As we move closer to the day COVID-19 vaccines will be allowed for mass usage, the optimism in the air is progressively increasing.
Stock Markets across the world are scaling new peaks with many key variables indicating sustained rebound in economic activities. However one needs to view the current market sentiment with measured perspective and a practical approach. While the general optimism around launch of vaccines is running high, the on-the-ground situation will be challenging for implementation of mass immunization programs especially in a developing country like India of our size and population.
Since Serum Institute of India, one of the largest producers of vaccines, is expected to produce one billion doses of the Novavax vaccine by 2021, India will have a significant advantage in securing supplies of vaccines. But taking this vaccine to the public at large can be a logistical nightmare.
According to the comprehensive multi-year plan (2018-2022) for Universal Immunization Program issued by the Ministry of Health & Family Welfare, only 62% of the population was covered in the National Family Health Survey (NFHS) in 2015-2016 compared to 44% in NFHS 2005-2006. Even though these numbers are definitely improving, there remain gaps in overall coverage. On an average four out of ten individuals are still out of the immunization coverage in India. Sadly, due to legacy issues of past, the vaccination priorities also changes depending on factors such as caste, education and economic status of the individual.
Another crucial aspect is the state of readiness of the infrastructure and facilities for even and extensive distribution of the COVID-19 vaccine distribution in the near future. The government targets to distribute 600 million doses for priority groups within a phase ending August 2021. The installed capacity for such distribution—putting together government and private agencies—stands at 360 million doses. To overcome these challenges there is need of robust country wide cold chain infrastructure to transport and distribute the vaccine. Private cold chain infrastructure can support only 200 million doses. Hence for distribution and implementation of vaccination, we will need to quickly close the gap between the targeted level of activity and the existing infrastructure to support the Government’s plan.
The Government’s expenditure on cold chain facilities and maintenance has been minimal, as onset of the pandemic of this scale was beyond everyone’s imagination. The situation is the same even in most advanced countries across the world. Resultantly, it lagged the expenditure budgeted/incurred on vaccines, injection supplies, cold chain equipment and also transport.. The performance of 230 electronic vaccine distribution cold chain points in twelve states surveyed in 2017-2018 on various parameters was not adequate. Only 30% had a backup cold chain handler in case of adversity and 23% of the facilities reported wastage of vaccines.
Given the key impediments of infrastructure & distribution logistics extrapolated to the massive coverage of mass immunization, there is always a possibility of built up of stress and temporary dislocation during the distribution phase. The government has been rightfully trying to rope in private sector participation to meet up to this challenges. The efficacy of the model will determine how quickly and efficiently the roll out of vaccines is likely to be across India’s vast population. This will also have a direct bearing on the pace of normalization of life and all round activities. From a stock market perspective, there will be few sectors like Pharma, Logistics, and Infrastructure which may benefit, however, investors should do their research and take professional advice to make a sound investment decision.
Businesses such as travel, tourism, entertainment, hospitality and retail which are banking on the arrival of vaccines for getting back to growth and generating revenues, needs to be carefully studied. The quality companies which are market leaders in these segments may be quicker to deliver a strong upside but the rest may take a longer time to limp back. Whilst Investors have every reason to be cautiously optimistic at this juncture, they should avoid the pitfall of investing into low quality companies and fall prey to the ‘fear of missing out’. Instead, they should use the expected volatility in Equities to their advantage, stick to universe of high quality stocks, continually review their portfolio based on their risk profile and benefit by take prudent investment decisions.
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