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

Domestic benchmark indices extended gains as rebound in IT and metals supported Nifty to scale new highs today. Additionally, recovery in FMCG stocks and RIL supported market. However, it was again not a broad-based rally as profit booking in midcap and smallcap stocks remained visible with Nifty midcap and Smallcap indices declining for the third consecutive day. Bharti Airtel was in focus today as recent tariff hike and expectations of better ARPU in subsequent quarters supported Bharti Airtel. PSU Bank and Realty stocks witnessed steep correction, while volatility index declined by ~1.5%. Bharti Airtel, ITC, Eicher Motors and Tech Mahindra were among top Nifty gainers, while SBI, IndusInd Bank, Bajaj Finance and ICICI Bank were laggards.

Going forward, given sharp improvement in key economic indicators like GST collection, auto sales volume and other high frequency indicators like e-way bills in July, we believe strong momentum of corporate earnings recovery may sustain in subsequent quarters. This should aid market to sustain premium valuations. Further, India stands to be benefitted from China's regulatory crackdown on technology and education companies in recent weeks in the form of FIIs investments. Notably, barring Financials, June quarter earnings so far have been encouraging and most companies succeeded to beat consensus estimates, which offered comfort. 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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