Post Market views - July 16, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities
(Time Zone: UTC)
Domestic equites traded in a range bound today with Nifty and Sensex hitting fresh all-time highs. However, profit booking IT after witnessing sharp recovery in recent days followed by selling pressure in financials dragged Nifty. However, pharma stocks were in focus today followed by metals. Notably, buying momentum in midcap and smallcap stocks sustained led by expectations of strong earnings. Divi's Lab, Bharti Airtel, Tata Steel and UltraTech Cement were among top Nifty gainers, while HCLT, Eicher Motors, Infosys and Shree Cement were laggards. For the week, Nifty gained over 1.2%, while investors' wealth increased by Rs2.9 lakh crore during the week.
Notably, dovish remark of Federal Reserve Chairman Powell in his testimony despite surge in inflation and soft bond yield in the USA in recent days offered 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. Further, expectations of sustained soft monetary policy stance of the RBI despite higher inflation augur well for equities. 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.