Post Market views - Aug 3, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities

Domestic equities extended gains and recorded fresh highs with benchmark Nifty finally breaching 16,000 psychological marks. Notably, a sharp rebound in heavyweight financials supported market's rally. Additionally, sustained recovery in auto, consumer, and IT aided indices. Barring metal, most key sectoral indices traded in green today, while volatility index surged over 6%. However, midcap and small cap stocks lagged today, and profit booking was seen in number of midcap and smallcap stocks. Hence, today was essentially a day of large cap stocks. Titan, HDFC Ltd, IndusInd Bank and SBI were among top Nifty gainers, while JSW Steel, Grasim, Bajaj Auto and Shree Cement were laggards.

Notably, key economic indicators like GST collection, auto sales volume and other high frequency indicators like e-way bills indicate a strong rebound in July, which bodes well and indicates sustained healthy corporate earnings in subsequent quarters. 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

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