Post Market views - Jan 7, 2022 - Mr Mitul Shah, Head of Research at Reliance Securities

Domestic equities closed higher after volatile session. The market opened higher despite negative global cues, and later on witnessed some profit booking in the second half. It picked up again during last hour of trade. The Nifty closed 0.3% higher, while the broader market outperformed the main indices, Nifty MidCap 100 was up 0.55% while SmallCap index was up 0.43%. Majority of sectors were in green except Auto, Media and Pharma. US equities finished lower across the board with the Nasdaq Composite giving up a modest bounce in the final minutes of trade. The Dow Jones fell 0.5%, The S&P 500 down 0.1% while Nasdaq slipped 0.13%. Selling continued after the release of minutes from the FOMC meeting which showed officials not only talked about quicker and more frequent interest-rate hikes but also about a more aggressive wind-down of its $8.9 trillion balance sheet. The yield on the 10-year Treasury yield was at 1.733%, rising about 24 basis points. Unemployment benefits rose but remained at historically low levels, suggesting that the job market remains strong. US jobless claims rose by 7,000 to 207,000. The four-week average of claims rose by nearly 4,800 to just below 205,000.

India appears to be better-placed in terms of handling COVID compared to other countries throughout the pandemic, be it the first wave, second wave, Delta variant or the ongoing Omicron on the basis of which we expect fastest revival from the current slowdown along with similar strong bounce-back in the market. In past we have observed that volatility in market persists till the announcement of first rate hike by Fed, post that it settles down and flow in equities resumes. Equities would continue with the outperformance with double-digit returns. Our year-end 2022 target for Nifty stands at 20,000, valuing it at 22x FY24E earnings. We expect Nifty to enjoy premium valuation for the next 1-2 years on the back of higher earnings CAGR (before reaching stable earnings pace of growth), as India becomes a preferred destination for global manufacturing, going ahead. This trend would continue over the next 4-5 years, supported by China+1 policy and the government's support for various industries. We believe that an all-round calibrated economic recovery is on the cards, though the timing remains highly uncertain. Recently rising Covid cases in India is of concern now and how it would shape up in coming days would key deciding factor for market trend in the month. We would be monitoring situation on recent Covid surge and Omicron issue.

Source : Equity Bulls

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