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The stock market lost 25% in March, the worst month since October 2008. In a land with around 1.3 billion people, the government made the unprecedented move on 25th March to lock down the entire nation for an initial period of three weeks. What a logistical undertaking this is where all trains and flights have been cancelled, buses and taxis have been taken off the road and travel outside the home is prohibited except to access cover basic needs.

Like in other covid-victim countries, India also made use of the fiscal tool box and the Finance Minister announced a fiscal package worth 0.8% of the GDP to help low-income households from the lockdown and the central bank initialed package of measures and cut the interest rate by 75 basis points and cut the cash reserve ratio among others two days after the country-wide lockdown. To help the most needed, the use of the strategic grain reserve is in place, free cooking gas along with direct money transfers. Not surprisingly, foreigners pulled out nearly $8 billion from the equity markets and about the same from the debt markets in March. Interestingly, domestic investors put $7 billion into the equity market in March.

After this aggressive correction in equity values, the price to book of the Nifty index is 2.0x (trailing) which is 30% lower than the past 10-year average. The market-to-GDP ratio has also fallen to 50%. This is lower than 55% seen during the 2008 financial crisis. Companies focused on domestic supply chains and end markets in India with strong balance sheets, established brands have fared better than the obvious losers within travel, retail, and consumer related segments.

Reopening a shutdown in India at the ‘right time’, which has more people than Europe, North America and Russia combined, will be interesting to observe.

Domicile: Malta
Source: Bloomberg, UTI International, Reliance Investments

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