The budget seems to have changed the market’s view on cyclical stocks. There is a clear intent to spend our way out of the Covid economic crisis. We are now faced with the rising prospect of public investment, stable private consumption, and reforms.
Disinvestment and better structural treatment of PSUs is now a looming reality. Naturally, this has made the market sit up and take notice of ignored public sector cyclicals. Till now, the defensives are holding onto their Covid gains while PSU stocks are gaining all the fresh attention. But as public participation in PSU theme grows and more evidence of disinvestment is visible, we can see a rotation of interest.
The stretched valuations of defensives in IT, FMCG, and pharma have very limited room for error and any underperformance. Profit warnings or slowdowns are bound to be punished. For now, players are closely watching the emerging scenario.
Markets will also keep an eye on global sentiment even as the Dollar indices are slowly stabilising from their lows. 2021 will be a year where flows will decide the market direction, leadership, and rotation. All three aspects will define the 2021 market. A domestic investor needs to carry a global perspective into his investing in such phases. This year promises to be a decisive economic phase for India’s growth story. It is now, or never.
