It seems like the market is reacting to medical news as a trigger point and pricing it in.
Absolutely. We all know that in the next one or two months, we are going to be back. But we will realise the extent of the damage caused as time goes by. Right now, there is already a talk that 30 bps on GDP has been taken off. My guess is the market is trying to say that we will see downgrades in earnings from the previous expectations.
The quarter one numbers, which would have looked just out of the world considering the lockdown last year, are going to be diluted and more so because this time we are seeing a spread across the length and breadth of the country unlike last year when we saw a majority of the cases being in metros. The earnings downgrade is one part of the story. The market is trying to digest that. The market had run up based on a very strong recovery and earnings valuations were rich. As that recovery gets diluted a little bit, the market is settling down to trade in a range for some time. Liquidity flows have started moving the other way but my own guess is that if we do see some sort of correction, the flows could come back over the next many weeks. Otherwise, the range-bound market will probably continue for the next few weeks.