The associated risks can come from (i) rising Oil prices, (ii) rising interest rates due to fiscal deficit, and (iii) synchronous global market correction as US multi-year economic expansion is behind India.

Bond Interest Rate and the Stock Market

In the month of February, the bond investors were revolting against the bond market interest rate. As a result of which reflation (stimulating the economic output by means of fiscal stimulus or reduction in taxes)- the guiding light of treasuries betting on rebounding growth is proving to be resilient. Long-term Treasury yields touched the highest in almost a year, the market stumbled on the expectations of inflation that accelerated to the fastest pace since 2014 and the yield curve reached the steepest levels in more than 5 years (Bloomberg, 2021). 

The reflation trade paused for a while after the government press release on 10 February showed the consumer-price inflation to be revolving around 1.4% annually, which was lower than expected. According to Michael Pond, global head of inflation strategy at Barclays, the CPI report was a disappointment as it doesn’t change the outlook of investors and there is no expectation that it will change investors’ views about expected inflation (Bloomberg, 2021).

Hence the theme of reflation is based on a story about where inflation will move once the majority of the citizens are vaccinated and demand normalisation. 

Does a Change in the Federal Reserve Interest Rate on New Bonds Stimulate the Indian Market?

After Joe Biden swearing as the 46th US President and taking over his role in the White House, the Fed, the central bank of the US has been closely involved in changing the interest rates on new bonds in the month of February. For an emerging economy like India, these changes have a significant effect. The India investors whose speculations are based on the daily movements in the world stock markets are of the view that the decision of the Fed to decrease the interstate rate on bonds will be welcomed by the citizens as the economy struggles to revive from the COVID-19 pandemic. The ultimate goal is to infuse liquidity in the market so that citizens have cash in their hands which will help to pull up the demand in India. 

The Fed expected its interest rate to be close to zero and signalled that it will remain close to zero in many years to come. This is a part of a long-term strategy that the Fed adopted in the year 2020 that proved to be helpful while navigating a world of persistently low-interest rates that makes it difficult to hit its 2 percent inflation goal (Reuters, 2020). 

A sharp increase in demand as Covid-19 inoculations allow more of the economy to reopen could push inflation above the Fed’s 2 per cent target. If markets push up long-run interest rates a bit to reflect expectations for future faster growth, the Fed likely wouldn’t change course. That’s consistent with the new framework if the economy hasn’t achieved sustained 2 percent inflation by then (Reuters, 2020).

RBI Having a Tough Time in Keeping a Check on Bond Yields

After the release of Union Budget 2021, RBI is under constant pressure to keep the traders of bond calm. Although a higher fiscal deficit was expected, it rose to 9.5% as a percentage of India’s GDP for FY21 and is forecasted to touch 6.8% in FY22. A higher fiscal deficit came as a daunting news for the bond market which led to a surge in bond yields. 

There is an estimate made that the market borrowing of the central government will be at Rs 12 lakh crore in FY22. There is an increased supply of government bonds in the market that could lead to a demand-supply gap, thus putting pressure on yields. The investors in the government bonds are receiving higher yields thereby causing a similar demand on corporate bonds (ET Contributors, 2021). This leads to a rise in borrowing cost for corporates, thereby negatively impacting private investments in the country. In addition, higher bond yields further complicate the transmission process of the rate cut by the central bank (ET Contributors, 2021).

The responsibility now falls on the shoulders of RBI to keep a check on bond yields. In the last bi-monthly Monetary Policy meeting (MPC), there were no announcements made in this regard. As the economy is currently recovering from a recessionary phase, the phase of increase in inflation is getting stronger (ET Contributors, 2021). 

Thus given the current circumstances, RBI would be having a tough time in keeping the check on yields. The central bank has to deal with two-fold problems: on one hand to check the inflation while on the other hand has to handle the market borrowings from both the central and state governments. RBI needs to actively participate in the bond market and communicate well with the market participants in order to ensure that the bond yields are in check. 

Pandemic Fatigue Leading to a Fear of Lockdown

As news around the second wave, COVID-19 pandemic in foreign countries like UK, US, Australia are reaching the Indian households, residents are in a fist that there might be phased lockdown across the states in India. Several states like Maharashtra, Uttar Pradesh, Gujarat and Kerala are recording a spike in COVID-19 cases again which is directing the state and central government to impose night curfews in these states. Cities like Mumbai, Pune, Amravati, Aurangabad, Ahmedabad are already observing night curfews due to a rapid hike in COVID-19 cases. 

In a recent report released by Union Health Ministry, the primary reasons for the growing number of cases in few states were reported as – COVID inappropriate behaviour due to “lack of fear of disease”, pandemic fatigue, missed cases, super spreading events and crowds due to recent gram panchayat elections, marriages, reopening of schools, and crowded public transport.

The Recent INR-USD Change

The US Dollar to Indian Rupee Exchange Rate measures the ratio between the US Dollar and the Indian Rupee. Exchange Rates can be used to measure the relative health of an economy versus another. Exchange rates are also important in corporations that operate worldwide because they will directly impact their financials (YC, 2021).

US Dollar to Indian Rupee Exchange Rate is at a current level of 73.92, up from 72.74 the previous market day (February 25, 2021)  and up from 71.65 one year ago. This is a change of 1.62% from the previous market day and 3.17% from one year ago (YC, 2021). 

F&O Cues

F&O stands for Future and Options. These are the major types of stock derivatives traded in a share market. These Derivatives are the financial instruments deriving their values from an underlying such as currency, gold, or the stocks of a company.

Such contracts try to hedge market risks involved in stock market trading by locking in the price beforehand.

• Nifty February futures ended at 15,195; premium of 22 points 
• Nifty February futures add 1.2% and 1,745 shares in Open Interest
• Nifty Bank February futures ended at 35,854; premium of 102 points
• Nifty Bank February futures add 4.3% and 2,621 shares in Open Interest 
• Nifty Put-Call Ratio at 1.48 Out of F&O Ban: Sun TV Stocks In F&O Ban: BHEL, SAIL 

Brief on FII and DII Trading Activities during February 2021

Foreign Institutional Investors (FII) is the term used for investors who belong to foreign lands and are interested in putting their money in the Indian stock market. These are available in various forms such as mutual funds, investment trusts and pension funds. Domestic Institutional Investors (DII), on the other hand, refer to the investors belonging to India who invest their money in the Indian stock market. This comprises domestic mutual funds, banking and financial institutions, insurance companies and domestic pension funds (Dhanorker, 2020).

Indian stock market attracts millions of investors annually. These investors are primarily driven by institutional money. Both FIIs as well as DIIs constitute the major part of liquidity in the stock market. Therefore the effective tracking of their inflows and outflows are helpful in forecasting the broader trends in the markets. FIIs are believed to have a greater influence on the domestic markets along with the sustained flows from DIIs (Dhanorker, 2020). The countries which constitute a major portion of FII inflows into India are listed below. 

The performance of FIIs and DIIs have been carefully traced to meet the expectations of the investors during the month of February 2021. One of the primary reasons behind this is that the year 2021 will mark the arrival of the COVID-19 vaccine followed by the economic recovery that will see the Indian government taking stimulus measures to cope with the weak performance of the Indian economy during the COVID-19 pandemic. So it becomes of utmost importance to keep a track of previous FII and DII trading activities. 

