Why stock investors should be wary now

The Covid crisis has wreaked havoc on the economy. But despite the weak indicators, the stock market has bounced back from the record lows of March. While markets discount future and not current values, investors need to be careful. ET Wealth sifts through the good and bad news.The first quarter of 2020-21 will see the GDP contracting massively76907260Projected by CrisilNet profits of BSE 500 and Sensex companies have tanked76907308With the economy expected to contract, expect companies to report bigger net profit falls in the first quarter of 2020-21.Manufacturing sector has bounced back, but service sector lags76907312Manufacturing sector has almost reached the 50 mark (cut off between growth & contraction); but the services sector remains far behind.RBI has had to cut policy rates drastically to shore up economy76907316Commercial credit growth was falling even before Covid-induced crisis76907318After a jump in April, triggered by RBI measures, commercial credit growth has started weakening once again.Among positives, the trade deficit has lessened during the crisis76907322After a small blip, forex reserves have also started inching up76907324The rupee is slowly gaining against the US dollar...76907327 Stable currency, supported by strong forex reserves and falling trade deficit, has ensured continued FPI inflows....but Sensex remains below peak and valuations are high76907336% fall from peak to now: -12.58% increase in valuation during same time: 4.01Despite turmoil in mid & small-cap companies, valuations in these segments have also gone up76907338% fall from peak to now: -14.89% increase in valuation during same time: 2.5776907341% fall from peak to now: -13.54% increase in valuation during same time: 3.01Compiled by ETIG

from Economic Times https://ift.tt/2AWklTw