Post Market views - April 16, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities
(Time Zone: UTC)
Domestic equities remained resilient and defied rising COVID-19 cases in the country. Benchmark Nifty recorded moderate gains for the third consecutive day mainly supported favourable global cues and strong buying in Pharma, IT and Auto space. Barring banks, all key sectoral indices traded in green with Pharma remaining outperformer. Strong 4QFY21 show by Wipro along with robust double-digit growth guidance led Wipro to gain over ~8% today. Further, expectations of strong 4QFY21 earnings and possibility of further price hikes aided cement stocks to see sharp recovery. Further, midcap and small cap indices outperformed broader indices today as recent fall in the space made investors to do bargain trading in quality midcap and small cap space. Wipro, Hindalco, Asian Paints and UltraTech Cement were among top gainers, while L&T, ICICI Bank, TCS and JSW Steel were laggards.
A continued surge in second wave of COVID-19 cases in the country, which already crossed 2 lakh daily cases, has certainly posed a risk to sustainability of rebound of earnings momentum. 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 and Delhi 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. Further, softening of global bond yields and RBI coming to rescue of INR slide should offer comfort to investors. 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.