Post Market views - Feb 18, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities

Domestic benchmark indices fell for the second consecutive day as profit booking in private banks, auto and FMCG dragged benchmark Nifty and Sensex. While IT and Metals rebounded today, PSU banks continued to remain in focus with PSU Bank index gaining for the fifth consecutive day. As expected, midcap and small cap stocks continued to attract investors' interest led by improved earnings visibility and outperformed broad indices. ONGC, GAIL, BPCL and NTPC were among top gainers, while Shree Cement, Bajaj Finance, Kotak Bank and HDFC Bank were laggards.

3QFY21 earnings have been quite encouraging and a large number of companies succeeded to top consensus earnings estimate. This along with increased visibility of sustaining corporate earnings rebound after favourable announcements in the Union Budget emboldened investors. Persistent inflows from FPIs, which was the key driving force for markets in recent period, are expected to sustain on account of; a) India continues to offer superior visibility in earnings rebound; b) continued soft monetary policy stance of global central bankers despite bond yield surging globally due to improving prospects of economic recovery, and c) persistent weak dollar. Sharp rise in crude prices and higher input cost could pose a near term challenge for the economy and markets, while possibility of further improvement in capacity utilization is likely to negate the impact to an extent. While we continue to maintain our positive stance on equity for long term perspective, a rotational trade can be visible, wherein sectors, which are expected to be major beneficiary of higher capex, are likely to outperform. Further, midcap and small cap stocks are likely to remain in focus led by improved earning visibility and valuations gap.

Source : Equity Bulls

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