Binod Modi, Head Strategy, Reliance Securities
Domestic equities remained in the grip of bulls with Sensex crossing psychological 50,000 levels for the first time ever.
Positive cues from global markets supported by Biden’s remark to ensure all support to bring back the USA economy on track aided market rally today. A persistent rebound in auto index and sharp uptick in select heavyweight financials and Reliance Industries lent support to the market. Notably, volatility index cooled-off for the third consecutive day and now ranging below 21 levels, which augurs well for the markets. Tata Motors, Bajaj Finance, Bajaj Auto and Reliance Industries were top gainers, while ONGC, Gail, Tata Steel and Coal India were laggards.
We believe underlying strength of the market remains intact given continued recovery in key economic data and expectations of sustained recovery in corporate earnings. Further, ongoing vaccination drive and likely opening-up of the economy at full scale augur well for the economy and equities. Additionally, favourable monetary policies of global central bankers, weak dollar and large fiscal stimulus in the USA are expected to ensure sustained FPIs flow in domestic equities.
Further, as the union budget is just a few days away, rotational trading might be visible in the market. We may see sectors like infrastructure, healthcare, defense, real estate and agro chemical may see buyers’ interest. However, as valuations of the market are stretched and many stocks are trading ahead of fundamentals, a broad-based rally is unlikely to sustain. Investors should be cautious at these levels and bet on companies which have robust earnings visibility and margins of safety. (Share Manthan, January 21, 2021)
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