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Stimulus driving global markets, analyst Ajay Bagga says; second coronavirus wave, US polls adding to uncertainty

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Global stock markets are currently being impacted from four major events, analyst Ajay Bagga told Zee Business Managing Editor Anil Singhvi in an exclusive chat. Global markets have seen a rally between April-June on the back of stimulus packages by governments, he said.

Bagga referred to these four factors as ”waves”. The first wave was US Fed wave, he said and added that the Central Bank has injected liquidity worth USD 10 trillion into the markets.

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 Another factor is the coronavirus wave. There are speculations over the emergence of a second wave in the US, he said. He described how the citizens were being careless by not wearing masks. Wearing masks could potentially arrest a 5 per cent GDP fall for the country, he said, citing a report. 
The likelihood of its emergence is making the markets nervous.
The economies of US, Japan and Europe have indicated a drop of 45 per cent for the April-June quarter. 
 
The third factor is the US election wave. Presidential Candidate Joe Biden is currently enjoying a lead over Donald Trump he said. However, Biden’s announcement of higher corporate tax (if he comes to power) may have an adverse impact on the markets, Bagga added.

The last factor is the bipolar wave as the word is fast moving towards G2 – the US versus China wave. Even India is paying the price of China’s muscle flexing.

In India, we have stopped imports of Chinese raw material and it is a cause of worry, since the supply chain is getting affected, he said. Over 25 per cent of the auto input is coming from China. Similarly, a big part of API import for manufacturing of drugs is being met from China. It is impossible to create a supply chain on an overnight basis, he lamented.

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He further said that June 30 was a good marker of what has happened to the markets in the first half of the year. What is happening now is “reallocation” of assets, the analyst said adding that the money from the stocks have moved to the bond market. There has been a reallocation of USD 70 billion in this week which is holding back the markets, he said.



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