Post Market views - April 29, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities
(Time Zone: UTC)
Domestic equities traded mostly in positive territory today amid high volatility on F&O expiry. Notably, benchmark Nifty breached 15000 levels during initial hours, but it could not sustain to those levels. Metals stocks were in focus today on account of sustained price increase in ferrous and non-ferrous metals. Further, Reliance Industries remained in focus for second consecutive day ahead of 4QFY21 results. Barring, Metals, Financials and Pharma, most of key sectoral indices were in red today. Volatility index soared by over 3%. JSW Steel, Bajaj Finserve, Tata Steel and Hindalco were among top gainers in Nifty, while Eicher Motors, Hero Motocorp, L&T and HDFC were laggards.
Benchmark indices shrugged off continued rise in COVID-19 cases in this week. We note that absence of nationwide lockdown and high chances of reversal in cases by the end of May or mid of June'21 offered comfort. However, sharp rise in number of deaths and active cases crossing 3mn 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. 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. However, 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 months. 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.