Post Market views - March 8, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities
(Time Zone: Arizona, USA)
Domestic equities traded mostly positive today despite soft global cues. A sharp recovery in PSU Banks, IT and Metals indices lent support to markets. Barring realty and FMCG, most of key sectoral indices ended in green. Notably, volatility index softened by over 4% today offering some comfort to investors. UPL, GAIL, L&T and ONGC are top gainers, while Bajaj Finance, UltraTech Cement, IndusInd Bank and Shree Cement are laggards.
We continue to believe that recent rise in bond yield is discounting a faster recovery in economic growth and this is unlikely to move northward beyond a point. However, spread of over 465bps between India's GSec Yield and USA Treasury Yield along with weak dollar index still offers comfort. Given continued rebound in high frequency key economic indicators in Feb'21, we believe underlying strength of domestic equities remains intact despite recent uptick in crude oil prices. 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 believe that any meaningful correction in the market should only be creating an opportunity for bargain trading 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.