“While we do not deny further profit-booking in the next few weeks, it could offer a good buying opportunity supported by the positive earnings momentum and supportive global monetary and fiscal policies. We continue to expect equity markets to have the potential to provide attractive returns in the medium-term. Our preference remains for cyclicals over defensives in the medium-term as the rally may become even broad-based as the vaccine rollout gains momentum,” wrote Jitendra Gohil, head of India equity research at Credit Suisse Wealth Management in a March 2021 note with Premal Kamdar.
On Monday, the markets tumbled with the frontline indices – the S&P BSE Sensex and the Nifty50 – slipping over 2 per cent each in intraday trade. Besides the stringent lockdown-like conditions in Maharashtra imposed proposed the weekend in the backdrop of a sharp rise in Covid cases, the other factor that spoked markets was the growth in manufacturing sector, which slowed to the lowest rate in seven months at 55.4 in March from 57.5 a month earlier, as the rise in Covid cases hit demand, an IHS Markit’s purchasing managers' index (PMI) data revealed.
Despite the dip in manufacturing PMI, Jaipuria advocates buying capital goods stocks. “We don’t get worried by the month-on-month numbers. In fact, some of these stocks are now trading at levels last seen in 2008. So, a pick-up in the economy will boost the company’s fortunes and will in turn get reflected in the stock performance,” he says.
On a year-to-date basis, the gains in the mid-and small-caps have outpaced the frontline index, the S&P BSE Sensex. While the former have moved up around 15 per cent each, the S&P BSE Sensex has gained around 4 per cent, data show.
Going ahead, analysts at IDFC Mutual Fund expect market returns to be more gradual and suggest investors shouldn’t expect similar return as seen in 2020.
“Rising COVID cases that can lockdowns and uncertainty could impact growth. Valuations across large, mid-and-small caps are rich with high growth expectations built in; earnings growth disappointment may be the biggest factor to dampen investor sentiment,” they said in an April 5 note.
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