Post Market views - April 15, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities
(Time Zone: UTC)
Domestic equities looked to be resilient amid high volatility. Benchmark indices recovered sharply from today's low mainly led by rebound in financials and pharma indices. Auto Stocks were worst hit today mainly due to wider economic restrictions imposed in Maharashtra, which contributes over 20% of automobiles production of the country. Infosys witnessed heavy profit booking after missing street's estimate in 4QFY21 earnings. However, strong buying was seen in other IT majors due to sustained growth prospects. Volatility index soared over 2%. CIPLA, TCS, ICICI Bank and ONGC were among top performers, while Eicher Motors, Grasim, Infosys and Maruti were laggards.
A continued surge in second wave of COVID-19 cases in the country has certainly dented investors' sentiments. However, government's strong effort to expedite vaccination progress in the country by allowing multinational vaccines in domestic markets and absence of complete lockdown in Maharashtra offered some comfort to equities. However, risk of other states taking steps of wider economic restrictions continues to persist, which may continue to weigh on investors' sentiments in the near term. Unlike last year, states seem to be reluctant this time for complete lockdown due to wider ramification on economic activities. Further, current level of mobility restrictions imposed at different states and government's focus to improve supply of vaccine in the country should be helpful to contain outbreak in coming weeks and essentially should not lead to large economic damage. Notwithstanding some adverse impact on economic activities for one or two months, a sharp pickup in capital expenditures in current fiscal is still on the cards. A meaningful pickup in government's capex and recovery in investment and consumption cycle are expected support corporate earnings in ensuing quarters. Hence, earnings recovery in FY22E still remains promising. Therefore, any near-term possible correction in the market should be treated as opportunity of bargain trading. Investors must focus on quality stocks with robust earnings visibility and margins of safety.