The Indian economy has rebounded strongly post the second Covid wave with high-frequency indicators pointing to a V-shaped recovery to pre-second wave levels. While
manufacturing had led in the initial phase of the rebound, gradual withdrawal in restrictions has led to a strong rebound in the services sector since Aug 21. We expect
the economic recovery process to continue led by strong festive demand and continued
acceleration in the services sector. Significant progress on the vaccination front will restrict the fallout from any possible third Covid wave. Going ahead, we expect banking and consumer-facing sectors to drive the markets given an expected rebound in
earnings in H2FY2022. We also remain positive on the IT sector given the structural
up-shift in the medium-term growth trajectory for the sector. Although on a P/E basis the
Nifty is trading above its five-year average, ex of IT and RIL, the Nifty is still near its
five-year average which provides comfort.
