Post Market views - March 4, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities
(Time Zone: Arizona, USA)
Domestic equities traded lower today mainly on weak global cues. However, benchmark index Nifty witnessed recovery in losses after slipping below 15,000 levels during initial hours of trading. Financials and Metals indices were keg drags today, while FMCG, Pharma and IT indices were resilient. A sharp 6bps rise in 10-Year USA treasury yield made investors jittery today. Notably, volatility index soared over 6% today indicating some uneasiness at these levels. However, midcap and small cap indices ended in green today and outperformed benchmark index once again mainly led by strong visibility of corporate earnings rebound. UltraTech Cement, Adani Ports, Shree Cement and Grasim were top gainers today, while JSW Steel, HDFC, HDFC Bank and Tata Motors were laggards.
A steep rise in bond yields in the USA once again hurt investors' sentiments. However, we continue to believe that these concerns are short lived and any immediate correction in market due to rise in bond yields fear will only create opportunity for investors to buy quality stocks at reasonable valuations. In our view, a situation like taper tantrum in 2013 is still far away. The spread between USA treasury and India's GSec Yields is still over 475bps, which looks to be comfortable and unlikely to reverse FPIs flows meaningfully. 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 and investment activities should continue to support 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.