The above table shows the trading activities of FIIs and DIIs from December 2020 to February 2021. There has been a continuous increase in the gross purchase of FII from Rs. 182 crores (approximately) in December 2020 to Rs. 223 crores (approximately) in February 2021. The gross sales of FII also increased from Rs 134 crores (approximately) in December 2020  to Rs. 180 crores (approximately) in February 2021. This increase was sharp for the month of  January and February because of the speculations surrounding the foreign investors due to the successful release of the COVID-19 vaccine and vaccination of common citizens which ultimately registered a steep increase in the net purchase/sales for the FIIs. 

Similarly, DIIs showed an impressive improvement in their performance as their gross purchases increased threefold from Rs. 84 crores (approximately) in December 2020 to Rs. 104 crores (approximately) in February 2021. Due to the restrictions on the movement across the borders and closing of the economies worldwide, the domestic investors started putting their money in the Indian stock market as a result of which the gross purchase increased. However, the gross sales had reduced from December  2020 to January 2021 2020 but increased during February 2021. 

Conclusion

In my opinion, the COVID-19 pandemic in 2020 delivered some of the greatest shocks to the global economies since World War II. The entire economies have been locked down and people adjusted to the new ways of working, studying and socialising. There are millions of people who have lost their jobs and became unemployed as a result of which inequality and poverty soared. The globalised economies acting as lifelines to billions of people worldwide has suddenly become vulnerable, owing to the disruptions of the global supply chains and government strategies to protect domestic stock market. Given the persistence of COVID-19, the recovery in 2021 will largely depend on how effectively the vaccine is distributed and how the various industry stakeholders reacted to the Union Budget 2021-22. The multidisciplinary robust approach will be required to mitigate the ill-effects of the pandemic and to address longer-term challenges posed by climate change. For this current and former political leaders, scholars, academicians, senior policymakers should provide exclusive analyses of the tasks that lie ahead in order to ensure that we are ready to meet the forthcoming challenges. 

References

Bhise, R. (2021, February 11). February 2021 Stock Market Outlook. investment shastra. https://www.moneyworks4me.com/investmentshastra/february-2021-stock-market-outlook/

Bloomberg. (2021, February 14). Bond market reflation trade absorbs punch to extend 2021 advance. Economic Times. https://economictimes.indiatimes.com/markets/bonds/bond-market-reflation-trade-absorbs-punch-to-extend-2021-advance/articleshow/80906847.cms?from=mdr

Dhanorker, S. (2020, June 29). What stocks are FPIs, FIIs and DIIs buying and selling? Economic Times. https://economictimes.indiatimes.com/wealth/invest/retail-investors-urged-to-stay-away-from-gamestop-inspired-communities/articleshow/80663373.cms

ET Contributors. (2021, February 18). Why is RBI having a tough ride in keeping bond yields in check. Economic Times. https://economictimes.indiatimes.com/markets/bonds/why-is-rbi-having-a-tough-ride-in-keeping-bond-yields-in-check/articleshow/81088372.cms?from=mdr

Reuters. (2020, December 16). Fed will be tested in 2021 as vaccines boost US economic outlook. Economic Times. https://economictimes.indiatimes.com/markets/stocks/news/fed-will-be-tested-in-2021-as-vaccines-boost-us-economic-outlook/articleshow/79751536.cms?from=md

YC. (2021, March 7). US Dollar to Indian Rupee Exchange Rate 73.92 INR/1 USD for Feb 26 2021. Charts. https://ycharts.com/indicators/us_dollar_to_indian_rupee_exchange_rate_h10

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India, spanning across 29 states and 8 union territories, offers unique ethnic, religious and linguistic diversity. While taking a stroll in the streets of India, one can see people doing their daily stuff, whatever that is. Or they are just standing and sitting around talking in a large group of people. Whatever they are engaged in, one thing is universal. They seem to be relaxed in whatever they do and be at peace with themselves and the environment. It is as if they don’t need the word ‘happy’ in their vocabulary to feel good and relaxed: they are fine with how it is. In India, happiness is not an abstract term. that people all intend to have as their life’s goal.

Maybe the Indian version of happiness has something to do with the present activities. Maybe being happy is just equivalent to being yourself. It’s more about not wishing for anything else and not to have big desires for which we would be willing to give something dear but to find these desires and happiness in the things we already have and as a result be grateful and at peace. Maybe it is acceptance of what is instead of hoping for what may be. 

Happiness, Well-being and Human Development

It is quite understandable that the ultimate objective of social and economic development is to provide improvements in the lives of men and women who generate employment now and the younger generation who we hope will generate in the future. This makes the idea of well-being universal: achieving a state of well-being has to be inclusive everywhere, whether in developed or developing countries (OECD, 2015).

Well-being is a focal concept: human well-being provides a means of understanding the growing relationships between apparently diverse ideas and issues that abound as and often appear to compete, in the international agendas. The proper study of human well-being provides a possible way to map out the relationship between poverty and sustainability as it helps us to explore the relationship between various economic dimensions and development such as productivity and efficiency, social cohesion and governance which are vital for the successful overall development (OECD, 2015).

Following the need to study the relevance of happiness, well-being and human development, various methodologies were developed in the international conferences and meetings of the United Nations (UN), United Nations Development Programme (UNDP) and Organization for Economic Cooperation and Development (OECD). These methodologies presented frameworks that incorporated the socio-economic indicators which can be used to assess the improvements in human well-being. One of the innovations suggested by the well-being approach saw human well-being as a holistic phenomenon. The framework which was put forward by OECD was known as ‘How is Life’ framework. This provides a good example of this multidimensional approach to measuring human well-being that can be used to discuss its relevance for developing countries.

The above figure depicts the process of the OECDs ‘How is Life’ framework which involves three categories of variables. These three categories are listed below: 

• Material Conditions
• Quality of Life
• Sustainability 

Within each of these three categories, there are a certain set of variables upon which data is assembled. Under ‘Material Conditions’ following three variables are listed:

• Income and wealth
• Jobs and earnings
• Housing 

The variables included in the category ‘Quality of Life’ are listed below:

• Health status
• Work and life balance
• Education and skills
• Social connections
• Civic engagement and governance
• Environmental quality
• Personal security
• Subjective well-being

In the last ‘Sustainability’ category there are four types of capitals which are identified as being significant for the process that produces both material well-being and quality of life outcomes. These are listed below:

• Natural capital
• Economic capital
• Human capital
• Social capita

Thus the major innovation will lie in the integrated adoption of a multidimensional approach to understanding progress which integrally considers people’s subjective evaluation of their quality of life. 

Subjective Well-being as an Alternate Tool for Policy Evaluation

In recent times, subjective wellbeing measures have established themselves as reliable alternatives to standard economic indicators of welfare. Intertest in subjective metrics have been largely driven by the growing dissatisfaction with the conventional use of objective indicators like GDP to evaluate the impact of economic activities on public and private sector decision making. This has led international organisations such as the UN and OECD to advise against using the GDP as a measure of economic progress as it does not capture the outcomes that matter to the well-being of the people. 

Today, the governments in places like New Zealand, Wales, Iceland and Scotland have advocated and justified the use of subjective well-being matrices in evaluating public policy. As a result of which these countries have recently established the Wellbeing Economy Governments Alliance (WEGO) that aims to promote and share their expertise and transferable policy practices in regard to subjective well-being (Wiking, 2020).

The core benefit of using subjective well-being is that it measures individual experience by directly asking people to report how they feel about their lives. This is in contrast to the conventional economic metrics like inflation rate, unemployment rate and GDP per capita that focus instead on people’s market behaviour. The measures of subjective well-being have proven to be reliable across varying contexts. They remain stable over time, correlate with the third party, associate with physiological makers, respond to life changes and even help in predicting future socio-economic behaviour of individuals including suicide. 

