Post Market views - Aug 27, 2021 - Mr. Binod Modi, Head Strategy at Reliance Securities

Domestic equities bounced back amid mixed cues from global equities with Nifty recording fresh all-time highs. A sharp rebound in metals and pharma stocks and sustained recovery in IT supported benchmark indices. Notably, most key sectoral indices traded in green today ahead of Federal Reserve Chairman's crucial speech today in the Jackson Hole Symposium tonight. Strong buying was visible in midcap and smallcap stocks today after sharp sell-off in recent period. For the week, benchmark Nifty recovered over 1.5%, while investors' wealth increased significantly over Rs5.5 trillion during the week, which is quite impressive. UltraTech Cement, Hindalco, SBI Life and L&T were among top Nifty gainers, while IndusInd Bank, Infosys, M&M and Nestle were laggards.

We believe India is at the beginning of capex revival phase and therefore corporate earnings recovery looks sustainable. Notably, 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. Additionally, government's focus to improve credit growth through credit outreach programme augurs well for domestic economy. Additionally, 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-loose monetary policy. 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. We further believe as Federal Reserve intends to reverse its ultra-loose 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, festive demand, recovery in rural demand and COVID-19 positivity rates will be in focus in the near term. We note higher government's capex and revival in industrials' capex should aid economic recovery.

Source : Equity Bulls

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