Post Market Views - Jan 12, 2022 - Reliance Securities

Mr Mitul Shah, Head Of Research at Reliance Securities

Domestic equities closed higher for fourth consecutive day. The market opened higher taking positive global cues, ahead of strong IT result expectation. It witnessed buying momentum throughout the day. The Nifty closed 0.9% higher, while the broader market outperformed the main indices, Nifty MidCap gained 1.25% while SmallCap index was up 0.9%. All sectoral indices were closed higher except Nifty Pharma, Nifty Realty gained 1.9% followed by Auto (1.45%) and Nifty Metal (1.33%). US equities ended higher with IT sector leading the gain. The markets appeared to take testimony by Fed Chairman Jerome Powell in stride as they looked for clues to the pace of future rate increases and other plans for tightening monetary policy in 2022. The Dow Jones rose 0.5%, S&P 500 advanced 0.9%, while Nasdaq jumped 1.4%. The markets digested Fed Chairman Jerome Powell's testimony before the Senate Banking Committee in a hearing on his nomination to serve a second term. Powell painted a picture of a soft landing for the economy as the Fed moves to remove emergency stimulus measures and begin raising interest rates.

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 is 20,000 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. Sectors like IT Services, Engineering, Capital Goods and EV ecology would continue to be in focus in 2022. Automobile is also another promising sector on the back of likely demand revival, better supply and commodity softening. 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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