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Below is the Daily Market Commentary 20 October 2021 By Mr. Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd

Equity markets opened flat and was very volatile in initial part of the session. It fell sharply in the second half and ended the session in red (down -0.8%). Broader market continued with their sharp downfall and was down more than 2% for the second day in a row. On the sectoral front, except for PSU Banks and media, all other sectors were in red. Profit booking was witnessed across market as the valuations for many stocks have touched unrealistic levels. The stocks termed as quality are either overpriced or priced near perfection thus leaving very little margin of safety.

Global cues were mixed as earnings season gather momentum and US Democratic leaders edged closer to agreement on ways to trim the stimulus package. On the positive side, oil prices come off recent highs after a fourth straight weekly rise in U.S. crude inventories.

The markets are likely to continue witnessing volatility given weak global cues, ongoing earnings season and overstretched valuations. Given the sharp rally in the market, many stocks are priced to perfection thus leaving very little room for any king of disappointment. Thus any variance in result expectation can lead to sharp swing on either side. We would suggest traders to stay grounded of various risks including supernormal valuations and remain sector / stock  specific. While investors can adopt buy on dip strategy as market volatility is likely to throw many such opportunities.

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