In this sort of scenario, it’s natural that economic activity will reduce sharply, availability of labour would be limited, disruption of the supply chain would be a reality.
I will surely be reducing the earnings estimates for FY22, however would wait for the rest of the earnings for Q4 FY21 to be declared.
After a tough FY21, though there were government sentimental booster and some sops for this segment, they were trying to get back on track when again got struck by the pandemic.
I doubt whether FY22 will be a stellar year for the stock markets, though as yet we still seem to be having a strong momentum backed by liquidity flows.
Thus, when the markets correct for any reason, which could be an extension of the pandemic, global market cues, rising yield, below expected earnings or geopolitical issues, the rich valuations will not provide enough cushion for the markets, and liquidity could dry up.
The sectors which I would buy are those which benefit from a pandemic or are immune to it.
I would buy Jindal Steel & Power as the company has been able to repair the balance sheet, reduce leverage and is in a good position to benefit from the upcycle in steel.
Thus a stock that provides a good dividend yield, expected to grow at 20 percent, having a good cushion of quoting at a discount to book value, a safe investment option in this volatile market.
The Robinhood investors are overconfident on the equity markets since they have rarely lost in the last 12 months, thus shifting funds from other asset classes to equity.