Indian as well as the global markets went through a severe disruption during the lockdown. It impacted their revenues and corporate earnings. Among the key highlights, IT, Telecom, Financial Services, and Pharma sectors were the least hurt. They posted positive top-line and profit growth. Autos and Commodity sectors on the other hand were worst hit.
Going ahead, as world economies are gradually opening up, global facing sectors are expected to lead earnings recovery. It includes metals, chemicals, and the IT sectors. Domestic discretionary consumption is still expected to remain laggard as households preferring to save their incomes for uncertain times ahead.
Private banks have recently raised fresh capital which has eased the Liquidity and solvency risk. However, concern around credit growth and asset quality persists for them.
For the auto stocks, the BS-VI and Covid-19 related disruptions are behind them. The sector is expected to stage recovery from the next financial year onwards. Pent up demand post lockdown and reluctance towards public transport could be the major tailwinds.
Metal companies posted high double-digit top-line contraction as Covid-19 hit the demand sharply. However, improving global growth outlook augurs well for the sector– it is already visible in the sharp spike in metal prices.
The rural sector was the saving grace for the economy during the lockdown due to the steady monsoon. However, the growth is expected to taper off with a reduction in MGNREGA jobs and completion of the Kharif season.
Key Takeaways:
Despite the opening up, the economy is expected to remain weak in the current financial year. The recovery after that will be slow and gradual. Given the context, we maintain #Mandi outlook on the economy for the current financial year.
