The brokerage also feels that the pullout by foriegn investors is at par with the weightage given to India in the composite indices and also with the pullout at the global levels.
Swiss brokerage UBS Securities on Wednesday said it expects an over 14 per cent jump in the equity markets in the current fiscal in the base case scenario, despite the heavy sell-offs that have dominated in the recent past due to the COVID-19 pandemic. It can be noted that the Indian equity markets have corrected by nearly 25 per cent in the last two months, ever since the onset of the pandemic in China and as it grew to other countries of the world.
The brokerage said it expects the NSE's 50-share benchmark Nifty to be at 10,000 points by March 2021 in the base case scenario, 11,500 points in the upside scenario and go down to 6,000 points if the downside risks play out.
As a base case, the brokerage has assumed that the disruptions caused by the pandemic will last only till June, while in the upside scenario, the difficulties will get over by May and may prolong till September in the downside risks scenario, its analyst Gautam Chhaochharia told reporters over a call.
At present, there is a near-unanimity about the lockdown getting extended beyond April 14 at least in the parts which are affected by the spread of the virus. Even after the lockdown gets lifted, there are concerns whether normal economic activity will resume, due to which they feel the disruptions will last longer.
Chhaochharia said the lockdowns will have an impact on the earnings growths for companies and warned that an extension in the lockdown will have a non-linear, disproportionate impact as activity stalls that much longer and takes more time to revive.
He, however, said that as a base case, the brokerage sees a 2 per cent rise in earnings and added that markets will go by previous experiences like the global financial crisis to find its levels.
The brokerage also feels that the pullout by foreign investors is at par with the weightage given to India in the composite indices and also with the pullout at the global levels.
Chhaochharia said the brokerage is advising clients to study the balance sheet strengths and a demand impact on a business before investing.
Consumer staples, oil and gas companies and the stronger players in the banking and finance universe which have seen a correction in prices would be the best bets in this market, he said.
When asked about the sectors one should stay away from, he pointed to metals, mining and industrials and also flagged risks from mid-caps like hospitality and tourism.
In banking, the small finance banks and microlenders who depend on physical visits to borrowers for repayments and also new loans will be impacted because of the lockdown, he said, adding that the others will be tested on the willingness to lend which was found wanting in the run-up to the crisis as well.He said telecom is also another sector which will be least impacted by the goings-on, but was quick to add that the Supreme Court judgement on AGR dues may force consolidation which may result in the emergence of a stronger entity.