Post Market views - Jan 5, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities

Domestic equities saw a brisk recovery from today's low mainly led by sharp rebound in banking and IT stocks. Continued improvement in Covid-10 recovery rates along with likely commencement of vaccination drive shortly and sustained improvement in key economic data defied weak global markets. IT stocks witnessed strong buying ahead of TCS's 3QFY21 numbers. However, other key sectoral indices like auto, pharma, FMCG and metals were in red. Axis Bank, IndusInd Bank, Wipro and HDFC were top gainers today, while Bajaj Finance, Tata Steel and ONGC were laggards.

Key economic data for Dec'20 have been quite encouraging, which along with likely commencement in vaccination drive in India have bolstered investors' confidence. Hence, domestic equities are likely to remain in buy on dips mode. While apprehension around potential rise in borrowing costs in the USA could be a near term concerns, considering current status of economy and stance of fed reserve, any reversal in interest rate scenario is unlikely to happen in the medium terms. Therefore, we believe FPIs flow into domestic equities should continue to remain favourable. 3QFY21 corporate earnings and Union Budget will be crucial events for the markets in the near term. Sectors which were laggard so far and did not witness convincing pick up due to pandemic, might be in focus hereon due to higher chances of budgetary support and wider valuations gap. However, as market is already at all-time highs with rich valuations, investors must play cautious by investing in quality companies with high earnings visibility and margins of safety.

Source : Equity Bulls

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