Second wave not as bad as first, but companies cautious: Morgan Stanley

Corporate sentiment is cautiously optimistic for the period going ahead with the caveat of a potential third wave of the Covid-19 pandemic, said Morgan Stanley.

The brokerage in a note on Monday said that the impact of the second wave of the Covid-19 pandemic on business has been less than the first wave that was seen in 2020. Demand has remained relatively intact in some sectors, said the international brokerage firm.

The second wave of Covid-19 in India peaked in May, with cases coming down from 4 lakh new cases per day to consistently under 1 lakh new cases per day now, and dropping further.

The brokerage pointed out that end demand deteriorated significantly in May as the Covid-19 wave began to peak although early signs indicate a recovery in June as lockdowns are being lifted.

Morgan Stanley said nascent capital spending plans are gaining a foothold. The brokerage also pointed out that pricing power is missing in the downstream sector in relation to escalation in costs by rising commodity prices. On the financial sector, Morgan Stanley pointed out that banks are indicating a drop in collection efficiencies especially in May across retain and rural loans while corporate books are doing much better than they did in the first wave.