Post Market views - Jan 20, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities
(Time Zone: Arizona, USA)
Domestic equities extended their gains today with benchmark indices recording fresh highs despite mixed global cues. Barring FMCG and realty, most of the sectoral indices contributed positively. IT stocks witnessed sharp recovery today after seeing profit-booking for last couple of trading days. Similarly, PSU Banks again remained in focus today especially on news regarding fresh recapitalization. Notably, volatility index softened for second consecutive day in the range of 21-22, which augurs well for the markets. Tata Motors, Adani Port, Wipro and Tech Mahindra were top gainers, while HDFC Bank, Shree Cement, GAIL and NTPC were laggards.
In our view, underlying strength of domestic markets remains intact despite a large portion of expected earnings recovery has been factored in current valuations. A scenario of large fiscal stimulus from the USA, soft monetary policy stance by global bankers, weak dollar and continued improvement in economic activities should continue to act as key tailwinds for FPIs flow. Further, low appetite for other traditional asset classes and rising popularity about equities among vast population (which is evident from record number of new Demat accounts in 2020) augur well for domestic equities, which may aid markets to sustain premium valuations. Union Budget is likely to be the most crucial event for the year, which will offer clarity about sustainability of economic rebound in subsequent quarters. We believe there might be some rotational trading ahead of budget, where sectors like infrastructure, building materials, healthcare, real estate, select auto and agro chemical should be in focus in coming days. However, considering rich valuations of the market, investors must be cautious and invest in quality stocks, which have robust earnings visibility and margins of safety.