Post Market views - June 15, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities
(Time Zone: UTC)
Domestic equities remained firm and steady with benchmark indices Nifty and Sensex recording fresh all-time highs. A rebound in financials, FMCG and Reliance Industries supported market today. Further, positive cues from global markets also aided sentiments. Baring pharma, most key sectoral indices traded in green. Midcap and smallcap indices traded at with broader indices. Asian Paints, Axis Bank, SBI Life and HDFC Life were among top Nifty gainers, while Divi's Lab, Coal India, Baja Finance and Hindalco were laggards.
Indian equites remained buoyant in last couple of weeks aided by withdrawal of business curbs by states and improved prospects of economic recovery. Higher than expected CPI print for May and continued surge in fuel prices remains a near term worry for the markets. However, prospects of sharp recovery in economic activities in coming months overshadows these concerns. Notably, government's plan to expedite development programmes to push economic activities and pickup in business activities are expected to result in sharp improvement in high frequency key economic indicators from current month onwards. Sharp growth in IIP data for April indicates strong 1QFY22 earnings performance but pick up in consumption is much needed to sustain improvement in coming months. Investors will be watching out the progress on daily caseload (which looks to have weakened significantly), vaccination ramp-up and monsoon progress in coming weeks. In addition to high government's capex, various industries have also announced higher capex programme to sustain growth, which should also aid economic recovery. Therefore, notwithstanding some adverse impact on economic activities in 1QFY22E, a sharp pickup in capital expenditures in current fiscal is still on the cards. Hence, earnings recovery in FY22E remains promising. While domestic equites continue to look good, investors must focus on quality stocks with robust earnings visibility and margins of safety. In our view, sectors considered to be major beneficiaries of capex revival are likely to be back in focus in coming weeks. Soft bond yields and improving prospects of earnings visibility have resulted FIIs' flow to turn favourable in last couple of days, which are expected to sustain. However, FOMC meeting outcome this week will also be crucial for Indian equities.