“Investors are looking past the threat of the second wave,” said Pankaj Pandey, head of retail research at
. That confidence is reflected in the Nifty Midcap 100 and Nifty Smallcap 100 index’s 1.4 per cent and 2.9 per cent respective gains during the week as against the Nifty50 index, which ended flat.
Money managers said that the presence of multiple Covid-19 vaccines as well as the Centre’s reluctance to impose a national lockdown will result in lower damage to the manufacturing side of the economy than the national lockdown.
Pandey is of the opinion that investors have already shifted their attention towards the broader market in search of higher returns given that the benchmark indices are likely to move sideways in the near term.
Analysts expect the performance of benchmark indices to remain muted largely because of the ongoing correction in shares of financial services companies. Banks and non-bank lenders make up for 38 per cent weight in the Nifty50. With the sector undergoing correction due to concerns around asset quality, market participants are worried that it will keep the index anchored around current levels.
Global rating agency Fitch believes that the second wave has raised concerns over the business prospects of the banking sector and at the same time raised risks of higher non-performing loans going ahead.
“Headwinds would intensify if rising infections and follow-up measures to contain the virus further affect business and economic activity,” Fitch said in a note today. The Nifty Bank index has already fallen roughly 14 per cent from its record highs hit in February.
One sector that will help cushion the impact of the weakness in banks on the headline indices is information technology. IT companies will kick-off the March quarter earnings season next week with Tata Consultancy Services, Infosys and Wipro declaring their earnings.
The sector is expected to report another quarter of trailblazing earnings and likely give optimistic guidance on revenue growth and margin performance. Brokerage firm YES Securities expects revenue growth of largecap IT companies to be around 4-5 per cent sequentially in the March quarter.
Better-than-expected performance and commentary from
and Infosys will set the tone of optimism for the rest of the earnings season, said analysts.
