Post Market views - Sep 24, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities
2021-09-26 16:59:34 (Time Zone: IST)
Benchmark indices extended gains amid mixed global cues mainly led by sustained rebound in IT and financials. However, selling pressure was seen today in midcap space as investors preferred to book some amount of profit after seeing strong rebound in recent period. Notably, barring IT, financials and auto, most key sectoral indices traded in red. IT stocks were in focus today as strong guidance shared by Accenture lifted sentiments. Additionally, Nifty realty extended gains today by recording gain of over 1% as improving earnings visibility of real estate companies continued to attract investors. For the week, benchmark Nifty gained over 1.5%, while over Rs2 trillion was accumulated in investors' wealth in the week. Asian Paints, M&M, Eicher Motors and HCL Tech were among top Nifty gainers, while Tata Steel, JSW Steel, SBI and Axis Bank were laggards.
Notably, investors remained on tenterhook with regards to progress on Evergrande. Investors need clarity about interest payout of US$83.5mn, which was due to 23rd Sept, and nothing has come out so far in this regard, which essentially indicates a kind of defaults and may weigh in sentiments. However, favourable outcome from FOMC meeting has offered comfort to global markets in last two days. Additionally, we continue to believe that high frequency key economic indicators for Aug'21 in the form of GST collection, railway freight, auto sales volume despite semiconductor issues, power consumption, import-export data and fuel volumes indicate a sustained economic recovery on YoY comparison. Additionally, ease of retail inflation at 5.3% for August bodes well as this should essentially aid RBI to maintain its soft monetary policy stance to support ongoing recovery in economic momentum. In our view, while 1QFY22 GDP growth 20.1% indicating a sharp recovery, there has been sharp contraction in sequential comparison due to second wave of COVID-19 and growth is still lagging from pre-pandemic level. Hence, economy still needs policy support from government and RBI, which is likely to persist. India is at the beginning of capex revival phase and therefore corporate earnings recovery looks sustainable and premium valuations might sustain. Additionally, government's focus to improve credit growth through credit outreach programme and continued traction in PLI schemes augur well for domestic economy. While concerns over global growth due to recent rise in delta variant Coronavirus cases in different parts of the world continue to persist, we believe that underlying strength of domestic market remains intact. In our view, festive demand, recovery in rural demand, COVID-19 positivity rates and vaccination ramp-up will be in focus in the near term. We further believe that higher government's capex and revival in industrials' capex should aid economic recovery. However, liquidity driven market may take a backseat in 2022 and investors must start focusing on quality aspect of companies, in our view.