Post Market views - Jan 21, 2022 - Reliance Securities

Mr Mitul Shah, Head Of Research at Reliance Securities.

Domestic equities closed lower following weak global cues and possibility of rate hike in the near-term. Nifty fell by 0.8% while broader market underperformed compared to the main indices with Nifty Midcap and SmallCap declining by 2.4% and 2.2% respectively. Most sectoral indices ended lower except Nifty FMCG which gained 0.4%. Nifty Media declined the most at 3.5%, followed by Nifty PSU Bank (-3%) and Nifty Reality (-2.4%). The correction continued in US equities to hit lows, as the major index lower for a second straight session. The Dow Jones fell 0.9%, S&P 500 declined 1.1% while Nasdaq slumped 1.3%. The 10-year Treasury yield was flat at 1.83%. The correction was mostly due to concerns about a potential near-term move on interest rates from the Federal Reserve.

The earnings season has gathered pace with revenue is largely in-line with estimates, however higher commodity prices taking toll on margin and profitability to some extent. We believe 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. We expect Nifty to enjoy premium valuation for the next 1-2 years on the back of higher earnings CAGR, 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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