Pre-Market views - March 30, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities

USA equities finished mostly lower yesterday as concerns about potential spillover after USA's investment firm Archegos Capital Management was forced to sell massive holdings as margins call got triggered. Even global investment banks, Credit Suisse and Nomura Holdings highlighted that they are likely to take hits due to volatility in markets without naming USA investment firm. Meanwhile, 10-year USA treasury yield surged again yesterday and moved to 1.73% again after President Biden stated that 90% of adults in the USA will be eligible for vaccines from 19th April. Notably, mega US$3trillion infrastructure spending plan is likely to be unveiled tomorrow and investors will be keenly watching out government's plan to raise resources for this spending commitments.

Domestic equities look to be modestly good at the moment. A sharp spike in Coronavirus cases in various parts of the country made investors jittery in last couple of weeks. Further, recent announcements of night curfews by various state governments and indication of lockdown by Maharashtra state government certainly do not augur well for equities. Further, strengthening dollar index, which already gained ~1.5% last week, can aggravate investors' concern in emerging markets including India. We continue to believe that ongoing concerns of new wave of coronavirus in the country may keep markets volatile in the near term. However, given the experience of 2020, spread can be controlled without putting a large scale of business restrictions. Additionally, a faster rollout of vaccination process can be helpful to contain the spread of virus. Hence, any adverse impact on business activities might not be meaningful. Further, 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. Hence, any meaningful correction in the market should only be creating an opportunity for bargain trading in quality stocks. Investors must focus on companies with strong earnings visibility and margins of safety.

Source : Equity Bulls

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