Post Market views - April 28, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities
(Time Zone: UTC)
Domestic equites extended gains for third consecutive day. Continued rebound in Financials aided benchmark indices to defy concerns of rising COVID-19 cases. A visible contraction in daily caseload in Maharashtra and Mumbai offered comfort to market. Further, short covering ahead of F&O expiry also contributed recent rally. Barring Metals and Pharma, most of key sectors traded in green today with Financials witnessing stronger recovery. Notably, strong 4QFY21 numbers delivered by ICICI Bank, Axis Bank and Bajaj Finance along with strong commentaries from managements despite ongoing challenges supported rally in Financials. Notably, rebound in equities this week added over Rs6 lakh crore to investors' wealth in last three days. Bajaj Finance, Eicher Motors, IndusInd Bank and ICICI Bank were among top Nifty gainers, while Britannia, HDFC Life, Hindalco and Nestle were laggards.
While decrease in cases in large state like Maharashtra and financial capital Mumbai offers comfort, other states are still witnessing rise in caseloads. Further, sharp rise in number of deaths is a matter of concern 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 remain volatile until we see a clear reversal in COVID-19 cases. In our view, central government will continue to handle this disaster by maintaining a fair balance between lives and livelihoods. 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 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.