Post Market views - Feb 16, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities

Domestic equities witnessed some amount of pullback after witnessing a brisk opening today. PSU Banks and Metals remained in focus. However, selling pressure in Financials, IT and FMCG dragged index. Volatility index also surged almost ~2%. Notably, mid cap and small cap stocks remained in focus as improved earnings visibility started attracting investors in this space. Powergrid, ONGC, Tata Steel and Hindalco were top gainers, while Axis Bank, ICICI Bank, Infosys and Nestle were key laggards.

A continued buying from FIIs has been a major driving force in recent period. Huge capital expenditure programme announced in the Union Budget along with bold measures to revive consumption and investment activities emboldened investors. Additionally, robust 3QFY21 earnings and improved visibility of sustaining earnings rebound supported market rally. Further, indication given by the RBI in latest policy meet outcome to keep interest rates lower by maintaining sufficient liquidity in the system and supporting government's pro-growth policy also offered comfort. Softening in CPI data, which is within RBI's reference range, augurs well for ongoing low interest rate scenario as low interest rate cycle was a prime factor to revive corporate earnings in recent quarters. In our views, infrastructure, industrials, engineering, building materials, banks and select auto stocks are likely to outperform in the medium to long term perspective as these are the key beneficiary of higher capital expenditures. However, current valuations of market are factoring a large portion of earnings rebound and therefore investors need to be cautious at these levels and must focus on quality names with robust earnings visibility and margins of safety.

Source : Equity Bulls

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