Post Market views - Sep 15, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities
2021-09-15 18:16:38 (Time Zone: IST)
Domestic equities witnessed sharp rebound today with benchmark indices Nifty and Sensex recording fresh all-time highs despite weak global cues. Notably, sharp rebound in IT, financials especially PSU banks, auto and metals aided strong rally and added over Rs2 lakh crore in investors' wealth. Barring, Nifty Media, all sectoral indices traded in green today. Additionally, strong buying in midcap stocks remained visible, while volatility index hardened over 1%. Telecom stocks were in focus today as relief measures for telecom sector from government aided sentiments. NTPC, Bharti Airtel, Coal India and ONGC were among top Nifty gainers, while Tata Consumers, BPCL, Nestle and UltraTech Cement were laggards.
A strong rebound in FIIs flow in last two days (bought over Rs30bn equities in two days) augured well, which led Nifty to record fresh all-time high. Unlike developed markets, faster ramp-up in vaccination process and relatively lower daily caseload offer India an edge over other markets and therefore domestic bourses are resilient despite pressure in global equities. Additionally, we continue to believe that high frequency key economic indicators for Aug'21 in the form of GST collection, railway freight, auto sales volume despite semiconductor issues, power consumption, import-export data and fuel volumes indicate a sustained economic recovery on YoY comparison. Further, July month IIP at 11.5% (higher than consensus estimate) almost reaching to pre-pandemic level also offers comfort. Further, ease of retail inflation at 5.3% for August bodes well as this should essentially aid RBI to maintain its soft monetary policy stance to support ongoing recovery in economic momentum. In our view, while 1QFY22 GDP growth 20.1% indicating a sharp recovery, there has been sharp contraction in sequential comparison due to second wave of COVID-19 and growth is still lagging from pre-pandemic level. Hence, economy still needs policy support from government and RBI, which is likely to persist. India is at the beginning of capex revival phase and therefore corporate earnings recovery looks sustainable and premium valuation might sustain. Additionally, government's focus to improve credit growth through credit outreach programme and continued traction in PLI schemes augur well for domestic economy. 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. In our view, festive demand, recovery in rural demand and COVID-19 positivity rates will be in focus in the near term. We note higher government's capex and revival in industrials' capex should aid economic recovery. However, liquidity driven market may take a backseat in 2022 and investors must start focusing on quality aspect of companies, in our view.