It is observed that the United Nations for the last eight years has published national rankings of subjective wellbeing in their World Happiness Report. These well-being measures have proven to be aligned with economic objective country conditions, including GDP per capita, life expectancy and levels of corruption. Subjective wellbeing metrics are therefore poised to reveal important underlying dynamics that can help us to understand how people have felt and behaved during the COVID-19 pandemic (Wiking, 2020). 

The Lessons Learnt From Nordic Countries

From 2013 till today, every time the World Happiness Report (WHR) has published its annual ranking of countries, the five Nordic countries- Finland, Denmark, Norway, Sweden and Iceland have all been placed in the top ten with Nordic countries occupying the top three spots in 2017, 2018 and 2019. It is of no doubt that whether we look at the state of democracy, structure of political institutions, lack of corruption, social cohesion, trust between the citizens, gender equality or Human Development Index, one can easily find the Nordic countries in the global top spots (Martela & Greve, 2020). 

There has been a lot of research done on finding the reasons that make Nordic citizens so exceptionally satisfied with their lives. Through reviewing the existing literature the prominent factors responsible for the happiness of Nordic citizens include quality of institutions, low corruption and proper well-functioning of democracy and political institutions. In addition, Nordic citizens experience a high sense of freedom as well as high levels of social trust among each other that play a significant role in determining life satisfaction (Martela & Greve, 2020). 

Denmark is one of the top five happiest nations in the world. It has consistently remained in the top three global spots in the World Happiness Report. Comparing the Indian and Danish GDP, the GDP growth rate of Denmark averaged 0.40% from 1991 to 2018 while the annual growth rate of India’s GDP averaged at 6.61% from 1951 to 2018 (Trading Economics, 2019). Indian economy is much larger as compared to Danish economy. However, there are other factors than financial prosperity and GDP that makes the Danish people among the top happiest in the world. 

If India has to go the Nordic way, it can adopt some features of the happy country as mentioned in Figure 2. It clearly depicts that Denmark does simple things elegantly and makes it the motto of their life. They seek happiness in the small happening of their life and build a hyggelig environment around themselves (Sarkar, 2018). 

Weaving the Path for India to Follow the Nordic Happiness Way: A Long Way Ahead

The happiness of the citizens in India needs to follow a six-pronged strategy to go the Nordic way of living and can be counted as a happy nation in near future. This strategy is depicted in the figure below:

Indian policymakers should carefully observe how education, transport, health and social policies will affect the happiness of citizens. Furthermore, policies that aim to promote public cooperation and equality are equally likely helpful in increasing the subjective indicators of well-being like longevity. India has been a place for poverty research for a very long period of time. With the appropriate policies in place, maybe it could become a laboratory to study happiness one day. 

Bibliography

Martela, F., & Greve, B. (2020, March 20). The Nordic Exceptionalism: What Explains Why the Nordic Countries Are Constantly Among the Happiest in the World. World Happiness Report. https://worldhappiness.report/ed/2020/the-nordic-exceptionalism-what-explains-why-the-nordic-countries-are-constantly-among-the-happiest-in-the-world/

OECD. (2015, April 5). MEASURING WELL-BEING FOR DEVELOPMENT. OECD Development Centre. https://www.oecd.org/site/oecdgfd/Session%203.1%20-%20GFD%20Background%20Paper.pdf

Sarkar, D. D. (2018, April 13). India and the happiness quotient. Mint. https://www.livemint.com/Opinion/n5HPI9id2l3jBrjZLut3SL/India-and-the-happiness-quotient.html

Trading Economics. (2019, August 4). Denmark and India-Economic Indicators. Trading Economics. https://tradingeconomics.com/denmark/indicators

Wiking, M. (2020, June 20). Wellbeing in the age of COVID-19. Happiness Research Institute. https://6e3636b7-ad2f-4292-b910-faa23b9c20aa.filesusr.com/ugd/928487_f35139968bca4668b456726d010e8d45.pdf

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The Indian stock market attracts millions of investors annually. These investors are primarily driven by institutional money. Both FIIs as well as DIIs constitute the major part of liquidity in the stock markets. Therefore the effective tracking of their inflows and outflows are helpful in forecasting the broader trends in the markets. FIIs are believed to have a greater influence on the domestic markets along with the sustained flows from DIIs (Dhanorker, 2020). The countries which constitute a major portion of FII inflows into India are listed below. 

The performance of FIIs and DIIs have been carefully traced to meet the expectations of the investors during the month of January 2021. One of the primary reasons behind this is that the year 2021 will mark the arrival of the COVID-19 vaccine followed by the economic recovery that will see Indian government taking stimulus measures to cope with the weak performance of Indian economy during the COVID-19 pandemic. So it becomes utmost important to keep a track of previous FII and DII trading activities. 

The above table shows the trading activities of FIIs and DIIs from November 2020 to January 2021. There has been a continuous decline in the gross purchase of FII from Rs. 260 crores (approximately) in November 2020 to Rs. 168 crores (approximately) in January 2021. The gross sales of FII also declined from Rs 194 crores (approximately) in November 2020  to Rs. 160 crores (approximately) in January 2021. This decline was sharp for the month of  November and December because of the speculations surrounding the foreign investors due to the outbreak of COVID-19 which ultimately registered a steep decline in the net purchase/sales for the FIIs. 

While FIIs were registering a decline in their performance, DIIs, on the other hand, showed an impressive improvement in their performance as their gross purchases increased threefold from Rs. 71 crores (approximately) in November 2020 to Rs. 105 crores (approximately) in January 2021. Due to the restrictions on the movement across the borders and closing of the economies worldwide, the domestic investors started putting their money in the Indian stock market as a result of which the gross purchase increased. The gross sales had increased from November 2020 to December 2020 but reduced during January 2021. This is primarily due to the fact that the domestic inventors chose to wait till the releases of Union Budget 2021-22 before taking any financial decision. 

Vaccine, Covid Situation and Geopolitical Trends to Be Major Drivers for Indian Stock Market in 2021

The global outbreak of COVID-19 pandemic, news about the release of vaccines, Union budget 2021-22, economic growth and recovery and geopolitical trends are the major factors that would be driving the sentiments of investors in the year 2021 after the pandemic year 2020 that witnessed both good as well as bad times for the stock market in India (PTI, 2021). There were losses incurred by the investors while few record-shattering gains were also observed which depicted that the investors went on a roller-coaster ride amidst the COVID-19 pandemic followed by announcements of massive stimulus measures.  

The Indian stock market experts are of the view that 2021 will see massive changes in the perception and preference of people towards buying and selling of shares, stocks, assets and equities in the financial markets thus affecting their financial decision. In the words of Mr. Hemant Kanawala, Head, Kotak Mahindra Life Insurance, “If 2020 was a year of COVID infection, lockdown and recession, 2021 will be a year of vaccination, reopening and recovery.” (PTI, 2021).

Some new highs are continuously observed in the markets due to the positive news on the progress of COVID-19 vaccines and US stimulus announcement. The FY21 will be marked with greater hopes of early release and distribution of COVID-19 vaccine, normalisation of economic activities and undisturbed growth recovery. This will result in better recovery in both economies as well as earnings (PTI, 2021).

