Post Market views - Feb 22, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities.
(Time Zone: Arizona, USA)
Domestic equities witnessed sharp fall for the fourth consecutive day as concerns pertaining to soaring bond yield globally and rise in commodity prices dragged investors' sentiments. Barring Metals, all key sectors indices witnessed sharp pullback with IT, Auto, Pharma and Financials declining ~1.5-2%. Notably, volatility index surged by ~13% today, which does not bode well for the market in the near term. Hindalco, Adani Ports, Tata Steel and JSW Steel were top gainers, while M&M, Tech Mahindra, L&T and TCS were laggards.
Positive sentiments formed after the announcement of Union Budget and robust 3QFY21 earnings appear to be fading now as investors indulge in profit booking and started focusing on reflation trade. However, we continue to believe that every correction in the market will be bought out as underlying strength of domestic equities is intact. Undoubtedly, budget succeeded to offer clarity about the sustainability of ongoing corporate earnings rebound in subsequent fiscals. Huge capital expenditure program and reforms announced in the budget to expedite infrastructure activities in the country are likely to support many ancillary industries and job creation. Further, persistent weak dollar and possibility of higher fiscal stimulus in the USA are likely to act as key tailwind for FPIs inflows. In our views, infrastructure, industrials, engineering, building materials, banks and select auto stocks are likely to outperform in the medium to long term perspective as these are the key beneficiary of higher capital expenditures. Investors will be keenly watching out December quarter GDP print, which would be released on Friday.