Mr Mitul Shah, Head Of Research at Reliance Securities
Domestic equities closed marginally higher with the market opening higher taking positive global cues and strong IT results, though it remained volatile throughout the day. The Nifty closed 0.26% higher. While the broader market outperformed the main indices, Nifty MidCap gained 0.68% while SmallCap index was up 0.66%. All sectoral indices closed higher except Nifty Bank, Nifty Fin Service, Nifty Realty and Nifty Pvt Bank. Nifty Metal gained the most (3.53%), followed by Nifty Auto (1.64%) and Nifty Media (0.51%). US equities closed higher after the consumer prices data largely met expectations and eased some concerns about faster-than-expected interest rate hikes.The Dow Jones rose 0.1%, S&P 500 index climbed 0.3% Nasdaq advanced 0.2%. The 10-year Treasury yield fell 2 basis points to 1.725%. Consumer price index increased 0.5% last month after rising 0.8% in November, while in the 12 months through December, the CPI surged 7.0% to its highest year-on-year rise in nearly four decades.
India appears to be better-placed in terms of handling COVID compared to other countries throughout the pandemic. In past we have observed that volatility in market persists till the announcement of first rate hike by Fed, post that it settles down and flow in equities resumes. Equities would continue with the outperformance with double-digit returns. Our year-end 2022 target for Nifty is 20,000 at 22x FY24E earnings. We expect Nifty to enjoy premium valuation for the next 1-2 years on the back of higher earnings CAGR (before reaching stable earnings pace of growth), as India becomes a preferred destination for global manufacturing, going ahead. Sectors like IT Services, Engineering, Capital Goods and EV ecology would continue to be in focus ahead of Union Budget 2022.