The optimism surrounding the vaccine release and measures supporting liquidity which was on a rough path during trading sessions in March 2020 has infused positivity and life into the Indian equity market.  As countries are in a race to vaccinate their large number of people against COVID-19 amidst the news of vaccine makers struggling continuously to meet their demand, India is making plans to speed up the manufacturing of vaccines so as to supply it to 60 nations in the coming months of FY21. 

India’s role as the “pharmacy to the world”, which will be reinforced by its supply of vaccines, will win it goodwill that will stand New Delhi in good stead as it looks to carve out a bigger role for itself in world affairs, analysts said (Roche, 2021). 

Companies’ Quarterly (Q3) Results: An Overview of Performance During the Covid-19 Pandemic

Various companies in India are seeking an increase in their net profits during the Q3 following the strategies adopted by them to deal with the pandemic. This makes Q3 extremely important from the economic recovery point of view. 

The following section suffices the performance of several companies in Q3 and highlights the net profits and net losses incurred by them respectively. 

1. Triveni Turbine posts ₹27.54 crore net profit in Q3.
2. IDFC First Bank posts ₹130 crore profit in Q3.
3. Relaxo Footwears Q3 net profit jumps 67% to ₹90 crores.
4. Shree Cements Q3 profit jumps over two folds to ₹632 crores.
5. ICICI Bank Q3 net profit rises 19.1% to ₹4,939.6 crore.
6. Tata Consumer Q3 results: Net profit rises to 29% to 218 crores, revenue up 23%.
7. Escorts’ net profits jumped 83% in Q3. 
8. Reliance Industries Ltd. net profits rose 12% in Q3. 
9. DLF posts 9% jump in net profits in Q3.
10. Tata Motors recorded a 67% rise in net profits on account of festive boost.
11. IRCTC Q3 net profits plunged to 67%.
12. TVS Q3 net profits rose to 120%. 
13. Maruti Suzuki Q3 net profits rose to 24%.
14. HUL Q3 net profits jumped 19% on account of demand recovery.
15. JSW Steel net profit surges 93% in Q3. 

The following companies showed a decline in their net profits during Q3:

1. CITY Union bank Q3 net profits decline 12%.
2. Adani enterprises net profits decline by 10% in Q3.
3. HDFC Q3 net profits decline by 65%.
4. Chevron falls to a fourth-quarter loss on weak refining charges.
5. Union Bank of India net profits drop 37% in Q3.
6. IndusInd Bank net profits fell 34% in Q3.
7. Indigo reports quarterly loss of Rs. 620 crore.
8. Axis Bank net profits drop 36% in Q3.
9. Bardhan Bank Q3 net profit falls 14%.
10. PVR reports net loss of Rs. 49 crore in Q3. 

The net earnings of companies in Q3 points to economic recovery for India. Some of the companies dealing with the consumer durables and automobiles like HUL, TVS, Maruti Suzuki and Tata Motors registered a sharp increase in their net profits due to the festive boost that led to the demand recovery in the economy. 

The oil and gas companies like Reliance Industries Ltd. showed a rise of 12% in their net profits during Q3. However, the analysts are concerned over the issue of transparency as the company made a firm decision of not reporting its gross refining margin. The net subscriber of the Info COMM department of Reliance Industries increased to 5.2 million in the third quarter showing the trust placed by the customers in the reliance company (Bhardwaj, 2021). 

Some of the Banks like City Union Bank, HDFC Bank, Union Bank of India, IndusInd Bank and Axis Bank have announced their quarterly results which reported a decline in their net profits. This is because of the rising NPAs of these banks which is acting as a major driver for losing the confidence entrusted by the customers in these banks. The shareholders are not receiving the due dividends which are making the banks think of the measures to take care of probable hit on the asset quality for the quarter. 

Forecast for Indian Rupee to Average at Rs 75.50/USD for 2021

With the revision in Forecast for the Indian rupee from Rs 77/USD to average at Rs 75.50/USD, the central banks of both the countries- RBI and the Fed are in the row for a stronger 2021 forecast. This is followed by the expectation that the rupee will trade only slightly weaker over the upcoming near term from the current rupee levels. There was depreciatory pressure built up on the rupee due to the declining terms of trade which arose from a rise in oil prices and central bank foreign exchange intervention aimed at combating the imported inflation (Kumar, 2021).

It is expected that over the longer term, the overvaluation of rupee in real terms in India should aim at exerting weakening pressure for the rupee vis-à-vis the US dollar. In addition to this, the experts of the Indian economy are expecting a 50 basis point cut in the interest rates and repo rates by the RBI which will also add to the downward pressure on the Indian rupee. 

According to the forecast made by Fitch Solutions, there are two factors that will partially offset the effect of depreciatory pressure on the Indian rupee. First, the adoption of the loose fiscal and monetary policy by the US Fed will exert downside pressure on the US dollar in 2021 as well that would ultimately offset rupee weakness. 

Second, the RBI, with a foreign exchange reserve position of USD 578 billion as of December 2020, representing an import cover of around 19 months, will likely intervene to prevent excessive rupee weakness to manage imported inflation to reduce the risk of high inflation derailing India’s recovery in 2021 (Kumar, 2021). 

Dalal Street Cheers Budget 2021 as Sensex Surges 2,315 Points, Nifty Settles at 14,281

While the Union Finance Minister Nirmala Sitharaman presented the Union Budget 2021-22 on the morning of February 1, 2021; the Indian stock market reacted to the proposals she announced on the floor of the Lok Sabha. The Indian equity indices responded to the Union Budget 2021 by breaking up the six-day losing streak as they cheered the announcement of the government’s plan for the economic recovery. As a result, the Nifty was up 646.6 points and settled at 14,281 while the Sensex recorded the best Budget day since 1997 and surged 2,315 points. 

The volume of shares on the NSE was highest on Budget day. All the sectoral indices except pharma recorded a gain of 1-8%. The other broad market indices like BSE Midcap and Small cap rose 2-3%. This is because the markets and investors speculated that the Banks, Materials and Metals sector might be benefitted by the increasing privatisation and spending in the Union Budget. The stock market of Asia gained as well after the COVID-19 vaccine maker AstraZeneca agreed to increase their supplies to Europe amidst the worries about the pandemic. 

The manufacturing sector of India also started the year 2021 on a strong note as the Manufacturing Purchasing Managers Index (PMI) for the month of January stood at 57.7, which reflected the strongest improvement in three months. Manufacturing PMI in December 2020 and November 2020 came in at 56.4 and 56.3, respectively (Pachal, 2021).

Top Sensex gainers were  IndusInd Bank, ICICI Bank, Bajaj FinServ, State Bank of India (SBI), Larsen $ Toubro, Housing Development Finance Corporation (GDFC) on the Budget day. On the flip side, Dr Reddy’s, Tech Mahindra and Hindustan Unilever Ltd (HUL) were the only Sensex laggards as shown in the red colour in the following illustration (Pachal, 2021). 

2021: The year of The Great Reset for Indian Stock Market

The sentiments of the Dalal Street in Mumbai have been largely driven by the geopolitical situation with the new US President Joe Biden taking charge of the largest superpower of the world-USA. The experts are of the view that the improvement in the trade relations between US and India under the new US president and his administration will play a major role in speeding up the economic recovery (PTI, 2021). 

The continuity of the global liquidity in the financial markets and the changing geopolitical situation with Joe Biden taking the charge of the White House will drive global sentiments. The global recovery’s leading variables added that the COVID-19 is not going to disappear just like that, as the outgoing US President Donald Trump suggested to the world in his last speech. Although there are instances of substantial recovery of the economy from the initial depths of economic lockdown, the losses to the macroeconomic variables like GDP and employment around the world are yet to pick up its original pace (Mint, 2021). This will hold true with the releases of vaccines and its availability to the masses. 

