Post Market views - Jan 8, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities
(Time Zone: Arizona, USA)
Domestic equities witnessed sharp rebound with Nifty clocking fresh record highs today mainly on strong global cues. Growing expectations of stronger fiscal stimulus in the USA after Congress confirmed president elect Joe Biden's victory have fueled equities rally globally. Markets completely downplayed earlier concerns of reversal of lower tax rates in the scenario of Democrats taking control of both the houses of Congress. Auto and IT stocks witnessed strong rebound, while Pharma, Realty and Financials also were in action. Barring metals and PSU Banks, most of key sectoral indices ended in green. Wipro, Tech Mahindra, Maruti and UPL were top gainers today, while Hindalco, Tata Steel, IndusInd Bank and Bharti Airtel were laggards.
A sustained rebound in key economic data for Dec'20 and likely commencement of vaccination drive shortly in India augur well for domestic equities. The underlying strength of domestic equities is intact, which essentially can propel benchmark indices to witness fresh highs in coming weeks. FPIs are unlikely to turn net sellers barring select weeks of days considering the status of global economy, stance of global central bankers and weak dollar. We believe Union Budget and 3QFY21 earnings are key events for domestic equities in the near term, which will offer clarity about sustainable economic rebound. However, given a sharp run up in recent months, a large number of stocks are trading ahead of their valuations and hence investors must play cautiously. Focus should be made only on quality stocks with high earnings visibility and margins of safety.