India’s financial markets have braved the Covid-19 headwind so far, despite the devastating second wave of the pandemic ripping through the country. 

Hugh Young, chairman of Aberdeen Standard Investments in Asia, said he is “a little surprised” by the resilience of India’s stock market in the face of the unfolding tragedy.

“I suspect in the face of such a human tragedy investors have looked back at what happened a year or 18 months ago in other markets where those markets collapsed. The scenes in Italy were frightening. The U.K. came close to the brink as well,” he told CNBC’s “Street Signs Asia” on Monday. “I think investors are reluctant to settle and be caught short of markets. So, by and large, they’re hanging on.”

On Monday, India reported another 366,161 new cases and 3,754 more deaths. That brings total reported cases in the South Asian country to over 21.49 million while fatalities exceed 234,000.

Despite the second wave of Covid ravaging the country, the BSE Sensex is still up more than 3% so far this year, while the Nifty 50 index has jumped about 7% over the same period.

While the current crisis is challenging, India remains attractive for investors over the long term, according to Young.

“Could the market well go low? Yes, it could. But we are long-term investors and we like the stocks we own,” he said.

Indian Prime Minister Narendra Modi is facing growing pressure to impose another national lockdown, even as some states impose their own restrictions. Last year, India enacted a strict national lockdown to slow the spread of the coronavirus, but the shutdown hammered the economy, which contracted 23.9% last year between April and June.

The government has introduced fiscal stimulus in an effort to restart the economy. Last week, the Reserve Bank of India announced fresh support to mitigate the economic stress from the country’s second wave.

“Investors are also drawing comfort from the rear-view mirror bias, i.e. expecting a swift recovery akin to last year once the caseload peaks and begins to turn down,” said Radhika Rao, an economist at DBS, in an email.

“Whilst financial markets have braved the Covid-19 relapse, underlying caution is likely to sustain as the path of the pandemic spread will dictate the severity and longevity of restrictions, which in turn will impact the growth trajectory,” she added. 

The recent surge in Covid infections has also spurred some volatility and put downward pressure on the Indian rupee. Last month, bearish bets on the currency climbed to their highest in about a year, according to a Reuters poll.

“The rupee had started April on a weak note but has since trimmed losses,” said Rao. “Cooling-off in the US dollar and US rates have provided a breather,” she added.

Divya Devesh, Asia foreign exchange strategist at Standard Chartered, said he is bearish on the outlook for the Indian rupee.

“Medium term, we are still quite negative. We still think that with oil prices — Brent back at around $70 — and imports eventually picking up as well as demand recovers, that’s going to put a lot of pressure on the rupee in the second half of the year,” he told CNBC’s “Street Signs Asia” on Monday.

He added the bank is looking at dollar-rupee moving toward 76.5 by the end of the year, as a result of these factors.