For the European Union (EU), navigating the COVID-19 crises has been challenging yet the Europeans stuck together in these difficult times and grew together, forging a more cohesive bloc. In 2021, it is believed that global cooperation will make a strong comeback and the EU will pursue its own strategic autonomy in order to safeguard its citizens and their interests in the coming decades (Mint, 2021). 

In my opinion, the COVID-19 pandemic in 2020 delivered some of the greatest shocks to the global economies since World War II. The entire economies have been locked down and people adjusted to the new ways of working, studying and socialising. There are millions of people who have lost their jobs and became unemployed as a result of which inequality and poverty soared. The globalised economies acting as lifelines to billions of people worldwide has suddenly become vulnerable, owing to the disruptions of the global supply chains and government strategies to protect the domestic stock market. Given the persistence of COVID-19, the recovery in 2021 will largely depend on how effectively the vaccine is distributed and how the various industry stakeholders will react to the Union Budget 2021-22. The multidisciplinary robust approach will be required to mitigate the ill-effects of the pandemic and to address longer-term challenges posed by climate change. For this current and former political leaders, scholars, academicians, senior policymakers should provide exclusive analyses of the tasks that lie ahead in order to ensure that we are ready to meet the forthcoming challenges. 

References

Bhardwaj, S. (2021, February 2). Q3 Nifty Earnings Point To Recovery For India Inc. Bloomberg Quint. https://www.bloombergquint.com/quarterly-earnings/q3-nifty-earnings-point-to-recovery-for-india-inc

Dhanorker, S. (2020, June 29). What stocks are FPIs, FIIs and DIIs buying and selling? Economic Times. https://economictimes.indiatimes.com/wealth/invest/retail-investors-urged-to-stay-away-from-gamestop-inspired-communities/articleshow/80663373.cms

Kumar, S. (2021, January 4). Fitch Solutions revises forecast for Indian rupee to average at Rs 75.50/USD for 2021. Hindustan Times. https://www.hindustantimes.com/business-news/fitch-solutions-revises-forecast-for-indian-rupee-to-average-at-rs-75-50-usd-for-2021/story-u0nP8yvh83aeVb77OEz5kO.html

Mint. (2021, January 1). Lessons from COVID-19 pandemic. Mint. https://www.livemint.com/news/world/2021-the-year-of-the-great-reset-11609434044784.html

Pachal, D. (2021, February 1). Budget 2021 Market HIGHLIGHTS: Sensex zooms 2315 pts, ends at 48,600, Nifty at 14,281 as D-St cheered Budget. The Indian Express. https://indianexpress.com/article/business/budget/budget-2021-market-live-updates-bse-sensex-nse-nifty-stocks-shares-benchmark-indices-finance-minister-nirmala-sitharaman-7169479/

PTI. (2021, January 1). Analysis of Budget 2021. Economic Times. https://economictimes.indiatimes.com/markets/stocks/news/vaccine-covid-situation-geopolitical-trends-budget-to-be-major-drivers-for-indian-equities-in-2021/articleshow/80056883.cms

Roche, E. (2021, January 31). India ramps up exports of covid vaccines to plug supply gaps. Mint. https://www.livemint.com/news/india/india-a-major-player-at-home-and-world-in-covid-vaccination-drive-11612085153226.html

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In these unprecedented times, when the common citizens are adapting to the new normal and life is returning to normalcy, the eyes of the entire nation will be stuck at the national television and channels on February 1, 2021, when the union finance minister Nirmala Sitharaman will be presenting the Union Budget for the upcoming financial year 2021-22. This will be the first time ever since the release of independent India’s first budget on November 26, 1947 that the government has decided not to print the Budget documents following the protocols of COVID-19. Hence all the MPs will be receiving soft copies of the Budget and Economic Survey of FY 2021-22. 

Speaking about Union Budget 2021-22 set to be presented in the Parliament on February 1, 2020, FM Sitharaman said-

“100 years of India wouldn’t have seen a Budget being made post-pandemic like this”

The Union Budget 2021-22 will make it quite imperative for the government to come up with a comprehensive strategy for the revival of the Indian economy against the backdrop of an economic contraction of 7.7% (Mint, 2021). Therefore all the stakeholders hold great expectations from the release of the budget hoping that it provides a boost to the economic growth. While the investments in social sectors like health, education, medical infrastructure, Research and Development (R&D), inculcating better skills to manage the use of technology in medicine is going to be important, challenges in the livelihood pattern ought to be seen in a broader canvas with the changed perspective on skill development. 

Tax and FDI reforms: Impetus to the insurance industry

During the past several years, there has been a tendency of low insurance penetration in health insurance that has acted as a cause of worry for the common citizens. Following the shortage of healthcare insurance funds in the light of  COVID-19, it becomes imperative for the industry experts to believe that the Union Budget 2021 should be leveraged in such a way to mitigate the distress of individuals and industry to some extent. 

It is being speculated that the reforms in two key spheres- tax and foreign direct investment (FDI) can be undertaken and discussed at length under the Union Budget 2021. The provisions should be made for enhancing the limits of insurance under section 80C and 80D that will encourage consumers to opt for health life insurance (Mint, 2021).  

Further, the GST payable currently on the insurance premiums must be reduced by the government thus making life insurance affordable to the vulnerable sections of the society. Such tax reductions and incentives will prove to be successful in the long run by ensuring insurance penetration in India. 

Liberalisation in the FDI regime is extremely important in order to attract additional capital to expand the business in the economy and ensure substantial insurance penetration into India. Therefore, there is a growing need that the government should liberalise the current FDI regime by raising the FDI limits to 74% from the current limit of 49% of paid-up equity capital (Mint, 2021). This would in turn support the disinvestment programme of the government. The reduction in the FDI limits will prove to be an impetus to the expanding insurance industry of India thereby providing opportunities to the investors to fetch higher returns on the assets and capital. 

Another important recommendation has to be made in the form of treating annuity income as tax-free income which will encourage higher uptake of annuity policies and better financial security during the old age years.  This recommendation is significant for a country like India, which has a history of limited social security measures. 

Work from home: A time to rethink the income tax allowances 

The global outbreak of the novel COVID-19 in the month of March has drastically changed the working landscape for the organisations globally. This shift in the working landscape has put in several companies to provide enabling infrastructure such as furniture (like tables, chairs etc), printers, high-speed internet connectivity, stationery etc for providing ease to the employees working at their residences. 

For the smooth conduct of the work at their respective places, the organisations are providing a fixed allowance to the employees in order to meet the expenditure incurred on furniture and digital infrastructure. The governments have to work in tandem with these organizations and ensure the efficient provision of exemption and deductions for the allowances which are reimbursed by the employer to employees who are working from their respective homes. The Union Budget 2021 should also incorporate a similar approach as well thus reaping the benefits of evolving a new digital working landscape. 

The Education sector: Seeking an array of Expectations

With just a fortnight left for the release of Union Budget 2021-22 by the Ministry of Finance, the experts are in lieu of several expectations in the education sector from the Union finance minister Nirmala Sitharaman. Here is the discussion on the top five expectations for the education sector in Budget 2021 (Economic Times, 2021). 

