COVID 19

The Indian stock market witnessed a sharp recovery in the post-COVID-19 period owing to the sweeping investor enthusiasm. The event studies show that the 2020 lockdown and announcement of the first fiscal package had a significant impact on the stock returns. The impact of other events like the first COVID-19 case, second fiscal package, beginning of the vaccination drive, and the second wave was insignificant. Our estimates also show a significant impact of investor sentiment on stock returns, except during periods of extreme volatility. Further, the stock returns are positively related to oil price and negatively related to the exchange rate. 

The recent growth recovery has been uneven as is visible across different sectors of the economy and different segments of the population. This unevenness is hurting the consumption of lower-income households and private investments, which are vital for sustained or durable growth.

The flow of bank credit is crucial to revive the economy. The fear of potential asset quality woes has reduced the risk appetite of banks. Going beyond the restructuring support, banks need policy support by relaxations in prudential norms in the near term to be normalised in the next four–fi ve years. Coping with the adversities of the pandemic needs a collaborative policy support of all stakeholders to step up the lending appetite.