IGI Logo

Below are Quote on Daily Market Commentary 4th June 2021 by Mr. Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services

Equity markets opened positive with Nifty touching yet another lifetime high of 15733 levels but could not sustain at higher levels post RBI MPC announcement and ended the session on a negative note. Nifty ended with loss of 20 points (-0.1%) at 15,670 levels while Sensex settled with loss of 132 points (-0.3%) at 52,100. The broader market outperformed with both Nifty Midcap100/Smallcap100 closing with gains of +0.7%/+0.4% at 26,552/9,475 respectively. Weakness was seen in Banks and Financials - down -1.0%/-0.2% followed by minor loss seen in Pharma (-0.1%) and FMCG (-0.4%). On the other hand, strength was seen in Metals and Media which ended with gains of more than +1% followed by Auto, Realty, Energy and Infra which gained less than a percent each while IT ended flat. India VIX moved up by 1.27% from 15.74 to 15.94 levels. India VIX is near to its lowest levels of last 17 months since February 2020 and falling VIX could extend the bullish market momentum towards new high territory.

Global cues continued to be mixed amidst Biden’s Tax proposal and encouraging US non-farm payroll data while awaiting monthly US jobs data. Domestically, Nifty snapped its two day positive momentum and witnessed profit booking, despite the RBI kept repo rate unchanged for the sixth consecutive time at 4% and maintained the policy stance as Accommodative. Factoring the impact of second-wave, RBI reduced the FY22 GDP forecast from 10.5% to 9.5% and trimmed the inflation forecast from 5.2% to 5.1%. Furthermore, it announced the third tranche of bond buying worth Rs 40,000 crore under G-SAP 1.0. It also announced G-SAP 2.0, under which it will buy bonds worth Rs 1.2 trillion. Broader markets witnessed buying interest after the RBI announced a special, Rs 15,000 crore-liquidity window for sectors like travel and toursim, tour operators, hotels, restaurants, aviation and related companies, spa clinics and beauty parlours. Therefore, stock specific action was seen in these sector stocks, while, liquor stocks like, United Breweries Globus Spirits, United Spirits, IFB Agro Industries, and Radico Khaitan surged between 1%-8%.

After the recent run-up, Nifty now trades at rich valuations. Thus any negative surprise or misses in the June quarter earnings could act as a dampener. However, the overall structure of the market remains positive as the second COVID wave has now started to recede, with the number of active COVID cases down >50% since its peak in early May to sub-18 lakhs now. There is greater visibility on vaccine supply now v/s April’21 and May’21. The expeditious containment of active COVID-19 cases and accelerated pace of vaccinations would boost and provide confidence in economic growth recovery in FY22E. As states ease restrictions gradually in Jun’21, we expect the demand environment to get better. Technically too, Nifty can see move towards fresh life time high of 16000 zones.

Above views are of the author and not of the website kindly read disclaimer