With new confirmed Covid-19 cases spreading to states outside Maharashtra, the risk of a second wave in India has risen materially, Nomura said in a research note.
"We believe this can lead to near-term growth concerns and delay market expectations on the timing of policy normalization," it added.
Over the medium term, progress on vaccinations, stronger global growth and lagged effects of easier financial conditions are likely to act as growth tailwind, it said.
Nomura said that India is potentially entering its second wave of Covid-19.
While the initial pick-up was mainly led by Maharashtra, cases have now risen in other states as well, such as Punjab, Gujarat, Madhya Pradesh, Tamil Nadu, Chhattisgarh, Delhi, West Bengal, Haryana, Karnataka, Uttar Pradesh among others, in varying paces, Nomura said.
India is likely to witness higher infection cases in coming months, the research said.
The trend still appears higher. On a 7-day moving average basis, daily cases are rising at 34 per cent week-on-week (as of 16 March), with a faster pace in Maharashtra (46 per cent) and slower but rising in all other states (18 per cent).
The upcoming elections in five states (Assam, West Bengal, Tamil Nadu, Kerala and Puducherry) scheduled between 27 March and 29 April may also be a trigger.
Hence, current trends suggest risk of a second wave in the coming months.
On the vaccination front, India has so far inoculated 2.3 per cent of its population, presently targeting senior citizens and people aged above 45 with co-morbidities, after frontline workers.
The 7-day average inoculation rate is around 1.4 million per day and around 0.6 per cent of population is being inoculated every week.
Nomura said at this rate, India will inoculate close to 30 per cent of the population by end-2021.
"In our baseline, we assume that India will vaccinate 30 per cent of the population by end-2021 and attain its vaccine pivot point sometime in Q3. Hence, while rising virus cases are a risk to near-term activity, this should become less of a threat over the coming quarters," Nomura said.
(This story was published from a syndicated feed. Only the headline and picture has been edited by FIT).
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