Use of Technology in Education

Following the outbreak of COVID-19, there was an increasing use of technology in education as the schools and academic institutions were shut down. The Finance minister should provide some relief to the education sector in terms of reduction in GST and subsidy on the education loans which are granted for both formal as well as skill-based learning. The focus should also be on the provision of the appropriate flow of ed tech-focused funds into the education sector that will enable the mid-size tech start-ups inside the campuses in raising the money for better and faster experiences using technology in education. 

Online teaching

In order to make online education accessible to each and every student, the GST on online education should be cut down to 5% from 18% in the upcoming Budget 2021 (Economic Times, 2021). The experts are looking at the more announcements especially in reference to New Education Policy 2020 with a primary focus on the K12 segment. The collaborative approach should be adopted wherein the government and private institutions can come forward in order to scale up the coding education. Thus increasing the contribution of education in the lives of students across the nation. 

National Education Policy 2020

The NEP 2020 marked the historic turn of events in the education sector. The vision laid by the government in the form of mandates in NEP 2020 will play a significant role in achieving the inclusive education system. There has to be a concrete implementation plan for the NEP 2020 in the Union Budget 2021 to further ensure focussed investment in Edu-tech companies. 

Tax Exemption

In the Union Budget 2021, the central government must ensure to reduce the expenditure limit of 85% to obtain tax exemption of 75% (Economic Times, 2021). Further, the academic institutions having good NAAC score should be allowed to retain the additional 10% of the funds received by them for providing education loans to the students. Such a provision will prove to be successful in providing funds to students that cannot provide collaterals to obtain loans in the long run. 

Restoring the trust of India’s upset farmers

With the farmers’ agitation still in place, the Union Budget 2021-22 will have to address the problems in agriculture with a more comprehensive and practical approach. The promise of doubling farmers income by 2022 made by the then finance minister Nirmala Sitharaman in her last year budget would require annual growth of 15% in the real income of the farmers till 2022. The Union Budget 2021-22 will therefore have an action to increase the allocation of Central government to schemes like on irrigation, rural roads, warehousing and storage facilities. Moreover, the new Acts are likely to supplement the working of mandis and will not replace them. The Minimum Support Price (MSP) will continue with no substantial changes. This will reorient the expenditure of the government in the right direction to restore the lost trust of farmers. 

Weaving a way for healthcare innovations

While the country is still struggling to deal with the pandemic, the state of health infrastructure in some of the developed economies has raised an alarm across the globe. This pandemic has reflected on the structure of the healthcare sector in India. Keeping  in view the last year allocation of Rs 69,000 crore to the healthcare budget, some of the key considerations for the Union Budget 2021-22 are listed below:

1. The centrally funded hospital and medical college have to be established in each Indian district. This will change the landscape of healthcare in India by ensuring effective and quality healthcare facilities to citizens.
2. The National Healthcare Audit Authority (NHAA) should be set up and funded which will provide the facility of audit functioning of all the healthcare institutions in the country.
3. The Ayushman Bharat Yojana, also known as the Pradhan Mantri Jan Arogya Yojana (PMJAY) should be expanded to include all the taxpayers. 

The gap in the accessibility and affordability in healthcare facilities is enabling local technology-driven innovations that will facilitate the delivery of medical devices within the country. This gap and provision need to be addressed in Budget 2021 with a special focus on the equitable allocation of the funds for healthcare delivery, healthcare equipment, healthcare infrastructure and healthcare innovations by means of start-ups. 

Hospitality sector: Looking for a fair deal in Budget 2021

The travel and tourism sector is the worst-hit sector due to COVID-19 pandemic. The structural financial reforms are needed to ensure the pathbreaking recovery of the sector in the upcoming Union Budget 2021. The experts of the sector are in the view of revitalising the famous Incredible India campaign in accordance with the year 2023 when India will be hosting the G20 summit. The current GST structure of wellness and medical tourism should be restructured so that there is an infusion of funds into the tourism businesses. 

The Federation of Association in Indian Tourism and Hospitality (FAITH) has proposed the setting up of a National Council of Chief Ministers to be headed by the Prime Minister as well as the Tourism Minister. This Council should be placed in the concurrent list and be a subject matter of both Central and State government. Further, the incidence of taxes on tourism earnings should be cut down to zero per cent. The current Service Exports from India Scheme (SEIS) of 10% to all the foreign exchange earnings in tourism be made in place for the next 5 years in order to ensure the post-covid recovery (Sinha, 2021). 

The country holds immense potential for promoting domestic tourism. The Indian organisations and business houses should be encouraged to promote domestic MICE (meetings, incentives, conferences and events) by offering them 200% income tax expense benefits to those Indian organisations who are a part of domestic MICE in India. For conserving the rich cultural heritage of our country, there is a need to establish a Natural and Cultural Heritage Restoration Fund with a backup of at least Rs 2000 crore that will encourage sustainable tourism around each horizon of tourism. 

A secured comprehensive mechanism is required to secure the future travel plans for the travel agents and tour operators who are affected by the pandemic thus restoring the higher growth in the travel and tourism sector. 

Privatisation of Public Sector Banks and PSUs

While the previous year’s budget(2020-2021) made way for the bank-led growth, banks are facing the challenge of confounding the impact of COVID-19 pandemic on their balance sheets and focussing on the economic recovery of India. It is expected that the upcoming Union Budget will include the proposal for Bank Investment Company (BIC) which will increase the shareholding of the government in its banks. As a result of which Public sector banks (PSBs) will dominate the banking sector as the major responsibility will fall on them. 

The government which is running a high fiscal deficit is in search of alternatives in order to reduce its burden on the Non-Performing Assets (NPAs). it is projected that the gross NPAs will be rising to 16.2% in the first quarter of FY21. the mounting NPAs has to be reduced. The BIC is therefore seen as a first welcoming step signalling the intention of the government to undertake reforms in order to ensure that the performance of PSBs are improved. The upcoming budget could therefore act as a signal by announcing the first step- the re-emergence of the Bank Nationalisation Acts and the State Bank of India Act.

Fiscal deficit targeted at 4% of GDP by FY26

It is expected that the Central government will provide an outline and lay down a road map in the Union Budget 2021 to bring the fiscal deficit down to 4% of GDP by FY 2025-26. This plays an important role in considering the fact that there will be growing demands for expansionary policies for the next 4-5 years. This further means that the government had to deviate from the set medium-term target of around 2-3% of GDP as the recommendations made by the Fiscal Responsibility and Budget Management Act (FRBM).

An opportunity to fund data infrastructure and Artificial Intelligence skills 

India has a golden opportunity to lead the next Industrial Revolution which is dominated by Big Data and Artificial Intelligence. The upcoming Union Budget 2021-22 will act as a platform for the Union Finance Minister Nirmala Sitharaman to unfold the benefits of big data through employment multiplier by means of funding through data science which is subjected to research (Umapathy & Singh, 2021). The integrated pool of the entire national data will be the way forward. The data generators ought to share the unfiltered data with the pool. This step will boost employment, nurture the start-up ecosystem and generate employment in the economy.  

Inclusion of Climate-responsive budgeting: A way forward

There is a growing need to recognise the potential of India is working towards a national budget responsive to climate change. Several initiatives have been taken by the leaders worldwide after recognising the significance of efficient fiscal handling of the climate changes in the spheres of planning of domestic public finances. For example, the Paris government has launched the Paris Collaborative on Green Budgeting. In south-east Asia, Indonesia has successfully implemented its climate budget tagging framework in 2016 and leveraged it in 2018. 

