Post Market views - July 30, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities
(Time Zone: UTC)
Domestic equities traded in a range bound today, while sharp recovery in auto, pharma and realty stocks supported benchmark indices. Further, better than expected performance reported by Tech Mahindra and Sun Pharma helped stocks to see sharp up-move. However, financials remained soft today. Notably, baring financials, most key sectoral indices traded in green today, while strong buying continued to remain visible in midcap and small cap stocks. For the week benchmark Nifty contracted marginally by 0.5%, while investors wealth grew by modestly by Rs500bn during the week. Sun Pharma, Tech Mahindra, Cipla and Shree Cement were among top Nifty gainers, while Hindalco, SBI Life, Bajaj Finance and SBI were laggards.
Notably, selling pressure in Asian markets led by mounting regulatory concerns about Chinese tech stocks weighed on sentiments this week. However, 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. Visible improvement in key economic data in June and satisfactory ramp-up in vaccination indicate healthy corporate earnings in subsequent quarters. Further, expectations of sustained soft monetary policy stance of the RBI despite higher inflation and recent drop in crude prices augur well for equities in India. In our view, progress of monsoon, 1QFY22E corporate earnings and COVID-19 positivity rates will remain in focus in the near term. 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.