Published On: Thursday, May 6, 2021 | By: Team KnowMyStock
Besides, investors know from the first wave in 2020 that firms will protect earnings by idling operations and firing workers if required. Those who keep their jobs may cut back on discretionary spending. Their excess savings will gravitate to stocks even as pain accumulates in smaller firms that don’t trade on public markets.
Another reason for optimism is the expected response of authorities. That’s based, once again, on last year’s experience. If more infectious variants of the disease make a national lockdown inevitable, the finance ministry and the central bank might come together to offer moratoriums, state-guaranteed loans and other liquidity-enhancing measures to make up for disappearing cash flows. Sure enough, the Reserve Bank of India Wednesday announced repayment relief, as well as 500 billion rupees ($6.8 billion) in three-year funding at its policy rate of 4% for banks to extend to vaccine makers, hospitals and oxygen suppliers.
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