Post Market views - July 6, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities

Domestic equities traded in a rangebound with Nifty breaching 15,900 levels mainly supported by sharp rebound in financials. However, selling pressure in Auto, IT, Pharma and FMCG overshadowed surge in Financials. Improved prospects of higher credit growth led by pick-up in economic activities and increasing possibility of higher recovery aided banking stocks. Further, cement stocks were in focus today on expectations of strong 1QFY22 earnings. Notably, selling pressure was visible in smallcap stocks. while volatility index inched up over 1% today. UltraTech Cement, HDFC Bank, Shree Cement and Bajaj Finance were among top gainers, while Tata Motors, Tech M, TCS and Coal India 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 in last couple of days. 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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