Post Market views - April 30, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities
(Time Zone: UTC)
Domestic equities fell sharply today on weak global cues and heavy sell-off in financials. Asian markets traded weak on emerging concerns about growth after China's factory activity expanded slower than expected in April. Baring Pharma, Metals and IT, most of key sectoral indices saw selling pressure. Divi's Lab, Coal India, Grasim and ONGC were among top Nifty gainers, while HDFC Bank, HDFC, ICICI Bank and M&M were laggards. Notably, it has been a strong week for domestic markets as benchmark Nifty witnessed weekly gain of ~2% and added over ~Rs4.5 trillion in investors' wealth.
A persistent rise in daily caseload (crossed 3.8 lakh yesterday) and higher number of deaths continue to remain matter of concerns for central and state governments and therefore any possibility of further economic restrictions cannot be ruled out by the state governments. Market is expected to be volatile until we see a clear reversal in COVID-19 cases. Further, 89% jump in demand for work by households under MGNREGA in April certainly raises concerns about economic condition in hinterland part of the country. In our view, central government will continue to handle this disaster by maintaining a fair balance between lives and livelihoods. Market participants would be keenly watching out how soon vaccination at private hospitals start. Timely availability of Jabs is still a concern for many states. Further, despite putting enhanced mobility restrictions by states, manufacturing and infrastructure activities have not halted yet and companied appeared to be proactive this time to convince most workers to stay back by offering basic amenities and facilities. Therefore, a large economic damage like last year is unlikely to happen. Notably, management commentaries of various companies have so far been encouraging despite seeing some initial disruption due to second wave of COVID-19. 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. 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.