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Below are Views On Assets to Rule Going Forward - Weekly article by Ms. Nirali Shah, Senior Research Analyst, Samco Securities

Markets extended its stride towards all-time highs with unwavering support from broader indices and this excitement is likely to continue till the Budget. While equity markets were enjoying the rally, there was another asset class which zoomed above $40,000 for the first time ever! The recent take off in Bitcoin is luring market participants who are feeling FOMO but this lightening rally in cryptocurrencies also signals that our world is marching towards an inflationary price increase across real (tangible) assets. It is probable that down the line as inflation rises people’s liquid assets will start eroding in value and there will be a decline in purchasing power which then instils the need for alternative real assets such as the Bitcoin. And the cycle from building of inflationary tendencies to erosion in purchasing power could last for atleast 3-5 years. This brings out an opportunity for investors who can focus on companies in the metals and mining, industrial, cement and real estate sectors. Currently, there is buying conviction in the FMCG, IT and pharma stocks but if inflation continues to rise then they may not perform well in the future. Also, if the movement in Bitcoin is any precursor for equity markets then one can expect a massive rally in metals, mining and real estate, industrials and cyclical stocks. The uncertain nature of the pandemic has disrupted many businesses; therefore, some traditional principles of investing are demanding a careful relook. Extended years of underperformance in cyclical, industrial and capital intensive industries may come out as winners for the next few years. Investors are therefore advised to bet on these themes in the equity market.

Event of the Week

BankNifty managed to create a buzz on D-Street this week as several banks announced their Q3 business updates. With the economy on its recovery path, lenders too did not shy away from carrying-out operations just like the pre-Covid days. But despite a healthy deposit growth of 19.10% by the largest private sector lender HDFC Bank, its advance growth of 15.60% is the weakest in 16 quarters. This moderation in loan growth shows that the banking sector as a whole is yet to reach its peak in terms of business growth and there is still an opportunity for investors to enter financials on dips. 

Technical Outlook

Nifty50 index closed the week on a positive note as the market remained unaffected in the short term and continues to surge higher. This week almost all sectoral indices closed in green except FMCG while metals, IT and media continued to lead. Nifty now seems to be heading towards 14500 as it is lacking any significant negative events. On the downside 13950 has been established as an immediate support and a break of the same may trigger a profit-booking move in the short term. The market continues to remain overbought in the short-term and we maintain a cautiously bullish outlook unless the market breaks below 13950.

Expectations for the Week

India Inc. is expected to swarm bourses with its quarterly earnings starting with IT companies. While a decent show is expected from majority players, market participants should act prudently as stock prices have already discounted most of the positives. Traders can devise a strategy post the market’s reaction to results in order to judge the strength in momentum before placing the trade. Investors on the other hand, should continue to ride the rally and look for opportunities to increase their bets on quality players from the metals and mining, industrials, cement and real estate sectors. Nifty50 closed the week at 14347.3, up by 2.3%.  

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