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Opinions5 Mins Read

CRISIL downgrades India’s FY21 growth forecast at 1.8% from 3.5%

On April 27th, the domestic rating agency CRISIL nearly halved India’s economic growth rate to 1.8 percent, projecting a total loss of Rs 10 lakh crore. The initial gross domestic product (GDP) growth estimate of 6 percent for 2020-21 (FY21) was revised to 3.5 percent in late March.

Another rating agency India Ratings and Research (Ind-Ra) has also revised its FY2021 economic growth forecast for the country down to 1.9 percent. This will seemingly be the lowest in the last 29 years.

The second revision came after the lockdown to curb the spread of the Covid-19 pandemic was extended till May 3rd. Some economists across the country have scrutinized the step taken by the government on the extension, and consequently, are expecting a contraction in the economy in the fiscal year 2021.

The overhanging threat of the coronavirus pandemic has policymakers in jitters, making them wonder if they should, at all, extend the lockdown beyond May 3rd, as this could lead to graver implications on our country’s economy, more so a massive loss of GDP.

So what does this mean for you?

  • What started as a crisis of confidence, has now become a real financial crisis. This crisis started outside the financial markets. The markets crashed as no one was sure what will be the impact of the virus. But after 40 days in lockdown, the impact is getting clearer and is as bad as everyone expected.
  • Markets will take longer to return to pre-COVID levels. The expectation that markets will bounce back as fast they crashed, has weakened. Since we still don’t have a vaccine for COVID-19, it means that there is a real chance of the second wave of infections. The consumer behaviors are expected to fundamentally shift to a new normal. It will take time for businesses to adapt to this change.
  • Markets expected this reality: The CRISIL news didn’t really surprise anyone. The stock market didn’t react much after this news came out. The impact on the economy is now apparent to most investors & corporates.
  • Stay long, stay invested. Most of the times it makes sense to stay invested in the markets for the long term as timing the exit and then re-entry is a futile exercise. But the recent shake-up in the corporate debt market and its potential to significantly dent overall portfolio returns is a real concern. Kristal has helped many clients exit from corp bonds to govt backed securities, namely Bharat Bond, Gilt Funds. Feel free to connect with your RM if you are in a similar situation or share your CAMs/CAS report at myscan@kistal.ai

Self-reliance will be name of the game, at an individual, country, and company level. People will seek financial fitness to safeguard themselves against such events in the future.

Disclaimer

The materials and data contained herein are for information only and shall in no event be construed as an offer to purchase or sell or the solicitation of an offer to purchase or sell any securities in any jurisdiction. Kristal Advisors does not make any representation, undertaking, warranty or guarantee as to the update, completeness, correctness, reliability or accuracy of the materials and data herein. All opinions, forecasts or estimation expressed herein are subject to change without prior notice. Kristal Advisors and its affiliates accept no liability or responsibility whatsoever for any direct or consequential loss and/or damages arising out of or in relation to any use of opinions, forecasts, materials and data contained herein or otherwise arising in connection therewith.

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