Post Market views - July 7, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities

Domestic equites remained resilient and shrugged-off weak global cues as persistent traction in financials continued to lend support to markets. Notably baring Auto, most key sectoral indices traded in green towards the final session of the day. Midcap and Smallcap stocks once again saw strong interest from investors and outperformed broader indices. Metal index witnessed sharp rebound today as strong demand environment and expectations of sustained earnings recovery attracted investors. Tata Steel, JSW Steel, Hindalco and UPL were among top Nifty gainers, while Titan, ONGC, Shree Cement and RIL were laggards.

Notably, sharp rise in crude prices and strengthening dollar index weighed on sentiments in recent weeks. Resultantly, FIIs turned out as large net sellers. However, improving business momentum with ease of business curbs started offering comfort. We continue to believe that 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. Additionally, GST collection for June despite falling Rs1 trillion continues to indicate economic resilience and reflects narrow impact of second wave of COVID-19. Notably, announcement of slew of measures by Finance Ministry to spur economic activities augurs well. In our view, progress of monsoon, 1QFY22E corporate earnings and COVID-19 positivity rates will be in focus in the near term. 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

Keywords