Post Market views - Dec 21, 2020 - Mr. Binod Modi, Head Strategy at Reliance Securities

Domestic equities witnessed sharp selling pressure today and wiped out more than Rs 7 trillion of investors' wealthy in a single day. Concerns of new Covid-19 strains in UK and emerging doubts over efficacy of Covid-19 vaccination dented investors' sentiments globally. Indian markets were worst performer today, which we believe profit booking could also be a key reason as domestic equities have outperformed global markets by a wide margin in recent months. All sectoral Indices witnessed sharp sell off today ranging 2% to over 7%. Notably, volatility index witnessed sharp jump by ~25% in a single day indicating more volatility ahead.

Unlike nations where new Covid-19 strains are being seen and resulting in fresh business restriction, India looks to be better placed with continued improvement in recovery rates. Further, strong jump in 3QFY21 corporate advance tax indicates strong corporate earnings in current quarter as well, which should continue to support domestic equities. Hence, Indian equities are likely to remain as a buy on dips. However, considering rich valuations and high volatility, investors are advised to invest in quality stocks, which have strong earnings visibility, sound corporate governance and margins of safety.

Source : Equity Bulls

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