Post Market views - Dec 28, 2020 - Mr. Binod Modi, Head Strategy at Reliance Securities

Domestic equities remained upbeat and gained sharply led by strong rebound in financials and cyclical sectors. Satisfactory progress on vaccination rollout globally, Brexti trade deal and president Trump signing pandemic relief bill in the USA bolstered investors' confidence globally. Baring Pharma, most sectoral indices witnessed sharp rebound. Volatility index also surged over 4% during the day before settling lower from day's high. Tata Motors, JSW Steel, Titan and SBI were among top gainers, whereas Shree Cement, Sun Pharma, Cipla and Britannia were laggards.

Domestic equities continue to look good given improved prospects of earnings recovery. Strong improvement in advance corporate tax data for 3Q and consistent improvement in high frequency economic data indicate strong earnings recovery. However, considering last week of 2020 (which essentially results in portfolio rebalancing by a number of investors) and F&O expiry, volatility is expected to be high in coming days. In our view, 3QFY21 corporate earnings are to be key catalyst for markets in the near term. However, considering rich valuations of the markets and threat emerging from higher input costs, market rally might not be broad based going forward and therefore investors are advised to focus on quality stocks with offers decent margins of safety and strong earning potential.

Source : Equity Bulls

Keywords