Post Market views - Feb 8, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities

Domestic equities remained in the grip of bulls with benchmark indices extending gains for the sixth consecutive day. Improved prospects of sustained economic recovery on the backdrop of sharp increase in capital expenditures and bold reform measures have emboldened investors. While global equities remained favourable today, benchmark index Nifty and Sensex recorded fresh all-time highs. Barring FMCG and PSU Banks, all key sectoral indices ended in green. However, volatility index surged over 2.5% today showing sign of discomfort at these levels. M&M, Hindalco, Shree Cement and Tata Motors were among top gainers today, while Britannia, HUL, Kotak Bank and ITC were laggards.

High capex and bold reforms announced in the Union Budget indicates that recent uptick in high frequency key economic data and rebound in corporate earnings are likely to sustain in subsequent quarters. Additionally, RBI supporting pro-growth strategy of government by maintaining liquidity at required levels and balancing bond yields bodes well. Low interest rate scenario, which is the key catalyst for corporate earnings revival, is likely to stay in FY22E. Additionally, huge fiscal stimulus in the USA, soft monetary policy stance of global central bankers and weak dollar should continue to remain as key tailwinds for FPIs flow in domestic equities. However, considering market is already trading at all-time highs with valuations started hitting the roof; investors need to be cautious at these levels and focus on companies which have high earnings visibility and margins of safety. In our view, sectors which are the key beneficiary of high capex programme of government are likely to do well in the medium-term perspective. In our view, Infrastructure, industrials, engineering, building materials, banks and select auto stocks are likely to be in focus.

Source : Equity Bulls

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