Post Market views - Dec 17, 2021 - Mr Mitul Shah, Head Of Research at Reliance Securities

The market witnessed heavy profit selling after flat opening, all the sector except IT closed lower following negative implications Fed tapering & Bank of England's outcome, rising cases of Omicron variant and negative cues from Asian markets. US sanctions on China over human rights issues also weighed on Shanghai market which is down ~1%. The Nifty IT index continued to gain, with the IT index up 1.4% following strong guidance from global IT giant Accenture . Almost all the components on the IT index were in the green, with Infosys leading the pack. The Bank of England lift interest rates to 0.25% from 0.10%. The European Central Bank would further slow purchases of assets under its Pandemic Emergency Purchase Program in the first quarter of next year. But the ECB softened the blow by planning to raise purchases under a separate, existing program in the second quarter, while ECB President Christine Lagarde reiterated that a rate increase in 2022 is unlikely.

Fed tapers bond buying aggressively, pencils in 3 rate hikes next year. The Fed will be buying $60 billion per month of bonds starting in January, down from December's rate of $90 billion, will likely to continue that trajectory in the months ahead. The central bank, as expected, announced a faster reduction in the pace of its bond buying to tackle high inflation rates. US government's focus is clearly on supporting growth through sufficient liquidity and low interest rates despite street fears over rising inflation, changes in interest rate policy by global economies and high commodity prices. Indian banks have started increasing interest rates, while negative verdict by RBI on NBFC norms weighed on banking stocks, pulling down overall index. However, India is at the beginning of capex revival phase and therefore corporate earnings recovery looks sustainable and premium valuations might sustain, barring near term hiccups.

Source : Equity Bulls

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