Post Market views - Feb 14, 2022 - Reliance Securities

Mr Mitul Shah, Head Of Research at Reliance Securities

Indian equities closed lower following disrupted global scenario as banking stocks drag down the domestic indices heavily. High inflation, record high crude prices, Russia Ukraine tussle and likely fed rate hike pulled down global equities including Indian equity market. Nifty declined by 3.23%. Broader markets underperformed in comparison to main indices with Nifty Midcap and SmallCap decreasing by 4.16% and 4.62% respectively. All sectoral indices ended in red. Nifty PSU Bank declined the most at 6.25% followed by Nifty Reality (-5.61%) and Nifty Metal (-5.21%).

US equities closed lower for the week due to the ongoing Russia-Ukraine conflict and rising crude oil prices. Investors also considered a sharp drop in consumer sentiment and a pickup in near-term inflation expectations. All three major indices saw a weekly decline, halting a two-week advance. Dow Jones dropped 1%, the S&P 500 fell 1.8%, Nasdaq or 2.2%, for the week.

With earnings season coming to end, 412 companies of BSE500, reported 23% YoY growth in revenue while EBITDA increased by 16% YoY due to higher commodity prices. In the past we have observed that volatility in market persists till the announcement of first rate hike by Fed, post which it settles down and flow in equities resume. Equities would continue to outperform 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. This trend would continue over the next 4-5 years, supported by China+1 policy and the government's support for various industries.

Source : Equity Bulls

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