Post Market views - July 5, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities

Domestic equities rebounded sharply today as strong recovery in financials, realty and metals aided markets. Further, strong rebound in Reliance Industries also extended support to market. Notably, baring IT and Pharma, most key sectoral indices rebounded today. Further, buying momentum remained visible in midcap and samllcap stocks as improved earnings prospects continued to attract investors' interest in this space. Volatility index softened marginally and standing at 12 level. We note visible recovery in economic activities, improved visibility of credit growth and increased possibility of recoveries aided banking stocks to see sharp recovery today. Hindalco, ONGC, Tata Steel and SBI were among top Nifty gainers, while Tech Mahindra, HDFC Life, Dr Reddy's and BPCL were laggards.

Benchmark indices appeared to be consolidating in the range of 15,600-15,900 in last couple of days, while sharp rise in crude prices and strengthening dollar index weighed on sentiments. Resultantly, FIIs turned out to be large net sellers in last week. While improving business momentum with ease of business curbs started offering comfort, a moderate rise in daily caseload in various states and increasing positivity rates in many districts can be a fresh worry in the near term. However, we continue to believe any meaningful correction in the market should be offering opportunity to investors to get in quality stocks. Strong data from core sector output for May, strong rise in import-export business momentum in June and visible traction in overall economic activities in June indicate healthy corporate earnings for 1QFY22E despite second wave of COVID-19. Notably, announcement of slew of measures by Finance Ministry to spur economic activities augurs well. In our view, high frequency key economic indicators in next couple of days i.e. GST collections, railway freight, e-way bills, etc. would be in focus as sharp improvement is expected due to reopening of states' economy. Further, higher government's capex and revival in industrials' capex should aid economic recovery. 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 outperform in FY22E.

Source : Equity Bulls

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