‘Disconnect between markets and the reality of on-ground Covid situation in the country’
The rapid rise in Covid-19 cases over the past few days has triggered a panic-like situation, with most state governments imposing curbs. Markets, too, have reacted sharply.
The Sensex has slipped around 9 per cent from its 2021 peak level of 52,517 hit on February 16 to around 47,700 levels now. The mid-and small-cap indices, too, have been in the line of fire with both the indices slipping nearly 7 per cent and 5 per cent, respectively during this period.
Given the weak domestic cues, leading experts see more volatility over the next few sessions. Measures adopted to check the rise along with the pace of vaccination will be among the key sentiment drivers, they say.
U R Bhat, managing director at Dalton Capital
MARKET OUTLOOK: In case the Covid-related situation is not brought under control soon, negativity may prevail, and that can take the markets further down.
That said, the Nifty50 has strong support at 14,000 levels, which should hold.
STRATEGY: Investors should look at corrections to buy for the long term.
Buy & Sell: Remain bullish on banking, financial services and insurance (BFSI) space from a medium-to-long-term perspective, especially private sector banks. That apart, metals, commodity-related plays should also do well.
Andrew Holland, CEO, Avendus Capital
Alternate Strategies
MARKET OUTLOOK: Going ahead, there could be concerns if the situation is not brought under control soon. That said, the focus over the next few months will shift to vaccinations done rather than rising cases – and that’s what has been the global experience as well. STRATEGY: Investors can start to nibble at stocks, but should stagger their purchase.
Buy & Sell: While the defensive plays – pharma, information technology (IT) and fast moving consumer goods (FMCG) – are likely to do well in the short term, the money will flow back into cyclical sectors – manufacturing, banks, etc, in the medium-to-long term. Unmesh Kulkarni, managing director and senior advisor, Julius Baer India
MARKET OUTLOOK: There is a clear disconnect between the markets and the reality on ground in terms of the Covid situation in India. That said, one needs to wait for May 2, when results of ongoing assembly elections are out for any central government measures in terms of lockdown/mobility curbs, which can trigger a fall in the markets. As things stand, market direction remains uncertain.
STRATEGY: One should use the correction to buy for the long term. There could be earnings downgrades as well in the quarters ahead.
Buy & Sell: In the short-term, defensive sectors will do well. From an economic recovery perspective (12-month horizon), we remain positive on cyclicals – industrials, auto, private sector banks, healthcare, metals, telecom and chemicals.
Neelkanth Mishra, co-head of Asia Pacific Strategy and India equity strategist, Credit Suisse MARKET OUTLOOK: Activity restrictions imposed by states are currently limited to weekend/night lockdowns. If medical capacities get stretched, harsher measures can be taken, we expect these to be localised. All this will impact market sentiment.
STRATEGY: Given the steep correction, we remain buyers, and recommend accumulating further on dips.
Buy & Sell: New stress for financials would be limited to segments like hotels, travel, where it is unlikely that sizeable new loans have been given since January.
S Naren, ED & CIO, ICICI Prudential AMC MARKET OUTLOOK: The near-term outlook is complex as it is very difficult to predict how the second wave will pan out. Once Covid-related issues are resolved, we believe there will be a period of cyclical economic recovery coupled with a very accommodative US Federal Reserve. However, this phase may not last very long. Markets are likely to remain volatile. STRATEGY: Invest via asset allocation schemes. Consider systematic investment plans (SIPS) with a long-term (10-year) investment horizon.
Buy & Sell: Remain positive on select banks, power, telecom, and metal.