Post Market views - Jan 6, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities

Domestic equities witnessed high volatility today and corrected mainly on turning outcome of Georgia's run-off elections for two Senate seats in the favour of Democrats. Control of Senate by Democrats is likely to result in reversal of lower tax rates in the USA, which may create certain volatility in the market. Volatility index shot up sharply today over 5% at one point of time. A continued buying was seen in financials and metals stocks, whereas IT, FMCG and Pharma stocks were in pressure. Powergrid, Gail, Shree Cement and ICICI Banks were key gainers today, while ITC, RIL, Bajaj Finance and HCL Tech were in laggards.

In our view, announcement of date to begin vaccination drive and India continuing to remain the most resilient in the world in terms of Covid-19 recovery rates should continue of augur well for equities. Additionally, key economic indicators for Dec'20 show sustained recovery in the economic activities. Considering ongoing economic recovery and persistent weakness in dollar with soft monetary policies across the world, FPIs flow should continue to remain supportive for Indian equities. 3QFY21 earnings and Union Budget will be crucial for markets in the near term. We believe 3QFY21 earnings are unlikely to throw any major negative surprise and Union Budget is also expected to be pro-growth and constructive. However, market is already at all-time highs with rich valuations, hence investors must play cautiously at these levels. Focus should be on quality stocks with strong earnings potential and margins of safety.

Source : Equity Bulls

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