Post Market views - March 3, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities
(Time Zone: Arizona, USA)
Domestic equities extended gain for the third consecutive day as fading concerns of rising bond yields and continued rebound in high frequency key economic indicators in Feb'21 emboldened investors. Additionally, global markets also remained supportive. Financials were key market driver today followed by IT, Metals and Reliance Industries. Auto stocks witnessed pullback today after sharp recovery witnessed in last two days. Notably, volatility index fell sharply again for the third consecutive day. Tata Steel, Bajaj Finserve, JSW Steel and UPL were key gainers, while Hero Motocorp, Maruti, Bajaj Auto and M&M were laggards.
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 and 10-Year USA treasury yields have fallen from recent peak. This has offered 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. However, spread of over 480bps between India's GSec Yield and USA Treasury Yield still offers comfort. 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 investment and consumption should continue to support the ongoing rebound in corporate earnings. 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.