Post Market views - July 15, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities
(Time Zone: UTC)
Domestic equities extended gain with benchmark indices Nifty and Sensex recording fresh all-time high today. Notably, continued rebound in IT stocks followed by Financials supported today's rally. We note strong revenue performance and strong deal wins reported by key IT companies in 1QFY22 attracted investors toward IT pack. Baring auto, pharma and PSU Banks, buying momentum was visible in most of key sectors. Realty stocks witnessed sustained rebound due to better-than-expected improvement in operational performance of real estate companies in 1QFY22. HCLT, L&T, Tech Mahindra and Wipro were among top Nifty gainers, while ONGC, Eicher Motors, Coal India and Bharti Airtel were laggards.
Notably, dovish remark of Federal Reserve Chairman Powell in his testimony despite surge in inflation should offer comfort to global equities including India. Apparently, benchmark Nifty, which was consolidating in the range of 15,600-15,900 for last couple of weeks, is set to cross 16,000 levels shortly. In our view, higher crude prices, spread of delta plus variant globally and weakening INR could be a near risk for markets. However, we continue to believe that underlying strength of market remains intact and therefore any meaningful correction in the market should be taken as an opportunity to get in quality stocks. Visible improvement in key economic data including IIP, import-export business momentum and visible traction in overall economic activities in June indicate healthy corporate earnings for 1QFY22E despite second wave of COVID-19. IT companies have so far delivered better than expected performance on revenue lines and strong deal wins along with encouraging management commentaries augur well for the sector. In our view, progress of monsoon, 1QFY22E corporate earnings and COVID-19 positivity rates will be in focus in the near term. Further, higher government's capex and revival in industrials' capex should aid economic recovery. 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 outperform in FY22E.