'Disconnect between markets and the reality of on-ground Covid situation'

The rapid rise in Covid cases over the past few days have triggered a panic-like situation across the country, with most state governments resorting to mobility curbs and weekend curfews. Markets, too, have reacted sharply to the developments.

The S&P BSE 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 by the state and central government to check the rise in Covid cases 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: There is a lot of negative news floating around, which is impacting the overall sentiment. In case the Covid-related situation is not brought under control soon, the negativity may prevail that can take the markets even further down. That said, the Nifty50 has a strong support at 14,000 levels, which should hold - at least for now.

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: Markets are worried about the rapidly rising Covid cases. 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. The Sensex has slipped nearly 10 per cent from the peak and there seems to be a limited downside from here on. Globally, too, the markets have staged a comeback after falling around 10 per cent from their peak levels – and India should be no different.

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 as the vaccination against Covid gathers pace and the overall market sentiment improves.

Unmesh Kulkarni, managing director and senior advisor, Julius Baer India

Market outlook: The markets have reacted late to the Covid situation as they were focusing more on global cues, possible economic recovery and better-than-expected corporate earnings growth back home. There is a clear disconnect between the markets and the reality of the on-ground Covid situation in India. That said, one needs to wait for May 2 when the results of on-going 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, which can trigger a fall and provide a buying window.

Buy & Sell: In the short-term, defensive sectors will do well as investors hunt for safety. 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 sizable 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 of Covid 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 Fed. However, this phase may not last very long. Markets are likely to remain volatile.

Strategy: Invest via asset allocation schemes. Consider SIPs with a long term (10-year) investment horizon. 

Buy & sell: Renain positive on select banks, power, telecom and metal spaces.