Post Market views - March 31, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities

Domestic equities traded lower today as concerns pertaining to spike in Covid-19 cases and resultant restrictions continued to weigh on investors' sentiments. Further, rise in USA treasury yields and strengthening dollar index aggravated concerns. Financials especially private banks witnessed heavy profit booking, which along with selling pressure in IT stocks dragged Nifty today. However, investors continue to lap-up FMCG, Metals and Pharma names. Notably, buying was seen in midcap and smallcap counters also. UPL, Tata Motors, ITC and Grasim were top gainers, while HDFC Bank, HDFC, Powergrid and Tech Mahindra were laggards.

We believe that recent announcements of night curfews by various state governments and indication of lockdown by Maharashtra state government certainly do not augur well for equities. Additionally, strengthening dollar index, which already gained ~1.5% last week and surpassed 93 levels so far this week, has aggravated investors' concern in emerging markets including India. 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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