3QFY21 earnings are likely to play important roles

Binod Modi, Head Strategy, Reliance Securitie
Domestic equities remained upbeat and witnessed sharp rebound supported by financials.

Emerging possibility of a Brexit trade deal led Asian markets higher including India. Barring IT, all contributed to the market rally today including Reliance Industries. Banking stocks witnessed stronger recovery. Tata Motors, Axis Bank, Kotak Mahindra Bank and Reliance Industries were top gainers, while Infosys, Nestle and Wipro were laggards.
As the outline of the Brexit trade deal was reached, higher chances of a Brexit trade deal led markets to trade higher. Further, fear of the new coronavirus strain seems to be easing out now with select European countries opening borders for Britain. We note that FPIs flow continues to remain as a key driving force of domestic equities, which is expected to sustain in the near term in the backdrop of weak dollar, soft monetary policies of global central bankers and fiscal stimulus in the USA.
Sustainability of economic recovery and 3QFY21 earnings are likely to play important roles for domestic markets in the near term. However, considering rich valuations and threats from rising input costs, we believe a broad-based rally in the market might not sustain. Therefore, investors must focus on quality names having sound corporate governance and margins to safety. (Share Manthan, December 24, 2020)