Market has moved on. Who can say this is the same market that was tipped to go as low as 3,000 a couple of months back. The recovery has several threats attached to it but in today’s edition, we are just celebrating the green shoots that are appearing.

Indian market is looking up and running with strong signs of fundamental recovery. But, coronavirus cases are rising unchecked which is a major threat to the market. If the government is forced to reimpose the lockdown, the recovery could be stalled but let’s keep that thought for another day.

Monsoon Blessings:

Monsoon is showering extra blessings this time around. According to the IMD data, the South West Monsoon (SWM) is 18% above the normal rainfall in June’20, the highest in the past seven years. Last year in June 19 we had a shortfall of 33%

The total area sown under Kharif crops at 29.7% has almost doubled. It is the highest in any period since FY16. Area under rice is the best in the last five years, coarse cereals and oilseeds have shown a massive jump this year.

The water reservoir level also remains at unusually high levels. It is currently at 33.2% of live storage capacity v/s 15-20% in the last four years for 123 reservoirs in the country.

Bankers up from the slumber:

The fundraising by the banks is another major event that is silently taking place. Axis Bank Ltd.’s board approved a proposal to raise Rs 15,000 crore while HDFC Bank is planning to raise Rs 50,000 crore via perpetual bonds.

State Bank of India has also approved long-term fundraising of up to $1.5 billion through public offer or private placement while ICICI Bank is mulling to raise $3-billion through a share sale.

Key takeaways

With fresh fundraising, bankers are surely up from the deep sleep. It is a sign of them gearing up for a fresh credit cycle. It is a sentiment booster for the entire market for sure. The fundraising will also shore up their regulatory capital and provide against any large defaults arising out of the lockdown.

Urban markets remain in stress but the rural economy is surely bottoming out. Monsoon is surely playing its part but agriculture was a bright spot even before that.

High-frequency index data suggests that agriculture activity grew by 5% YoY in May’20 while the rest of the economy is estimated to have shrunk by ~22%. Going ahead, things are further looking bright for the rural sector with increased government expenditure on employment.


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