• India Inc over the last 3 years has seen multiple shocks – from demonetisation to key reforms like GST, RERA etc to credit freeze in aftermath of wholesale NBFC unable to get access to credit to current lockdown amidst the global supply and demand shock unleashed by Coronavirus. In the long journey of corporate India, these events almost seems like a big RESET button. A call to significantly change business practices, realign key business priorities in a changing landscape and massive consolidation across sectors.

• ·       Covid19 – while initial impact was localised to Chinese economy and therefore the supply shock given large export from China, the spread of virus globally now risks creating a demand shock as well. While global coordination of policy makers and containment of virus and improvement in drugs to counter will reduce the longer term impacts of this shock, near-term demand and supply chains remain frozen amidst a significant drop in economic activity.

• ·       While Indian government & RBI have announced few measures, we expect more measures to be announced given the unprecedented nature of events led by Covid 19. Amidst this uncertainty, Indian equities have seen large up and down moves in recent months.

• ·       While near term uncertainty induces volatility in asset prices, in the long run, wealth creation in equities is a function as how businesses can profitably grow over their cost of capital sustainably. Given the long-range of reforms introduced as well as likely relief measures by government & RBI, we believe longer-term prospects of Indian equities is quite encouraging and we would advise investors to benefit from such induced volatility.

• ·       Time in the market is more important than timing the market - recently, markets volatility has moved up and investors can benefit from this volatility by focusing on disciplined investing and asset allocation.

•       One of the biggest fallouts of the Covid crisis was seen in April with oil prices (WTI Crude) going into negative territory as inventory buildup, due to lack of demand, created a storage problem in the oil markets.

•       The lock down in India has been extended for the second time in India till the 17th of May, however several concessions were provided based on the classification of the entire country into Green, Orange and Red zones, depending on the number of cases in each region.

•       In the mutual fund space, Franklin Templeton wound up 6 of their debt schemes with over 30000 Crs of AUM as of 31st Mar 2020, citing inability to meet redemptions due to market liquidity conditions as a result of the Covid-19 crisis.

•       Earlier during the month RBI has announced several measures including a cut of reverse repo rate by 25 bps to 3.75 percent, LTRO 2 of 50000 cr that could be lent to NBFC’s and MFI’s

•       The current Gsec yield curve is quite steep. However we do expect further RBI action to introduce some amount of flattening.