Post Market views - April 9, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities
(Time Zone: Arizona, USA)
Domestic equities traded in a range bound today with continued selling pressure from financials. Further, weak cues from Asian markets and concerns of sharp rise in COVID-19 cases across the country weighed on sentiments. While financials remained a drag today, Pharma stocks witnessed strong buying due to expectations of improvement in sales volume in the backdrop of spike in new Coronavirus cases. Additionally, IT stocks remained in focus today ahead of major IT companies' numbers next week. Notably, volatility index softened today and slipped below 20 levels. CIPLA, Sun Pharma, HUL and Tech Mahindra were top gainers, while Bajaj Finance, UPL, Tata Steel and UltraTech Cement were laggards.
In our view, continued sharp rise in Coronavirus cases in the country is expected to keep market volatile in the near term. Mobility restrictions at local levels and several states started taking such measures will continue to weigh on investors' sentiments. Further, recent weakness in INR may also aggravate investors' concerns and adversely impact FPIs flows. However, softening of global bond yields and crude prices offered some comforts. 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 continue to 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.