Post Market views - Aug 2, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities

Domestic equities recovered sharply today as positive cues from global equities and strong rebound in auto supported benchmark Nifty. Further, modest recovery in financials, IT and pharma also supported market. Realty stocks were in focus after sharp improvement in property registrations in Mumbai for July, while decent improvement in monthly auto sales volume aided OEMs today. Notably, most key sectoral indices traded in green today, while volatility index broadly stood flat. Shree Cement, Titan, BPCL and Eicher Motors were among top Nifty gainers, while UPL, Tata Steel, Bajaj Finserv and ICICI Bank were laggards.

Notably, barring Financials, June quarter earnings so far have been encouraging and most companies succeeded to beat consensus estimates, which offered comfort and aided to restrict sharp fall despite selling pressure in global equities. Further, persistent soft monetary policy stance of Federal Reserve along with least possibility of any reversal of monthly bond buying in the near to medium term and recent softening of dollar index augur well for emerging markets including India. We further believe that intensifying asset quality worry for banks and NBFCs, especially after June quarter earnings reported by large private banks, is likely to ease with the reopening of complete economy and faster job creation. While concerns over global growth due to recent rise in delta variant Coronavirus cases in different parts of the world continues to persist, we believe that underlying strength of domestic market remains intact and any meaningful correction in the market should be taken as an opportunity to buy. In our view, progress of monsoon, 1QFY22E corporate earnings, RBI policy meeting outcome this week and COVID-19 positivity rates will be in focus in coming days. Further, higher government's capex and revival in industrials' capex should aid economic recovery. 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