The state of Odisha in India which is the most disaster-prone state with the highest disaster score in the country has launched its own climate-budgeting based on the experiences of budget lines across the key economic sectors. Gujarat is another Indian state which has worked at length to adopt its own annual climate budgeting framework. However, India lacks such uniformity in the process of integrating all the subnational climate actions with the national climate goals. The state governments need the leadership of the Centre in establishing guidelines for climate-budgeting at the national level and work on climate-related risk planning. 

Climate-responsive budgeting will make sure that the future governments in power are financially stable in order to ensure the smooth transition of the economy. Moreover, India has to be ready to act as a responsible host during its maiden G20 presidency on climate change and economy. 

Personally, I believe the upcoming Union Budget 2021 will play a crucial role in lifting the Indian economy out of the recession and take significant steps that will focus on post-Covid recovery. Additionally, it is extremely important to concentrate on the forthcoming vision of the upcoming budgets on the threats imposed by climate change. For this, a proper national framework will be required focussing on the contribution of stakeholders from a diverse background including civil society and think tanks. 

Bibliography

Economic Times. (2021, January 17). Budget 2021: Expectations of Education Sector. Economic Times. https://indianexpress.com/article/opinion/columns/union-budget-2021-psb-privatisation-7148097/

Maji, P. (2021, January 15). Budget 2021 expectations. Financial Express. https://www.financialexpress.com/money/budget-2021-expectations-tax-fdi-reforms-to-provide-much-needed-impetus-to-insurance-industry/2171583/

Mint. (2021, January 16). FM holds pre budget meetings with the key stakeholders. mint. https://www.livemint.com/budget/expectations/page-2

Pandey, R., & Priyadarshini, D. (2021, January 16). Budget must take steps towards privatising ownership of public sector banks. The Indian Express. https://indianexpress.com/article/opinion/columns/union-budget-2021-psb-privatisation-7148097/

Sinha, D. (2021, January 18). Budget 2021 Expectations: Travel, Tourism sector expects pathbreaking Union Budget for post-Covid recovery. Financial Express. https://www.financialexpress.com/budget/budget-2021-expectations-travel-tourism-sector-expects-pathbreaking-union-budget-for-post-covid-recovery/2173235/

Umapathy, S., & Singh, R. (2021, January 19). View: Budget 2021 should fund data infrastructure and Artificial Intelligence skills. Economic Times. https://economictimes.indiatimes.com/tech/technology/view-budget-2021-should-fund-data-infrastructure-and-artificial-intelligence-skills/articleshow/80317424.cms

The post Pre-Budget Analysis 2021-22: ‘Never before in 100 Years’ appeared first on WISER WORLD.

Factors shaping the market trends

The trends in the equity markets are influenced by several factors that shape the decision of an investor of whether or not to invest their money in the alternate forms like equities, bonds or securities. These factors are helpful in providing insights into how future trends may occur. Some of the factors are explained below:

• Government – Government plays a key role in shaping the market trends by means of altering the interest rates and the availability of dollars. The change is accompanied by the increase or decrease in investment flows into and out of the country which in turn causes a profound impact on the financial marketplace. 

• International Transactions – The funds that flow between the countries directly affect the currency and economy of the country. The money that flows into the economy due to the fact that the countries indulge in exporting more products and services can be further reinvested that can stimulate the equities and financial markets in the respective countries.

• Speculation and Expectation – Speculation and expectations form the basis of shaping the decision of the investor regarding the time when the money needs to be invested in financial markets. Every economic agent like consumers, businessmen, investors and politicians have different views when it comes to foreseeing the direction in which the economy will move in the future. They speculate various expectations about the future trends in the markets which depend on current acts. The technique which is employed to analyse the perceptions and feelings of individuals about the current state of the economy is called sentiment indicators. These indicators along with the other forms of analysis like fundamental and technical analysis give insights into the market by creating a bias of future prices and trend direction. 

• Supply & Demand – The dynamics in prices are affected by the market forces such as supply and demand for various products, currencies and other investments. In financial markets, the stocks fluctuate in the short and long run, thus causing trends. Buyers will buy the stocks and assets at higher prices if the supply is eroding at the current prices which creates large price increases. On the contrary, there will be downward movement in the prices due to the entry of a large number of sellers which would increase the stock available in the market. This process takes place on all time frames. 

All the above-mentioned factors closely affect one another as they are closely linked. Government mandates like news releases, change in tax policy, the Fed decided to maintain the interest rate affect international transactions which further causes fluctuations in international transactions and thus in the financial markets. 

Changing the dynamics of the Global Financial Market during the COVID-19 pandemic 

The above figure showcases the returns to some of the major stocks in the world financial countries. When the number of COVID-19 cases was increasing at a faster rate, markets reacted to the announcements made by several pharmaceutical companies like BioNTech, Moderna and AstraZeneca on the release of vaccines that proved to be efficient in reducing the causes of COVID-19. The next major step was to ensure the quick and equitable manufacturing, distribution and administration of the vaccines on the large scale. The emerging markets are in the process of pre-ordering the AstraZeneca/Oxford vaccines so are eagerly waiting for the approval and release of the vaccines in the market (Morgan, 2020). With the governments making continuous efforts to control the virus worldwide, the path to recovery still looks blurred. For example in Europe, there has been a significant decline in the number of new infections due to the frequent lockdown measures taken by the authorities. In the US, the situation is a bit different with the rise in new cases despite the measures taken by the government. However high-frequency data has shown that these restrictions cause a slowdown in the economy. Thus markets are believed to foresee the economic developments in terms of better times on horizon in both short as well as long run. 

Following the decisions made by the governments in Europe, the UK government reintroduced measures to curb the spread of the virus. In the process, the business and households were provided with monetary help through furlough scheme. According to the forecasts made by The Office for Budget Responsibility, the government borrowing will account for about 19.4% of GDP which is an alarming figure not seen since the end of the Second World War. 

The Bank of England (BoE) made announcements to increase its asset purchase facility by about British Pound Sterling (GBP) 150 million. With the equity market, the performance in December was dominated by this year’s losers, as the economy is slowly returning to normality. This in turn is followed by the continued recovery of the earnings expectations provided the support to the equities. For the investors and individuals who are thinking to diversify their portfolio beyond equities, an equitable allocation to macro funds and real assets will be helpful.  

Monthly switching impacting on Global Market Indices

With the optimism surrounding the global wave of COVID-19 vaccines, the MSCI-EAFE Index recorded a jump of 16.86% in December. The European Financial markets started performing much better, with higher gains in countries like France, Italy, Germany and the UK. This was achieved as the European markets focussed on the prevention of the obstacles in the path of the EU recovery package. The Asian financial system also performed better. China picked up 9.27% while India outperformed the other emerging markets with a jump of 11.45%. The markets in the Pacific region also had a good month. With Australia recording a jump of 9.96% while Japan recording one of the highest jumps of 15.04%. 

The equities outperformed the bonds and currencies in the financial markets. The world equities index stood at 9.3%. There were higher returns in countries like Europe, the UK and Latin America. The emerging markets also showed satisfactory returns with 5.8%. On the other hand, the bonds and currencies registered negative returns across the countries worldwide. Individuals and investors speculated the declining growth of economies and uncertainties in the global financial markets due to COVID in the near future. Hence they preferred equities over government bonds and currencies in the hope of better returns. 

Conclusion

While the path to COVID-19 recovery still looks blurred, there will be optimism surrounding the investors and businesses in the global financial markets. This will restore the trust of the investors who will be looking forward to the release of the vaccine so that they can accordingly shape their investment preferences. However, it becomes extremely important to analyse the growing need for financial instruments and institutions in the financial market. With the large number of capitals involved in the market, any fluctuations in these investments will have an impact on both the economics of different countries as well as on the participants of the financial global markets. Therefore the proper understanding of the management and transparency becomes essential. 

