Even as investors ponder about whether the sharp surge witnessed in the equity markets, which has pushed the Sensex almost 27 per cent higher from the lows it made on March 23, is a rally of the bears or the bulls, the Q4 2020 results are showing visible signs of damage in earnings for a lot of companies. This earnings’ season is just a precursor to the next earnings season where we can expect to see maximum damage caused due to the extended lockdowns. Meanwhile, one cannot waive off the possibility of the pandemic getting into a fresh phase and getting out of control, which may force the central and state governments to announce stricter measures.
And while the current rally could fizzle out easily and we may head lower towards the lows made on March 23, the bulls are hoping that even if the virus cases keep on increasing, the lockdown as seen in round one may not happen again. If it does, there is a chance that we may see a double-dip in the markets. For Q4 2020 it was expected that the earnings would be dampened to some extent due to the unprecedented crisis. Before the virus made its presence felt it was expected that corporate India would be delivering on its growth promises in Q4 2020.
The emergence of the outbreak forced the strictest lockdown in India which led to loss of business in the last week of March. However, amidst all the volatility and fire-fighting going on around the globe there is some good news on the earnings’ front for the bulls. Several analysts have continued to cut Asian companies’ 2020 earnings over a few months now but the downgrades have been the smallest in the last one month. This minimal downgrade, according to analysts, is because most economies have reopened after lockdowns stretching into several months.
This story is from the June 22 - July 05, 2020 edition of Dalal Street Investment Journal.
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This story is from the June 22 - July 05, 2020 edition of Dalal Street Investment Journal.
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