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 firstname.lastname@example.org
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.
This blog article has not been reviewed by the MAS. It is prepared solely for information purposes and does not constitute an offer or solicitation for the purchase or sale of units in the funds. This does not constitute any form of investment advice and Kristal Advisors (SG) Pte Ltd does not take into account your personal investment objectives, specific investment goals, specific needs, or financial situation and makes no representation and assumes no liability to the accuracy or completeness of the information provided here. The information and publications are not intended to be and do not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort offered or endorsed by Kristal Advisors (SG) Pte Ltd.