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Published on 7/07/2020 6:59:00 PM | Source: Motilal Oswal Financial Services Ltd

Daily Market Commentary 7 July 2020 by Mr. Siddhartha Khemka, Motilal Oswal

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Below is the View On Daily Market Commentary by Mr. Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd
 

“Indian equity markets ended on a positive note for the fifth straight day, on the back of mixed global cues. After a highly volatile session, Nifty ended 36 points (+0.3%) higher at 10800 while Sensex rose 187 points (+1.3%) to close at 36,675. The overall breadth of the market was positive with Nifty Midcap 100/ Smallcap 100 up 0.4%/1.0%. Sectorally it was a mixed bag with Private Banks (+2.7%), IT (+2.1%) and Financial Services (+1.5%) being the biggest gainers. On the other hand, Energy (-2%), Metals (-1.7%) and Infra (-1.5%) were the biggest losers.

Global markets took a pause today as investors struggle between expectations of an economic rebound in China and a resurgent U.S. services industry on one hand, lingering worries about continuous spike in U.S. coronavirus cases on the other hand. Domestic investors however, shrugged off weak global cues and focused on positive factors like foreign fund inflows and hopes of a good monsoon. But the gains were capped as rising Covid-19 cases and higher valuations weighed on investor sentiment.

Market is factoring in positive macro-economic data, strong rural economy and optimism over potential Covid vaccine emerging soon. Rural economy has seen lesser damage from the COVID pandemic, led by robust rural income, strong start to monsoons, robust Kharif sowings, and sharp hike in allocation to MGNREGA. Further hopes have now shifted to potential FY22E earnings recovery. However Nifty is trading at 21x one year forward P/E (premium to its long period average of 19x) and is not looking as attractive as it did in Mar’20. Hence despite the near term momentum, we would be more cautious/defensive in our approach going ahead. “

 

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