Bloomberg (Bloomberg) -- As Covid-19 continues to ravage India, financial professionals across the country are grappling with an increasingly surreal disconnect between the epidemic’s devastation and a record-breaking boom in local markets.The world’s worst coronavirus outbreak has battered India’s economy and lifted its official Covid death toll to more than 318,000 -- a figure that experts say is likely a significant undercount.And yet investors continue to snap up Indian assets, fueling a 65% rally in the Nifty 50 Index over the past 12 months that has outpaced every other major equity benchmark worldwide. The measure’s surge to a record on Thursday has coincided with the fastest rate of Indian initial public offerings since 2017 and an unprecedented flood of foreign-currency bond issuance by local companies.While the combination of pandemic pain and financial-market euphoria is hardly unique to India, nowhere else has the contrast been so extreme.Bulls say the gains are justified by central bank stimulus at home and abroad, along with signs that the current virus wave may be peaking and optimism that India’s long-term economic growth potential will emerge from the crisis intact. Skeptics point to overly rosy earnings estimates and the risk of further outbreaks in a country where vaccination rates remain stubbornly low. India’s central bank weighed in on Thursday, warning in its annual report that the surge in stocks “poses the risk of a bubble.”What’s clear is that financiers on all sides of the debate are stretched thin. Booming markets have left the industry swamped with work at a time when many employees have been sickened by the virus. Some have had to franticly search for medical help after hospitals were overrun and oxygen supplies fell short. Almost everyone has at least one friend or family member who has died.“You feel numb, as if we are in the midst of a war and are losing people one after the other,” said Vikaas Sachdeva, the Mumbai-based chief executive officer of Emkay Investment Managers Ltd., who lost four members of his extended family to the virus.Sachdeva expects Indian markets to be volatile in the near term as investors weigh uncertainties around the vaccination program and the possibility of a third wave. His firm has been buying shares of Indian companies with “high quality” management, betting that the country’s long-term investment case remains intact.India’s $2.9 trillion stock market has been buoyed in part by resilient demand from international investors, who’ve purchased a net $34.9 billion of shares over the past 12 months. While they pared holdings in April and early May, buying by local mutual funds and insurance companies has helped fill the gap. A steady decline in reported Covid cases since mid-May -- along with Prime Minister Narendra Modi’s decision to avoid another nationwide lockdown -- have added weight to calls for further market gains.Indian companies have taken advantage of the exuberance in markets to raise about $4 billion via public offerings since the start of the year, on track for the busiest first-half since 2017, according to data compiled by Bloomberg.“The IPO boom is being driven by Indian technology companies coming of age with businesses doing better than expected,” said Sunil Khaitan, India head of global capital markets at Bank of America. “Tech companies are advancing their fundraising plans and financial sponsors also believe this is a good time to bring in public market investors in these companies amidst ample global liquidity.”Khaitan expects India IPO volumes to more than double in 2021 from the previous year.The surge in activity has left some financial firms scrambling to complete deals after employees were sidelined by the virus. The head of equity capital markets at a Mumbai-based investment bank, who asked not be named discussing private matters, said that at one point 25% of his 40-person group was infected.About 200,000 Indian bank employees have been infected and 1,200 have died since the pandemic began, the industry’s largest union estimated this month.Among the biggest risks for India market optimists is another virus wave. Just 3.2% of the population has been fully vaccinated, versus 39.7% in the U.S. and 10.1% in Brazil, according to Bloomberg’s Covid-19 Tracker.The Indian economy’s recovery from last year’s recession is already showing signs of sputtering. The country lost 10 million jobs in May, according to private research firm Centre for Monitoring Indian Economy Pvt. Among the 40 companies in the Nifty 50 index that have posted quarterly results so far, more than half have missed analysts’ estimates. While India’s central bank predicts the economy will grow at a 10.5% pace this fiscal year, other forecasters including S&P Global Ratings and Moody’s Investors Service have recently cut their estimates to below 10%.