Weekly market review by Hemant Kanawala, Head - Equity, Kotak Mahindra Life Insurance Co. Ltd.

The big announcement in USA was President Biden’s proposal for an “American Jobs Plan” (AJP) totaling roughly $2.3tn in infrastructure spending over eight years, paid for by higher tax rates for corporations over 15 years. Main areas of investment are Transportation infrastructure, Housing, other infrastructure like drinking water and broadband and domestic manufacturing. This has resulted in buoyancy in metal stocks as it is expected to create strong demand for industrial commodities like steel, copper and aluminium. Domestically, covid cases in India continue to rise although Maharashtra remains the epicentre accounting for 60% of the cases in India. So far there have been sporadic announcements limiting mobility and commercial activities in Maharashtra and other states such as Rajasthan, Punjab, and Madhya Pradesh among others.

However, so far the rise in cases and localized restrictions has not led to any major disruption in economic activity. The power consumption so far in 2021 has remained buoyant and above the level recorded in last three years. Globally vaccination drive has been strong in UK and USA and hence these economies are expected to normalise sooner than others. Hence investors focus should be on export oriented industries like IT, Pharma, Specialty chemicals and auto ancillaries.  As we are entering the earnings season, investors focus will shift to corporate commentary along with the results to get guidance for the future outlook. The Nifty is trading at P/B of 4.2, which is close to post GFC high. The second wave of Covid and high valuation are expected to maintain volatility in the markets in the near term.

Source: Asia Insurance Review