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Investors vigilant for the 2nd COVID wave

A survey report by Bank of America Securities revealed that investors are under alert even though the deployment of cash in the market has escalated. The 2nd wave of COVID-19 will make the investing environment risky for investors.

The Indian stock market dropped sharply this morning due to global speculation over the 2nd wave of the COVID virus. Due to this, many foreign investors sold their holdings. The Sensex ended down 660.6 points close at 36,033 and the Nifty fell 195.35 points closing at 10,607. The volatility index spiked by 5.7% closing at 26.7. Although, the Sensex and Nifty have gained 41% since 24th March.

In the month of June, the cash levels inside the market have risen to 4.9% while it remained at 4.7% in April and May. The economic reality may worsen much more than what the market is suggesting. Retail inflation is also elevated as per the latest CPI reportings even though the economic activity has declined.

The survey was conducted from 2nd July to 9th July where 210 participants were involved having assets worth $6-7 billion. Around 52% of the investors said Coronavirus second wave is the biggest tail risk which will be followed by the elections in the US. Around 74% said about the long US stocks which are the most crowded currently.

Bank of America further said that only 14% of the fund managers surveyed believed the post COVID recovery to be V-shaped. 24% of investors think that the economy is in the early cycle phase. Around 62% of the investors think the economy is draining in recession.

The fund managers have estimated the global growth percentage to get escalated by 11% making it to a net 72% which is the highest value since January 2014. Around 36% foresee the global economy to get fortified.

Along with estimations of a stronger economic turnover, chances of inflation naturally crop up. The survey also mentioned that 37% of the fund managers foresee higher global price inflation in the upcoming year.

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