Post Market views - Aug 4, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities

Domestic equities extended gains today with benchmark Nifty scaling fresh high mainly on the back of sharp rebound in heavyweight financials. Further, positive cues from global equities also lifted sentiments. Notably, Financials have been sole driving force today for market rally, which essentially triggered after better-than-expected June quarter performance reported by SBI. However, it was not a broad-based rally today as sharp profit booking remained visible for second consecutive day in midcap and smallcap stocks. Notably, Nifty midcap and smallcap indices are down over 1% today. Barring, Financials, most key sectoral indices traded in red towards the final session of the market. HDFC Bank, Kotak Bank, ICICI Bank and SBI were among top Nifty gainers, while Grasim, Titan, Tata Motors and Maruti were laggards.

Notably, key economic indicators like GST collection, auto sales volume and other high frequency indicators like e-way bills indicate a strong rebound in July, which bodes well and indicates sustained healthy corporate earnings in subsequent quarters. Further, India stands to be benefitted from China's regulatory crackdown on technology and education companies in recent weeks in the form of FIIs investments. Notably, barring Financials, June quarter earnings so far have been encouraging and most companies succeeded to beat consensus estimates, which offered comfort and aided to restrict sharp fall despite selling pressure in global equities. Further, persistent soft monetary policy stance of Federal Reserve along with least possibility of any reversal of monthly bond buying in the near to medium term and recent softening of dollar index augur well for emerging markets including India. We further believe that intensifying asset quality worry for banks and NBFCs, especially after June quarter earnings reported by large private banks, is likely to ease with the reopening of complete economy and faster job creation. While concerns over global growth due to recent rise in delta variant Coronavirus cases in different parts of the world continues to persist, we believe that underlying strength of domestic market remains intact and any meaningful correction in the market should be taken as an opportunity to buy. In our view, progress of monsoon, 1QFY22E corporate earnings, RBI policy meeting outcome this week and COVID-19 positivity rates will be in focus in coming days. 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.

Source : Equity Bulls

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