market outlook: Money managers see good days ahead as Street looks forward to unlocking

MUMBAI: After three-and-a-half months of ping-ponging in a 1,300-point range, the Nifty50 index finally broke out of its shackles this week to hit a fresh lifetime high, as risk appetite among investors continued to improve with the Covid-19 situation in the country.

The feat was achieved with the help of continued rally in the financial services stocks, which is a sign that investors are less concerned about the fate of the economy than they were a few weeks ago. While the Nifty Bank index is still some way off its lifetime high, recent commentaries by the likes of State Bank of India have given the market confidence.

“The market is cheering the downward trajectory of the Covid-19 curve as the recovery rate since the last few days has been faster compared to the new cases. With the improvement in the Covid-19 curve, India is playing catch-up with the global market,” said Naveen Kulkarni, chief investment officer at Axis Securities.

Further, the rebound has been supported by the increasing likelihood of states slowly re-opening their economies from June as daily COVID-19 cases continue to fall. Delhi, one of the richest states in the country, is aiming to re-open from June after seven-day average daily cases in the city fell 92 per cent from their peak in April.

Not only Delhi, Maharashtra’s Health Minister Rajesh Tope on Thursday told reporters that the state may look at easing restrictions in districts where case positivity rates are falling sharply. That said, he dismissed the idea of wholesale relaxation of restrictions in the richest state as over 21 districts still have case positivity rate of more than 10 per cent.

Manish Jain, fund manager at Ambit Asset Management, said with overall economic impact limited, a V-shaped recovery is still in the offing and prospects of a double-digit growth still look bright for 2021-22.

The optimism for re-opening was reflected in the sharp gains seen in sectors such as hotels, multiplexes and some consumer discretionary stocks, which will immediately gain from the unlocking of the economy. Shares of hotels, quick-service restaurants, multiplex owners, inner wear makers, automobile producers saw strong gains this week.

“Incrementally, I will invest across all market capitalization at this moment,” said Chakri Lokapriya, Managing Director of TCG Asset Management. Lokapriya said sectoral rotation of funds may accelerate in the market, which will continue to support the benchmark indices.

Anshul Saigal, head of portfolio management services at Kotak Asset Management, said from a near-term perspective, investors should stay cautious given the sharp rebound. “…But if you are investing from a 2-year perspective, then earnings upgrade cycle is ahead of us and stock valuations don’t look expensive,” Saigal said.

Asked on which sectors they incremental will put their money on, both suggested that export-oriented plays will be a good place to go for investors given that the advanced economies are coming back on their feet much faster than the rest of the world

For Saigal, every dip in this is a buying opportunity for investors who are looking beyond their immediate horizon.

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