Post Market views - March 2, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities
(Time Zone: Arizona, USA)
Domestic equities extended gains modestly as sustained rebound in economic activities in Feb'21 bolstered investors' confidence. Barring financials, most of key sectoral indices witnessed recovery. Auto index continued to remain in focus today led by steady volumes reported by companies for Feb'21. Further, IT index also witnessed brisk recovery after sharp underperformance in recent weeks. A strong buying was seen in Midcap and Smallcap packs and outperformed broader indices as visible earnings recovery is attracting investors in this space. Notably, volatility index contracted sharply for second consecutive day by over 6%.
Concerns pertaining to rising bond yields appear to have softened a bit after central bankers across the world have begun to push back against higher rates. This should offer some comfort to Indian equities and INR as rising bond yields in the USA and declining spread between USA Treasury yields and India's GSec yields had started putting pressure on INR. Further, given continued rebound in high frequency key economic indicators in Feb'21, we believe underlying strength of domestic equities remains intact. Further, likely pick up in capital expenditures in FY22E and impact of new reforms announced in the budget to stimulate consumption activities should continue to support ongoing rebound in corporate earnings. Hence, we continue to believe that any meaningful correction in the market should be an opportunity to buy as India continues to offer superior growth prospects. 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.