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

“Indian equity market fell for the third day in a row. Markets opened on a strong note but came down in the second half and closed in red. Nifty lost 19 points (-0.13%) to close at 14,910, while Sensex lost 14 points (-0.1%) to end at 50,364 levels. Nifty MidCap 100 Index closed up 0.4% while Nifty SmallCap index closed up 0.3%. ITC, HCL Tech, HUL, Dr. Reddy’s and Asian Paints were the top gainers in the range of 1.4% to 4.7%. BPCL, SBI, ICICI Bank, Tata Steel and Cipla were the top losers in the range of 1.2% to 1.6%.

European equities gained as investors focused on the prospects of an economic recovery. FTSE, CAC and DAX Indices gained half percent each as traders also awaited an update from the Federal Reserve. On domestic front markets opened positive and moved in a narrow range throughout the day. Some profit booking emerged in the second half of the day and both Nifty and Sensex slid in the negative territory. Midcaps and Smallcaps outperformed Nifty and Sensex in today’s trade. Sectors like IT, FMCG, Auto were strong and closed positive whereas sectors like Banking, Pharma, Metals, PSU Banking, Financial services witnessed profit booking and closed in red.

Technically, Nifty has to decisively cross and hold above 15000 zones to witness an up move towards 15150 and 15250 zones while on the downside major support exists at 14750 then 14600 levels. Bank Nifty has to cross and hold above 35000 zones to witness an up move towards 35500 and 36000 zones while on the downside support exists at 34500 then 34000 levels. India VIX fell down by 4.90% from 21.22 to 20.19 levels. Cool down in VIX below 20 zones is required for bullish grip and smoother move in the market.

While we are positive on the market from long term perspective, it may face some hurdles in the near term due to concerns over the bond yields, rise in commodity prices and rise in inflation. Nifty valuations at ~21x FY22 EPS are slightly stretched and demands consistent delivery of earnings. Rising bond yields may cap equity valuations as the RBI may have to do a fine balancing act to keep bond yields at lower levels while managing the government’s borrowing program. Increasing cases of virus and the possible restrictions across India are closely watched by traders as well as investors as both can have impact on the equity markets.  We would recommend investors to accumulate good quality companies on decline in the market .”

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