Post Market views - Aug 23, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities

Domestic equities remained volatile despite witnessing brisk opening today. Strong cues from global equites aided benchmark indices to witnessed modest recovery, which was also supported by sustained rebound in IT stocks. Nifty IT gained over 1.8% today followed by Financials recording modest gain. An improved visibility of sustained earnings growth with least volatility compared to other industries attracted towards IT stocks. Midcap and smallcap stocks remained under pressure, while volatility index contracted ~2%. Notably, telecom stocks also witnessed some positive action following release of subscribe addition data for June released by TRAI. HCL Tech, TCS, Nestle and Wipro were among top Nifty gainers, while Grasim, Adani Ports, M&M and Eicher Motors were laggards.

Notably, minutes of MPC meeting held in the beginning of this month continues to show RBI's commitment to ensure policy support to sustain economy recovery despite select members showing some apprehensions about high inflation and pitching for gradual normalization in ultra-soft monetary policy. Further, considering improved visibility of sustained earnings recovery in subsequent quarters, a meaningful correction in quality midcap names should be bought. A sharp improvement in key economic indicators like GST collection, auto sales volume despite supply disruption, improvement in collection efficiencies of MFIs and other high frequency indicators like e-way bills, power consumption, strong import-export growth in July, etc. indicate sustainable rebound in corporate earnings in subsequent quarters. This should aid market to sustain premium valuations. 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. Additionally, as Federal Reserve intends to reverse its ultra-soft monetary policy by the end of this year, liquidity driven market rally might take a backseat and therefore investors should be advised to focus on quality companies with strong fundamentals. In our view, progress of monsoon, festive demand and COVID-19 positivity rates will be in focus in coming days. We note higher government's capex and revival in industrials' capex should aid economic recovery.

Source : Equity Bulls

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