Bibliography

Ghulam, & Diamond, N. (2016). Analysis of Financial Markets. LAUREA, VII(3), 32. 7 November

Greenwood, R., Hanson, S. G., & Jin, L. J. (2019, June 7). Reflexivity in Credit Markets. Harvard Business School, VI(2), 23. https://hbswk.hbs.edu/item/reflexivity-in-credit-markets

Jones, D. (2020, December 10). Monthly Market Insights- December 2020. Conscious Capital Wealth Management. https://www.consciouscapitalwm.com/campaigns/monthly-market-insights

Morgan, J.P. (2020, December 1). Monthly Market Review. J.P. Morgan Asset Management. https://am.jpmorgan.com/ch/en/asset-management/institutional/insights/market-insights/market-updates/monthly-market-review/

Featured Image Source: Reuters

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COVID-19: An opportunity to fix the problems in the Tourism Industry  

It was in the month of March when people were busy packing their bags and planning the itineraries to go on a holiday spree that COVID-19 hit the country. This led to the disruption of the global supply chain with all the economic activities coming to a halt. With the restrictions on the movement of people across the international borders in place, domestic tourism emerged as the ‘silver lining’ for the country. Over the years, due to the propagation of the networks, Indians have increasingly become aware of the lesser-known destinations which are the hidden treasures in our geography. The domestic tourism registered a growth rate of around 10 per cent with the number of domestic tourists increasing from 1.05 billion to 1.85 billion from 2016 to 2019. This is in due line with the ‘Dekho Apna Desh’ campaign which is started by the Ministry of Tourism to boost domestic tourism (ETTravelWorld, 2020). 

COVID-19, despite its negative effects on the tourism industry, can be turned into an opportunity to fix the problems and challenges that have pre-existed in the industry. As we adapt to the new normal, there is a need to mould India’s tourism industry into the one that is sustainable in the long run. Given the varied recovery plans adopted by the states, the revival strategies will have to be tailored to the specific context (Darbari, 2020). 

Reviving the Domestic Tourism 

The first step to the recovery is rebuilding consumer trust and confidence. As the tourists will be back to travelling with a changed mindset, they need the assurance that all the safety and health standards are in place during their stay which would, in turn, require percolation of the technological innovation in the tourism industry. The COVID-19 gave ample time to the hotels and the tourist places to access their carrying capacity and accordingly devise the strategies to ensure social distancing as people have started to travel again. The proper implementation of the carrying capacity across all the popular tourists’ destination will ensure that people follow the social distancing norms as they spread out and contribute to the livelihood of people who are directly dependent on the tourism.  This will serve the dual purpose of restoring the ecological imbalance caused by over-tourism while boosting domestic tourism in the emerging destinations of the country. 

Every Indian state has regions that are heavily dependent on tourism. These regions should be used as the basis for developing a comprehensive recovery plan for the tourism sector along with the local economy. The various stakeholders such as local government, tourism associations, transport associations, business houses, civil bodies and state government must work together to take proactive measures so that people are aware of the tourist places that exist in their own regions and the historical importance of visiting these places (Siddiqui, 2020). All these stakeholders have to complement each other’s working and focus on making the regional people as the important stakeholder of the industry. The local bodies who constitute these regional people must comply with the Tourism Department of the State and work together in devising the guidelines related to sanitization of the rooms, lodges, hotels and restaurants for sustaining the tourism industry within the vicinity of the region. This will further boost the confidence in the tourists as they will receive better quality services. 

The destinations which are emerging as the tourism hotspots in India are facing challenges in terms of disposal of the waste. The waste is either burnt or left untreated in the landfills which release toxic chemicals that are harmful to the environment.  As tourism is resuming, the destinations will see a significant increase in the number of biomedical wastes such as sanitizers, masks and gloves. This disposal will lead to contamination both among locals as well as tourists. In order to stop this contamination, the collection drives should be initiated across the tourist’s destinations of the country so that the biomedical waste is able to reach the nearest recycling centres. 

Tourism is often believed for creating the livelihoods of rural communities through sustainable development. However, it was observed that the tourism policies of India have focused more on the creation of tourists orientated destinations that cater to their demands. For example, Ladakh, known for its natural landscapes and breathtaking views, receives very less rainfall annually and every drop of water is preciously preserved for carrying out agriculture in the area. But the growing domestic tourism which is kept unchecked is leading to the scarcity of the water as the tourists are demanding for running showers during their stay. Thus, there is a growing need that paradigm of the tourism in the new normal should be focusing on creating better places to live first by preserving the traditional style of local communities while they are ready to host the tourists again. In Ladakh, this means restoring the indigenous practices of the local people so that in a world which is suffering from global warming and climate change, we are able to position Ladakh as an ecological paradise which is paving the way for resilience (Nath, 2020). 

The comprehensive network of rural tourism should also be developed wherein the local rural communities are provided with an online platform to sell their products. This will ensure that there is no disruption in the flow of income that is reaching to them in return for their products. For example, the locals who are the owners of the cafes in Himachal Pradesh are selling the ingredients of their dishes like various types of Indian spices that are making its way to the households of the country. Some of the other locals are selling the items like fridge magnets, badges and postcards. People are ordering them to witness these places though virtually. 

The international organizations like United Nations Development Program (UNDP) must work with the Ministry of Environment, Forest and Climate Change in the snow leopard landscapes to engage young people, especially women, to create tourism-led enterprises. These enterprises will not only generate employment for the locals in the region but also provide unique solutions to the challenges, especially in the mountain areas. The major challenges include inaccessibility, fragility and marginality. The creation of the enterprises will overcome these challenges by enhancing connectivity to areas with difficult accessibility as the niche tourism destinations will be emerging. The economic incentives will be provided for the preservation of natural and cultural heritage along with the alternatives to work that typically involves drudgery, such as farming. 

As the tourist destinations are reopening their doors for tourism, the potential travelers must come forward to launch an awareness campaign where they will be making people aware on the measures taken by the local people for coronavirus safety based on their interaction with them along with the significance of supporting the livelihoods of the locals while ensuring that the ecological balance of the environment is not disturbed. When people will hear the experiences of travelers and watch their videos, they will realize the importance of the changing paradigm of tourism towards the slow travel destinations. These destinations will see more people spending time in a single spot as they adapt to the new normal and continue to work from home. This, in turn, will give the incentives to the owners of the guest houses, hostels, hotels and homestays to convert their places into workstations that will provide all the facilities including meals, Wi-Fi connectivity, accommodation while enabling people to continue their work from home. These workspaces are located in some of the stunning new locations in India. People can expand their worldview by traveling to these places as they are the emerging new homes for the digital nomads. 

Conclusion

The tourism industry of the country holds an immense potential that needs to be gradually unleashed to create COVID-19 ready destination that is sustainable and resilient in the long run. The destinations will now thrive for achieving the zero-carbon footprint while the enduing proper level of hygiene. The tour operators will be more responsible in sharing the experiences of the local communities to the tourists. Travelers will now have to be more careful while planning their itineraries that will incorporate the ways to deal with the uncertainties as they will step their foot out to embark on a new journey. The traditional philosophies of ‘Atithi Devo Bhava’ that we have inherited decades ago will invite our citizens and motivate them to explore our own country. 

Bibliography

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