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Why markets are not enthused by vaccination for all from May 1

Amitabh Tiwari
·5-min read
A woman above the age of 45 being vaccinated against COVID-19 at a district hospital in Noida, India. Photo: Sunil Ghosh/Hindustan Times via Getty Images
A woman above the age of 45 being vaccinated against COVID-19 at a district hospital in Noida, India. Photo: Sunil Ghosh/Hindustan Times via Getty Images

The Government of India on April 19 (Monday) announced that every person above the age of 18 years will be eligible for vaccination against Covid-19 from May 1.

While this was expected to cheer the markets, the indexes, both Nifty and Sensex fell by around 0.5% on April 20th (Tuesday).

Both the benchmarks had ended sharply lower (-2%) on the previous day, dragged by heavy selling across the board due to rising coronavirus cases.

While this move will boost the immunity of younger people who are more productive in the ecosystem it has come a bit late.

The situation on the rising Covid cases has become very concerning, we touched almost 3 lakh new cases yesterday and crossed 2,000 deaths.

The new daily cases are now 3 times the peak in wave 1.o, daily deaths are almost twice the peak. That’s why the news may not be a game-changer for the markets.

The issue with the new policy is it doesn’t roll out an exact plan for vaccination for all. Neither has it put a target date.

This effectively means people below 45 will have to pay for the vaccines unless their respective state governments make it free of cost. Uttar Pradesh, Madhya Pradesh, Bengal and Assam have already announced free vaccination for all — apart from Bihar and Tamil Nadu.

The financial position of states has been affected adversely by the pandemic and how will they fund the purchases is a big question.

Many states may approach the centre for help. Serum has announced that it will sell vaccines at Rs 400 to state governments, more than double the rate applied to the central government.

As of April 20, around 13 crore people have received either the first jab or both the jabs. With the rate of around 30 lakh vaccinations per day we would reach 16 crore by the month end. Out of this maximum 2 crore are expected to receive both their does by May 1st.

21% of the population is above 45 years of age, meaning around 30 crore requiring 60 crore doses. Only about 25% of their requirement will be covered by May 1.

India has approximately 60% of its population above the age of 18 years, that is 86 crore. This almost tallies with the number of voters registered for 2019 general elections at 88 crore.

So we need to vaccinate 70 crore additional people (86 - 16), that is we require 140 crore doses. For the 14 crore people who have received just one dose, another 14 crore jabs are required of the second dose. In total, 154 crore doses are required.

The Centre has approved a payment of about Rs 4,500 crore as advance to vaccine makers against future supplies. They will supply 29 crore doses to the government by July at a pre-agreed rate of Rs 150 per dose, around 10 crore doses per month from May-July.

By the year end 2021, at this rate they could supply another 50 crore doses. That makes it 79 crore doses against a demand of 154 crore.

Russian vaccine, Sputnik V, is also expected to produce 5 crore doses per month from July, adding another 30 crore to domestic supply.

This means India needs to import 45 (154-29-50-30) crore vaccines over the next 8 months, 5-6 crore per month to achieve full vaccination by this year. The months of May and June could require higher imports as Sputnik local production would start only by July.

The task is mammoth. Shortages and black marketing of vaccines cannot be ruled out.

Markets have been down by close to 3% in the last 2 sessions. Nifty is down 8% from peak levels attained after the Budget.

While we may not see a 30% decline like in 2020 (Wave 1.0) because of availability of vaccines and medicines, volatility will be the order of the day.

The market movements would be entirely news based with respect to the number of cases, the progress of vaccination, lockdowns imposed and its impact, etcetera.

We may see another 7%-8% fall from here as per experts. The upside is capped at the 52 week high already achieved in my opinion.

We could test these levels by Dussehra / Diwali when a significant portion of the population would be vaccinated (hopefully).

Other factors like inflation, bond yields, performance of the US markets, foregin institutional investor (FII) flows will also impact the markets.

Foregin portfolio investors (FPIs) have pulled out money from the Indian markets in March and April and this is also a negative for the short to medium term.

The Bank Nifty index has been under severe pressure. The BFSI sector is a barometer of the economy. The lockdowns/mini lockdowns/curfews/janta curfews, whatever you call it, will impact growth and consequently the credit off take.

The banks could also turn cautious and there could also be credit quality concerns. Will there be a repeat of the moratorium is a question which looms large over the banking sector. Migrants have started moving back to their home states.

While the prime minister in his speech categorically said that lockdown should be the last resort, we already have it in place in Delhi, Mumbai, Jharkhand, many cities of Madhya Pradesh, Maharashtra and Uttar Pradesh. These curbs could shave off a portion of the GDP.

Chief Economic Adviser K V Subramanian has said the peak for the second wave of the pandemic might be reached by the middle of the next month — and that is still more than three weeks away.

At the current rate of growth in new cases, this could mean 5 lakh cases and around 3,000 deaths per day, crippling our health infrastructure further.

The decentralised process of tackling COVID at this time creates a lot of uncertainty because different states have different rules and this is a big negative for the market. Now they have to manage the vaccination as well.

Markets don’t like uncertainty and that’s why the announcement of vaccination for all may not cheer them.


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