Post Market views - April 6, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities
(Time Zone: Arizona, USA)
Domestic equities were quite volatile today and gave up initial gains as sharp spike in COVID-19 cases across the country and resultant mobility restrictions continued to weigh on investors' sentiments. Financials, Auto and IT dragged market today, while Metals and Pharma continued to outperform. Notably, strong buying was seen in quality midcap and small cap stocks today as investors indulged in bargain trading in these counters after recent corrections. Adani Ports, Tata Consumers, Asian Paints and JSW Steel were top gainers, while Powergrid, Eicher Motors, IndusInd Bank and Titan were laggards.
Clearly, sharp spike in COVID-19 cases in the country and announcement of mobility restrictions by select states have dented investors' sentiments. In our view, domestic markets are expected to remain volatile in the near term until Coronavirus spread is controlled. Further, imposition of weekend lockdown in Maharashtra, which contribute over 13% of country's GDP and ~20% of India's industrial output, certainly does not augur well for economy. However, we still believe that these restrictions unlikely to create any large supply chain issue and given experience in 2020 and possibility of further ramp-up in vaccination rollout process, spread of virus can be controlled without a large-scale of economic damage. Therefore, we continue to believe that any near-term possible correction in the market would be creating an opportunity of bargain trading for investors. A strong pick up in capital expenditures in FY22E, impact of new reforms announced in the budget to stimulate consumption activities and allocation for higher capital expenditures in select large state's budget for FY22E should continue to support ongoing rebound in corporate earnings. Investors must focus on quality stocks with robust earnings visibility and margins of safety.