Post Market views - April 26, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities
(Time Zone: UTC)
Domestic equities shrugged off rising COVID-19 cases and rebounded mainly led by sharp recovery in financials. Further favourable global cues also supported rally today. Barring Pharma, most of key sectoral indices traded in green today. Strong March quarter performance led ICICI Bank to recovery sharply, while HCLT witnessed sell-off due to subdued 4Q performance. However, volatility index hardened by over 3%. Axis Bank, ICICI Bank, UltraTech Cement and JSW Steel were among top gainers, while Cipla, HCL Tech, Britannia and BPCL were laggards. F&O expiry is going to be quite crucial for the week.
A persistent rise in COVID-19 cases across the nation and enhanced economic restrictions have dented investors sentiments over last couple of weeks. Further, sharp rise in number of deaths over last one week is emerging a major cause of worry for state and central governments, which can possibly lead to wider economic restrictions in coming days and may hurt economic momentum further. However, we still believe that a nationwide lockdown in still not in sight as of now as it can make Indian economy worse. In our view, government will continue to handle this disaster by maintaining a fair balance between lives and livelihoods. Market is expected to remain volatile until we see a reversal in COVID-19 cases. Notably, enhanced economic restrictions imposed by states and government's continued focus to increase supply of vaccines and allowing vaccines at private hospitals should be able to check spread of coronavirus in coming weeks. Further, despite putting enhanced mobility restrictions, 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. Further, cancellation of bond auctioning at higher rate by the RBI last week validates RBI's strong commitment to maintain low-rate interest scenario and support economic activities. This certainly bodes well, and aids spread between earnings yield and GSec yield to remain low and thereby supporting equities. 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.