Post Market Views - Dec 9, 2021 - Reliance Securities

Mr Mitul Shah, Head Of Research at Reliance Securities

The domestic market traded marginally up amid volatility, while broader market outperformed the main indices, NSE Mid-Cap up 0.4% while Nifty Small cap gained ~1%. The capital goods index up 1%, while buying is also seen in the FMCG, metal and oil & gas stocks. Nifty IT declined by 0.5%. The monetary policy turned out to be dovish as expected and came with no surprises. The central bank kept its stance, policy rate and corridor unchanged and did little to provide any forward guidance on the path of future policy rate increases. This is in contrast to other global central banks that are turning towards tightening monetary policy. The committee's focus is clearly on supporting growth through sufficient liquidity and low interest rates despite street fears over rising inflation, changes in interest rate policy by global economies and high commodity prices. The RBI of course can fine-tune the surplus liquidity to manage rates depending on the evolving situation. Since the last monetary policy there has been significant recovery visible from the high-frequency indicators and the vaccination rate has improved further. While keeping the faith in the growth momentum, the RBI also has retained the GDP projections at 9.5% for FY22.

The volatility in recent weeks is due to rise in dollar index and absence of positive surprise from 2QFY22 earnings especially due to higher input costs. Notably, high input costs have adversely impacted margins and profitability of consumer and manufacturing companies despite steady volume and sales growth. Notably, MPC meeting minutes pointed towards uneven growth as 55% of industries in India are still operating below FY20 levels. In our view, India is at the beginning of capex revival phase and therefore corporate earnings recovery looks sustainable and premium valuations might sustain.

Source : Equity Bulls

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PostMarketViews RelianceSecurities Nifty MidCap SmallCap IT FMCG