“If this Covid situation keeps affecting newer areas and new strains keep emerging, then there is a problem for the near term,” said Deepak Jasani, head of retail research at HDFC Securities Ltd.Sachdeva, the Emkay CEO, said Covid will impact him and his colleagues in ways that go far beyond their work in finance. He’s reading “The Difficulty of Being Good” by Gurcharan Das, who writes about his search for a meaningful life.“The pandemic has brought about a change in many of us and we are more aware of things that matter most in life,” Sachdeva said. “We would though have to see if this is indeed a permanent change when life comes back normal.”(Updates death toll in second paragraph)More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.<doc-sep>Lagging traffic continues to plague Starbucks, which reported very modest same-store sales growth for its third fiscal quarter. Despite efforts to boost afternoon visits, sales in that daypart have particularly dragged as Frappuccino sales continue to slip. Starbucks’ comparable-store sales in the U.S. grew 1% for the quarter ended July 1, while revenues rose 6%, the company announced this week. Traffic at the chain fell 2%, and full-year sales growth is expected to fall “just below” the previous goal of 3% to 5%, executives said. Closing stores for half a day in May for companywide anti-bias training lowered same-store sales by less than half a percent, they said. Starbucks CEO Kevin Johnson admitted during the earnings call that the company had fallen short of expectations for the third quarter. To grow sales and improve traffic, Starbucks plans to focus on adding units in the South and middle America, innovating around better-for-you beverage options and expanding its digital reach. More than 80% of new stores built in coming years will have drive-thrus, to capitalize on growth in areas where real estate is comparatively inexpensive. Beverage innovation will focus on less-indulgent cold beverages, particularly those using the chain’s new cold foam topping, plant-based milks and draft coffees. On the digital front, Starbucks is looking to capitalize on spending from its loyalty members, who now top out at 15.1 million active users, an increase of 14% from last year. Next spring, Starbucks will allow rewards members to redeem different amounts of points depending on their chosen reward.<doc-sep>
NEW YORK (Reuters) - Starbucks Corp SBUX.O forecast slower growth for the current fiscal year on Thursday as boutique coffee chains and fast-food retailers won business in the United States and other established markets and the bloom came off once-booming China. FILE PHOTO: A Starbucks store is seen inside the Tom Bradley terminal at LAX airport in Los Angeles, California, U.S. on October 27, 2015. REUTERS/Lucy Nicholson/File Photo Wall Street had been braced for a disappointing quarter from the ubiquitous coffee brand, and its shares were relatively unchanged in after-market trading. Seattle-based Starbucks last month warned of lower quarterly sales growth and announced plans to close about 150 U.S. cafes in the next fiscal year, triple the typical number of closures, as it seeks to enter under-served markets in the U.S. South and Midwest. But investors saw bright spots in the results, as Starbucks, the world’s biggest coffee retailer, reported revenue rose to a record high in its fiscal third quarter. The company also pledged a $10 billion increase in its share buyback and dividend commitment, to $25 billion through fiscal year 2020. Starbucks said its same-store sales rose just 1 percent globally and in its U.S. cafes in its third quarter ended July 1. Same-store sales in China slipped 2 percent amid fierce competition and stricter regulations on delivery services. “While acknowledging a disappointing Q3, I want to be clear that we have 100 percent confidence in our growth strategy and the sustainability of the leadership position we have built in the market,” Chief Executive Officer Kevin Johnson said in the company’s quarterly earnings call. Starbucks blamed a combination of cannibalization of its own stores and hiccups in its China delivery program for much of the slowdown in the country. In the year-ago quarter, Starbucks’ same-store sales grew by 5 percent in the United States and Americas and 4 percent globally. The sales dip in China is an even steeper departure from the 7 percent growth rate reported in last year’s quarter. Revenue rose to $6.3 billion from $5.7 billion in the year prior. Starbucks’ closely monitored digital membership program grew 14 percent year-over-year to 15.1 million active users. Starbucks’ shares are down 10.4 percent year to date. The company said it now expects full-year same-store sales growth to be “just below” its 3 percent to 5 percent targeted range, and sees fourth-quarter growth at the lower end of its 3 percent to 5 percent range. Starbucks’ report comes exactly one month after Howard Schultz, the brand’s elder statesman and former chief executive, stepped down as executive chairman, in a move that stoked investor concerns on how the company would evolve after nearly four decades of Schultz’s near-constant presence.