India’s equity benchmark Sensex has fallen 8% from record high levels that were hit on February 16, as rising Covid cases have triggered worry that the fragile economic recovery will be delayed further. UBS said India’s premium to emerging markets have cooled off considerably, while Indian equities have also fallen to below historical averages versus bonds.
“While some of the earnings cuts induced by commodity costs may be still ahead of us, overall valuations appear less stretched than a couple of months ago,” said UBS.
India’s tally of new Covid cases daily crossed the 3 lakh mark this week. The daily confirmed cases are three times the peak of daily cases seen during the first wave of the pandemic in 2020. About 16% of all districts are reporting more than 500 daily confirmed Covid cases and those districts account for more than 70% of total daily confirmed cases, said UBS.
The firm said it expects daily numbers to continue to climb in the coming weeks, but some second-order metrics suggest containment measures by the early moving states are having some impact. UBS said 6% of districts are displaying signs of having passed their second peak, and showing a decline in daily case counts.