Second Covid-19 Wave Likely To Hit Consumer Sentiment, Economic Recovery: Citi Research
A discarded protective mask on the ground. (Photographer: Angus Mordant/Bloomberg)

Second Covid-19 Wave Likely To Hit Consumer Sentiment, Economic Recovery: Citi Research

The second Covid-19 wave is likely to dampen consumer sentiment and hit economic recovery, Citi Research said.

“While the second wave hasn’t yet led to severe activity lockdowns of last year, dampening of consumer sentiments looks inevitable and sharp restrictions are possible,” it said in a report. India’s vaccination pace has accelerated, but at around 3 million doses a day it’s away from reaching herd immunity, the research firm said.

According to Citi, the economic activity in India improved sequentially in the quarter ended March, although the pace of improvement moderated. A rise in commodity prices and a return of discretionary spending likely imply some mean reversion on margins, it said.

“Excluding the commodities’ space, we expect 7%/4% quarter-on-quarter growth in top-line/profit for Nifty,” Citi said. With a new set of restrictions, however, Citi/consensus bottom-up forecasts of more than a 33% rise over the year-earlier may not be pricing in any major impact.

Among the sectors, Citi expects margin compression to impact the quarter-on-quarter trends for the discretionary, IT and healthcare sectors.

Also, valuations, the research firm said, remain expensive on an absolute basis. Its strategists remain cautious about global variables such as rising yields, the U.S. dollar, and the trajectory of the second wave of Covid-19.

Citi’s key overweight sectors are financials, industrials, real estate and pharma, while it’s underweight on consumer and auto.

Watch the full discussion with Citi Research here:

Citi’s Sectoral Outlook


  • Sustainability of demand is key question, given recent surge in Covid cases.
  • Citi expects to see impact of commodity cost pressures and the resultant price hikes.
  • Impact of semiconductor constraints to be looked for in Q4 results.


  • Expects cement sales volumes to be up nearly 18% over a year earlier.
  • Expects volume growth to be stronger at Shree, UltraTech, Dalmia, Ambuja.


  • The recovery story across the consumer space continues as strong headline growth is likely in the quarter.
  • Margin trends are likely to be mixed across companies.


  • RIL’s O2C Ebitda to continues to see meaningful sequential recovery on refining and stronger petchem spreads. Jio headine ARPUs and revenue to decline sequentially with IUC ceasing from Jan. 21.
  • ONGC’s Ebitda should improve meaningfully on higher crude realisations, though production trends are likely to stay muted.

Information Technology

  • Expects 2-4% growth in the quarter over the year earlier on the back of large deal ramp-ups, digital initiatives and mergers and acquisitions.
  • Q4 margin will also likely be a function of wage hikes.
  • Keenly awaiting FY22 revenue and margin guidance for HCL Technologies and Infosys.


  • Expects Sun Pharma, Apollo Healthcare and Dr. Lal PathLabs to report strong numbers.
  • For Cipla, strong U.S. numbers can offset India weakness to some extent.
  • Cadilla, Lupin, Torrent are expected to have a subdued quarter.


  • Bharti Airtel’s mobile Ebitda to gain from discontinuation of IUC, while Vodafone Idea’s to be negatively impacted.
  • Like-for-like mobile revenue growth for Bharti Airtel to continue to outpace Vodafone Idea on stronger subscriber additions.

Citi Research Disclosures

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