Post Market views - April 8, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities
(Time Zone: Arizona, USA)
Domestic equities, despite trading positively for most of the sessions today, gave up a large portion of gains towards the end of the day as concerns of rising COVID-19 cases continued to weigh on investors' sentiments. Financials witnessed profit booking today and dragged market. Barring financials, most of key sectoral indices traded in green today with Metal index remaining an outperformer. Expectations of steady 4QFY21 earnings and weakening INR continued to attract investors' interest towards IT stocks. Notably, volatility index broadly remained in range bound today. JSW Steel, Tata Steel, Shree Cement and Titan were top gainers, while SBI Life, Sun Pharma, ONGC and HDFC Bank were laggards.
We believe that local level mobility restrictions due to continued surge in new Coronavirus cases in various parts of the country are expected to keep markets volatile in the near term. While softening of bond yields and crude prices in recent period offered some comforts to markets, a sharp depreciation in INR in last couple of trading days could be a new worry for investors, which can also have an impact on FPIs flow. Notably, RBI's continued dovish stance and assurance of maintaining sufficient liquidity in the system through various tools also augur well for bond markets and will help in sustaining low cost of borrowings. We further believe that 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, any near-term possible correction in the market should be treated as opportunity of bargain trading. 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.