Why Reliance and HDFC are having a good time during Coronavirus lockdown?
The world is gripped by the Coronavirus (COVID-19) panic, yet the capitalists are jubilant in this so-called season of “social distancing”, even though the number of deaths steeply rise globally. Capitalism thrives on profit and an epidemic has provided some reasons for the big corporations to profiteer, if not through the straight route then through the crescent. The stock markets around the world, after stumbling and suffering worst shock in more than a decade, started not only recovering but are galloping with a rage. Now the question is, when half of the global big economies are under lockdown, why the capitalists are jubilant?
On March 25th 2020, the Bombay Stock Exchange (BSE) experienced the bull’s rage as the Sensex surged by 1,862 points, ironically on the very first day of a 21-day-long national lockdown announced by Prime Minister Narendra Modi. The investors and speculators managed to earn Rs 4.70 trillion in a single day as the total market capitalisation of the BSE-listed firms jumped to nearly Rs 108.40 trillion. Probably it’s a coincidence that Modi’s biggest patron Mukesh Ambani’s Reliance Industry Limited (RIL) was the driving force of the market’s bull rage along with the HDFC Bank. With this 1,862 points, the 30-share pack Sensex was 6.98% up at 28,536. The NSE Nifty rose by 497 points to 8,298.
Apparently, the RIL shares rose by 14% in the NSE after the Financial Times reported on March 24th that Facebook is going to buy 10% stakes in Ambani’s Reliance JIO, Ambani’s mobile telecommunication and broadband arm. The Reliance JIO has played an obnoxious role in wiping out competition from the Indian telecom sector. With the support of Modi, Reliance JIO has established a virtual monopoly in the Indian telecom market. Facebook has taken a decisive leap in buying stakes of Reliance JIO after Ambani assured US President Donald Trump that no Chinese components are used in its 5G expansion drive during the latter’s India tour.
The HDFC Bank also experienced a 12.41% surge in its stock price at Rs 863 on NSE. What made the stocks of HDFC Bank surge when the overall investor sentiments regarding the Indian banking sector has been negative? HDFC Bank is making a kill in the market along with the RIL because of its vigorous attempts to buy stakes of public sector banks (PSBs), which are packaged for privatisation by Finance Minister Nirmala Sitharaman through a merging drive. Morgan Stanley has positively reviewed the HDFC Bank and estimated a 20% CAGR for the next few quarters. Morgan Stanley also predicted a strong financial record for the bank to sustain the COVID-19 outbreak and lockdown. This confidence is rooted in the fact that the HDFC Bank will be gaining a lot from Sitharaman’s PSB privatisation spree without their bad debt burden.
While the decision of a 21-day-long nationwide lockdown should’ve worried industries and investors about the uncertainties and the loss of opportunities, the resurgence of hope, especially in RIL and HDFC stems from a confidence of the investors on Modi’s plan of an imminent corporate bailout. Though Sitharaman is the head of the economic task force for Coronavirus relief, it’s Modi and his closest aide Amit Shah, who are calling the shots. A bespoke corporate bailout plan is in the making.
There is an unconfirmed report in the press that the Modi regime may announce a relief package after discussing with the Reserve Bank of India. The government has a revenue deficit and is shoring up funds by utilising the fall in oil prices. The package can be of Rs 1.5 trillion and may go up to Rs 2.7 trillion. This speculation by the market of a large amount of money coming their way is backed by the case of the US, where the Trump regime is discussing a US$ 2 trillion Coronavirus aid package. From the Modi regime’s track record, it’s clear that the relief package’s aim will be to primarily help the big corporate houses — foreign and domestic — under the guise of helping the poor. This speculation will keep the market hyper-active for the next few days, as the big corporations and capitalism’s advocates will blame COVID-19 for the inherent shortcomings of the capitalist system. However, if the situation of the pandemic worsens, this bubble of joy will burst very soon. It will also come out that monopoly-finance capital has been a bigger threat than the COVID-19.
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