in harmony with other indices. In the last week of May, the mild optimism was witnessed in the stock market, which suggests the likelihood of Nifty50 crossing the 10,000-mark soon.

Going forward, the “lockdown” becomes the most buzzing word in the stock market right now. It is clear that the market will take a cue from the government’s decision on lifting of Lockdown 4.0 or extension of Lockdown 5.0, which is expected to happen for two more weeks. If the lockdown to extend, it would be without a doubt create pressure on our financial system which may lead to a kneejerk reaction in the stock market.

Nevertheless, investors should remain cautious and be prepared for worse. At this moment, it won’t be easy to predict the future movement of Nifty as it all depends upon the lockdown status.

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