India's stock market shockingly resilient amid Covid-19 devastation

 Fear of the virus is pervasive. Even the rich and the powerful are finding it hard to arrange a hospital bed or track down an oxygen cylinder

Why isn’t India’s stock market falling more?

The question is a fair one, considering the risky asset class in a country struggling with its most horrific calamity since its violent partition and independence nearly 75 years ago. New daily Covid-19 infections have remained above 300,000 for two weeks now, the worst caseload the world has seen. The death rate is 3,700-plus — probably much higher if you discount the underreported official statistics.

Fear of the virus is pervasive. Even the rich and the powerful are finding it hard to arrange a hospital bed or track down an oxygen cylinder.

But in all this, the benchmark Nifty 50 Index is down ever so slightly, clocking a less than 5% decline since mid-February.

At 32 times earnings, almost double the valuations in China, the Indian market is super-expensive. The logic for those prices runs like this: Unlike last year, there’s no national lockdown. And there may not be one if the peak of the surge is just a week or two away, as some epidemiological models indicate.

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.