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Below is the Daily Market Commentary 13 August 2021 by Mr. Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services

Equity market opened positive and hit yet another record highs making gains for the second consecutive week in a row, after breaking out of its 2-months consolidation last week. Positive global cues (US / European markets at new highs), strong domestic macro data (3-month low CPI at 5.6% and IIP growth of 13.6% YoY in Jun’21), healthy results by index heavyweights and strong buying interest in large caps propelled the benchmark indices to fresh highs. Sensex crossed the 55,000 mark for the first time today – hitting a new high of 55,487 intraday before closing at 55,437 with gains of +1.1%. Nifty too hit a fresh high of 16,543 and closed near life highs at 16,529, gains of +1.0%. However, selling pressure resumed in the broader market with Nifty Midcap 100/Nifty Smallcap falling by -0.3%/-0.4% respectively.

Sectorally too it was a mixed bag with Nifty IT leading the pack with gains of 1.4%, followed by FMCG (+0.9%), Oil&Gas (+0.7%) Bank (+0.7%), Metal (0.5%). Nifty Media (-0.9%), Realty (-0.9%) and Pharma (-0.6%) were among the major losers today. India VIX moved up by 5.% from 12.37 to 12.99 levels despite sharp rise in markets leading to overall jump in volatility.

Technically, Nifty formed a strong Bullish candle on daily and weekly time frame. It has given a range breakout and if it manages to hold above 16400 zones, we can expect the momentum to extend towards 16700 zones while on the downside support shifts higher to 16350- 16250 levels.

On domestic front, CPI-based retail inflation came in at a three-month low of 5.6% YoY in Jul’21, as against 6.7% YoY in Jul’20. With Jul’21 inflation data, CPI-based inflation is likely to average around 5.5% in FY22, moderately lower than 5.7% YoY forecast by the RBI. This would be within RBI’s comfort zone and hence more likely that RBI would maintain its monetary policy stance in the near term as well.

IT sector witnessed fresh buying with stocks like TCS (+3.1%) hitting new highs and top gainer in Nifty. HCL Tech (+2.5%), Wipro (+1.7%), Infosys (+1.4%) were also among the top gainers today. Bharti Airtel (+2.1%) too jumped to record high after it concluded the spectrum trading pact with Jio. Airtel received Rs1004cr from Jio for right to use Airtel's 800 Mhz spectrum in the Andhra Pradesh, Delhi, and Mumbai circles. Additionally Jio will assumed future liabilities of Rs470cr related to Spectrum. L&T gained 2.6% and was another Index major to hit record high today after the company announced that its heavy engineering arm got an order for oxidation reactor.

Equity market is likely to continue with its strong positive momentum as the economic activities are expected to further pick up pace with the lockdown measures getting relaxed. The result season is now largely over with corporate earnings being in-line to better than expectations. Going ahead, we expect corporate earnings to improve further as economy opens up and improving vaccination trends. We estimate Nifty EPS for FY22E/FY23E at INR725/INR862 which implies growth of 35%/19% respectively. Market has been witnessing a rotation from mid to large caps – a phenomena we believe could continue as well in the near term given the sharp outperformance of the broader market in the last 18 months. In terms of sectors we remain positive on IT, Metals, Cement, select BFSI, Consumer, Auto, and Healthcare space.

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