Post Market views - Jan 28, 2022 - Reliance Securities

Mr Mitul Shah, Head Of Research at Reliance Securities.

Domestic equities closed broadly flat with Nifty falling marginally by 0.05%. Broader markets outperformed main indices with Nifty Midcap and SmallCap increasing by 1.34% and 0.84% respectively. Most sectoral indices ended higher except Nifty Bank, Nifty Auto, Nifty Fin Service, Nifty PSU Bank and Nifty Pvt Bank. Nifty IT gained the most at 1.1%, followed by Nifty Pharma (+1%) and Nifty Media (+0.69%). U.S. stocks fell in another intense trade session as market try to gauge how monetary policy and the prospects for the economy will affect corporate profits and stock valuations. The Dow Jones fell 0.1% after rising as many as 600 points in the morning. The S&P 500 lost 0.5% while the Nasdaq fell 1.4%. The yield on the benchmark 10-year Treasury note fell to 1.807% from 1.845%. Investors were struck by FED Chairman, Jerome Powell's comments, as he repeatedly emphasized the bank's intention to fight inflation.

As the Budget Day coming closer, the markets are busy doing all sorts of permutations and combinations to get the big picture right. Corporate earnings, of course, will also have a bearing on the scheme of things. 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. 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.

Source : Equity Bulls

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