Post Market views - April 13, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities
(Time Zone: Arizona, USA)
Domestic equities witnessed brisk rebound towards the second half of sessions after investors took comforts from announcement that government is fast tracking approvals for overseas COVID-19 vaccines to improve supply of jabs and speed-up vaccination process. Financials and Automobile were the biggest contributors in today's rebound. However, IT and Pharma stocks were key drags today. Heavy profit booking was seen today in IT stocks after the announcement of TCS results. Notably, volatility index softened by over 10% today offering some comforts. A bargain trading was also seen in midcap and small cap stocks. M&M, Bajaj Finance, Tata Motors and Maruti were top gainers, while TCS, Dr Reddy's, Tech Mahindra and Wipro were laggards.
A sharp increase in COVID-19 daily cases in the country and possibility of larger economic restrictions have already dented investors' sentiments. Further, possibility of lockdown in large states like Maharashtra appears to have made investors risk averse. Additionally, recent weakness in INR, which crossed Rs75 against dollar, may also aggravate investors' concerns in the near term. However, 4QFY21 earnings began in a strong note with TCS delivering strong earnings performance with encouraging management commentaries. We believe despite today's heavy profit booking in IT space, IT stocks are expected to rebound in ensuing days. We believe RBI's continued dovish stance and assurance of maintaining sufficient liquidity in the system through various tools in latest policy meeting 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 with approval of Sputnik jab, 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.