4 Top Stock Market Themes To Invest In As India Begins To Reopen Post Covid Second Wave

Why the Indian stock markets remained unperturbed during Covid 19 second wave?

Even as if we are amid the second Covid 19 wave with least number of cases being now reported of over 1 lakh per day as per the health ministry, just today we saw Nifty scaling new high of 15,739 and broader markets outperformed with both Nifty Midcap 100 as well as Nifty Small Cap 100 clinching new highs.
In just four trading sessions of June month, FIIs or foreign institutional investors made an infusion of Rs. 8000 crore into the Indian markets.

Samir Arora, founder and Fund manager at Helios Capital Management in an interview with CNBC said the limited impact due to Covid 19 second wave on the market is seen as the vaccination process is currently underway across the length and breadth of the country and in a matter of say another few months most city dwellers can be vaccinated and now this Covid situation thing is more to do with personal precaution. He further went up to say that serious market impact won't be felt only because the end otherwise is quite visible. And the confidence in this end comes from the fact that even as second and third wave is happening across the world, no where it has been reported that people who have been fully vaccinated are having large number of case or are these cases that are being hospitalized etc., ......', added Mr. Arora.

How should you approach the market as Nifty is near its all time high and Indian economy begins to open?

Now as the Indian economy begins to re-open and will gear up with all its vigour to make up for the long stretch of lockdown phase spanning a month or even longer in some Indian cities, here we suggest some sector themes you can bet on going from here:

1. Entertainment theme:

Even as the air around re-opening of multiplexes is made clear in respect of some of the cities say for instance in Mumbai, multiplex as well as single screen shall remain shut, under Level 3 rules, we have seen the stock of multiplex owner PVR and Inox Leisure performing handsomely.

Performance of PVR and Inox Leisure of late and their prospects going ahead:

PVR performance:

Over the last month while the stock of PVR has gained nearly 25 percent, Nifty has gained just 8 percent in comparison. And while YTD gains for Nifty have been 12%, PVR scrip has gained just 5 percent during the same time.

Chart indications for the PVR stock: The stock of PVR after being on a decline for almost 1.5 months until April 19, 2021, is showing a trend reversal and is now on a continuing upmove, with the scrip just 12.96 percent away from 52-week high of Rs. 1591.9.

Inox Leisure performance:

Similarly, Inox Leisure during the last month has outperformed Nifty with returns of almost 19 percent, while Nifty during the same time gained just 8%. Considering the close of December 31 of Rs. 282.30, the stock has offered YTD gains of over 12 percent, which are very much in line with Nifty returns during the same period.

Chart indications for the Inox Leisure stock:

The similar trend line of a continuing upmove is visible for Inox Leisure after a period of sustained losses for the stock.

Even as the check box for quarterly numbers did not ticked for both of these companies which reported record loss for the March ended quarter, bets on reopening of these cinema units are driving the stocks higher in price, plus higher liquidity and positive cues from global multiplex industry are also creating a favourable spot.

Similarly in the space one can also bet on stocks like Imagicaaworld Entertainment as the country's largest themed entertainment park will also see its re-opening as and when the curbs are lifted, helping the business to return to normalcy. Last the stock closed higher at Rs. 7.75, while its 52-week high is Rs. 8.7. Bullish momentum is seen for the stock as the stock trades above its short, medium and long term averages.

2. Mall operator and developer firms including Phoenix Mills, DLF:

Phoenix Mills is the country's top mall developer and operator firm in the country. Peer companies for the firm are Macrotech Developers, DLF, Godrej Properties, Oberoi Realty among others. On Friday (June 4, 2021), stock of Phoenix Mills hit a fresh 52-week high of Rs. 884.9 per share on the NSE. Chart suggests upmove pattern in the scrip.

Bet on reopening hopes as well as positive global cues are making the stocks in the space to rally. Also, given the sound sales prospects for the real estate sector as a whole for FY22 is another major driver boosting the scrip of these construction and contracting- real estate stocks.

3. OMC companies:

As it is with the rise in international crude rates, which is close to $72/bbl for brent crude (as of June 4, 2021 closing price), fuel rates in India have surged phenomenally and for some cities have even gone higher than Rs. 100 per litre for petrol and now as the demand for fuel for mobility shall gain traction, we may see these stocks performing well going ahead.

Shares like BPCL which is a divestment bound scrip is already doing good with last 1-month performance at close to 13.5% against Nifty's gain of 8 percent.

4. Hospitality stocks

As the lifts are being lifted across the nation, we may see traction in hospitality stocks such as both from the hotel space as also aviation and related sectors. Also, in its RBI bi-monthly policy outcome on Friday, the centre announced special loan schemes for these sectors as categorised within the contact intensive sectors.

For stocks like Indian Hotels experts suggest an 'Accumulate' call as and more so when we get it cheaply. 

Other stocks such as Interglobe Aviation is also recommended owing to its competitive strength in the industry when compared to similar peers such as Spicejet. So as and when there is recovery and the industry sees revival, the stock shall do good.