An end to the stock market rally?

 The Covid-19 crisis has rattled economies all over the world and the governments have been taking
unconventional measures to tackle this unprecedented crisis.

 Even as the Indian economy suffered the markets have been going higher and seem to be detached
from the economic reality. This rally has primarily come on the back of fiscal stimulus package
which was announced by the Government in May 2020.

 From July 2020 onwards several major companies have declared the Quarter 1 results which will
provide an actual measure of the impact of the virus and the lockdowns on various sectors.

 The April 2020 to June 2020 quarterly results are significant because it is the first full quarter that
captures the impact of business uncertainty from the pandemic.

 The overall results show that the revenue growth has been badly hit and it will take a longer time to
return to normalcy (pre-Covid levels).

 The defensive sectors such as the Pharmaceuticals sector and the Information Technology sectors
have stood out with their results. Consumer-Durables sector has also shown mixed results.

 The margins for most of the pharma companies have improved on account of lower selling &
distribution and branding expenses. Dr. Reddy’s Laboratories Ltd. reported a 15% rise in revenues to
Rs. 4417.5 crores as against Rs. 3843.5 crores in Q1 of the previous fiscal.

 In the Information technology sector, Tech Mahindra reported a rise in net profit by 1.4% at Rs.972
crore. Infosys Q1 profit saw a jump of 11.5% to Rs.4,233 crore as it won large deals amounting to
$1.74 billon.

 However, these green shoots are few and far between. The automobile sector which was already
under pressure from the past year was hit hard. High fixed costs coupled with diminishing demand
played a dampener for this sector.

 Maruti Suzuki India Ltd, Tata Motors and TVS suffered operating losses due to decline in sales
volumes (with high fixed costs) which dragged down profits.

 The Airlines are in a turbulent spot as they have higher fixed operations costs and lower operating
margins. With restrictions on the movement of people it is yet to be seen how the industry recovers
from this scenario. Spicejet reported a loss of Rs.807 crores in the March Quarter(Q4) on account of
disruptions. Indigo reported a net loss of Rs. 2844 crores as its revenues plunged by 92%.

Reference:https://www.livemint.com/market/mark-to-market/stock-markets-are-low-on-steam-as-
results-show-covid-19-scars-11596357442485.html