Post Market views - June 1, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities

Benchmark Nifty traded flat today despite positive global cues. Barring Pharma, most of key sectoral indices traded in red today with marginal correction. Further, Reliance Industry remained in focus today and arrested any sharp fall in the Index. Notably, profit booking was visible in midcap and small cap stocks today after witnessing sharp rally in last couple of days. Volatility index hardened today after continuous fall in last three days. Adani Ports, ONGC, Bajaj Finance and SBI were among top Nifty gainers, while JSW Steel, Tata Steel, ICICI Bank and Grasim were laggards.

Better than expected 4QFY21 GDP growth print at 1.6% and improvement in fiscal deficit figures augur well and should help to maintain positive sentiment about domestic equities. A sharp 28% YoY and QoQ jump in government's expenditures in 4QFY21 shows government's commitment to spur economic activities. Going forward, with continuous reduction in daily caseload in second wave and possibility of withdrawal of economic restrictions imposed by states, government's higher allocation towards capital expenditures for FY22E should reflect in economic growth. Additionally, various industries have also announced higher capex programme to sustain growth, which should also aid economic recovery. Therefore, notwithstanding some adverse impact on economic activities in 1QFY22E, a sharp pickup in capital expenditures in current fiscal is still on the cards. Hence, earnings recovery in FY22E remains promising. Further, soft bond yields in the USA and dollar index remaining comfortable in the range of 90 offer additional comfort. This along with improving prospects of earnings visibility has already resulted FIIs' flow to turn favourable in last couple of days. Investors will continue to focus on trajectory of daily caseload and vaccination ramp up in the country in the near term. While domestic equites continue to look good, investors must focus on quality stocks with robust earnings visibility and margins of safety. In our view, sectors considered to be major beneficiaries of capex revival are likely to be back in focus in coming weeks.

Source : Equity Bulls

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