Post Market views - Jan 7, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities

Domestic equities remained firm today mainly supported by strong global cues. Strong rebound in Banks, Auto and Realty index supported markets, while metals stocks outpaced all. However, it was midcap and small cap stocks, which stole the show once again and investors continued to chase this space owing to wider valuations gap and improved prospects of earnings recovery. Tata Steel, Hindalco, Bharti Airtel and IndusInd Bank were top gainers, while HUL, Divi's, HDFC Life and Titan were key laggards.

An increased possibility of higher fiscal stimulus in the USA after Democrats taking control of both houses in the Congress bodes well for emerging markets including India in the medium term. Further, given current status of global economy and stance of global central bankers with weak dollar, we believe FPIs flow should continue to remain favourable in the near to medium term perspective. 3QFY21 corporate earnings and Union Budget are crucial for the markets. We believe given sustained rebound in key economic data of recent months, 3QFY21 earnings are unlikely to throw any major negative surprise. Additionally, likely commencement of vaccination roll out from next week bodes well domestic equities. However, as markets are trading at all-time highs where the valuations of a number of companies are ahead of fundamentals, investors must be cautious and bet only on companies which have strong earnings potential and margin of safety.

Source : Equity Bulls

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