Post Market views - Feb 23, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities
(Time Zone: Arizona, USA)
Domestic equities witnessed roller coaster ride today amid high volatility. While favourable global cues aided benchmark indices to rebound after four consecutive days of decline, metals and realty indices recorded substantial gains ranging ~2.5-3%. Barring financials, all key sectoral indices traded in green today. Notably, midcap and smallcap stocks outperformed large cap once again as improving visibility of earnings recovery continues to attract investors in this space. Tata Motors, Tata Steel, ONGC and Hindalco were among top gainers, while Kotak Bank, Adani Ports, Maruti and Bajaj Auto were laggards.
We note that concerns pertaining to increase in bond yields and higher commodity prices dented investors' sentiments in last couple of days. However, underlying strength of economy and market remains intact in our view and hence any meaningful correction in the market should be used to buy. Union budget has already provided much needed impetus to the economy with substantial increase in capital expenditure and a slew of reform measures. While recent rise in crude prices can pose a challenge to economy and stoke inflation, we believe higher crude prices cannot sustain for long. Further, minutes from latest MPC meetings continues to advocate for dovish stance of the RBI in next fiscal despite concerns over core inflation highlighted by one of the key members. In our view, Indian companies are likely to see sustained earnings recovery in subsequent fiscals and therefore premium valuations are likely to sustain.