Post Market views - Feb 4, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities

Domestic equities defied weak cues of Asian markets and extended gains for the fourth consecutive day as growing optimism about prospects of Indian economy post the announcement of bold budget continued to attract investors. Notably, domestic market crossed Rs200trillion market capitalization today. A strong buying in Banks especially PSBs and FMCG space supported market rally today. Barring IT, most of the key sectoral indices ended in green. We further note that midcap and small cap stocks equally participated in recent rally of the market post budget. ITC, SBI, Coal India and ONGC were among top gainers, while Asian Paints, UPL, Cipla and HDFC Life were laggards.

Notably, union budget has given much needed impetus to economy in terms of higher allocation towards capital expenditures and various bold reform measures to stimulate investment and consumption activities. This indicates that ongoing traction in corporate earnings should be sustainable in subsequent quarters, which should aid to sustain premium valuations of the markets. However, rise in crude oil prices and hardening of bond yield in the USA could be a near to medium term risk. Given weak dollar, soft monetary policy of global bankers and sizeable fiscal stimulus in the USA should remain as key tailwinds for FPIs flow into domestic equities. However, as market is trading at all-time highs with rich valuations and a number of stocks are trading ahead of fundamentals, investors need to be cautious at these levels and invest on quality stocks with robust earnings potential and margins of safety.

Source : Equity Bulls

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