Below are Quote on Daily Market Commentary 02 July 2021 by Mr. Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services
Equity markets opened negative and remained sideways throughout the day as investors became cautious of the rising Covid cases globally and profit booking continued for the second day in a row. Nifty/Sensex finally ended the day with losses of 38/183 points (-0.2%/-0.3%) to close at 15,690/52,386 respectively. Broader market, however, outer performed and ended on a positive note with Nifty Midcap 100/Nifty Smallcap 100 up +0.6%/+0.5%. Among sectors, Realty (+2.4%) was the top gainer, followed by Metals (+2%), Media, Pharma and Infra. Financials, Banks, Auto, and IT were laggards, down 0.2-0.7%. India VIX ended lower by 4.5% at 12.9 levels.
Global markets continued to witness selling pressure as investor’s sentiments took a hit as the Delta Covid variant fueled worries about economic recovery while Jobless claims in US indicated that there could be a potential slowdown in the labor market. U.S. reports more than 24,000 new coronavirus cases, biggest one-day increase since May 28. However, markets recovered partially from the intra-day lows after the People's Bank of China (PBOC) said that it would cut the Reserve Requirement Ratio (RRR) for all banks by 50 bps, effective on July 15, releasing around 1 trillion yuan ($154.19 billion) in long-term liquidity to support economic recovery that is starting to lose momentum.
Domestically, market turned negative as host of events like weak global cues, below expected TCS results and fear of third wave of covid impacted sentiments. Among stock specific action, Tata steel (+4.2%), followed by Bajaj Finserv (+3.6%), Adani Ports, Bharti Airtel and Divi’s Labs were among the top gainers. While Bajaj Auto, TCS, HDFC Bank, Reliance and Axis Bank were top laggards, down 2-1%. The refreshed Union Cabinet approved "India COVID-19 Emergency Response & Health System Preparedness Package: Phase-II" amounting to Rs23,123 crore ($3.10 billion) for FY22. Technically Nifty formed a Doji candle on daily scale while it made a Bearish candle on weekly time frame. Index has got stuck in a wider range of 15450 to 15915 levels from last 28 trading sessions and decisive directional move is missing in absence of follow up activities. Now, it has to cross and hold above 15750 zones to witness an up move towards 15850 and 15915 levels while on the downside support exists at 15600 and 15500 levels.
Equity markets have largely looked through the turbulent period of April/May’21 and have shown strong resilience, with indices trading near all-time highs – buoyed by best-in-decade earnings delivery in FY21 and the expectation of an even better FY22. The Mid & Small cap indices have sharply outperformed the Nifty and reset several benchmarks. The primary markets are also seeing a flurry of activity with several IPOs lined up. The market faces headwinds from the advent of a possible third COVID wave, persistent inflation readings prompting a potential rate increase, and volatility around the US Fed taper talk. Current valuations, while not expensive, are not lucrative from a risk-reward perspective. Meanwhile, balance sheets and cash flows have improved in FY21 as corporates tightened costs and deleveraged. The gradual unlocking of the economy and an improved demand backdrop do offer bottom-up opportunities. Consistent earnings delivery v/s expectations is critical for further outperformance.
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