Post Market views - March 26, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities

Domestic equities witnessed a strong rebound mainly supported by strong cues from global markets. All key sectoral indices ended in green with Metals, Financials and FMCG and Auto indices recording strong recovery. Notably, a strong buying was seen in midcap and small cap stocks, which outperformed broader indices. Further, volatility index softened by ~8% today offering some comforts to investors. It clearly appeared that investors today indulged in bargain trading after a sharp fall in market in recent period and bought quality stocks. Tata Steel, Bajaj Finance, Hindalco and Tata Motors were among top gainers, while UPL, Powergrid, IndusInd Bank and ITC were laggards.

While a sharp spike in Coronavirus cases in various parts of the country made investors jittery in last couple of weeks, contraction in bond yields and crude prices in this week offered comforts to investors in domestic equities. However, strengthening dollar index (already gained ~1.5% this week so far) 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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