Post Market views - Feb 18, 2022 - Reliance Securities

Mr Mitul Shah, Head Of Research at Reliance Securities

Domestic equities closed lower as geopolitical disturbances continue to throttle the markets. Nifty declined by 0.16%. Broader markets underperformed in comparison to main indices with Nifty Midcap and SmallCap decreasing by 0.91% and 1.06% respectively. All sectoral indices ended in red except Nifty Fin Service (+0.26%, Nifty PVT Bank (+0.06%) and Nifty Bank (+0.18%). Nifty Reality declined the most at 1.25% followed by Nifty Pharma (-0.87%) and Nifty Media (-0.69%).

U.S. equities ended sharply lower, as investors dealt with renewed fears of a Russian invasion on Ukraine. The Dow Jones dropped 1.8%, the S&P 500 lowered 2.1% while the Nasdaq tumbled 2.9%. Markets continue to be driven by Ukraine-Russia headlines, with NATO accusing Moscow of misleading the world over troop withdrawals, stating that the country had instead moved in about 7,000 additional soldiers. However, Russia insisted that it was pulling back its military units. The yield on the 10-year Treasury fell 7 basis points to 1.972%.

For 3QFY22, BSE 500 reported a healthy 24% YoY jump in revenue while EBITDA increased by 16% due to higher RM cost. 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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