After a strong quarter of Q2FY21 earnings, the expectations are on the higher side with improvement in macro data, demand recovery in manufacturing and cyclical sectors, Rajeev Srivastava, Chief Business Officer at Reliance Securities said in an interview with Moneycontrol’s Kshitij Anand.
Edited excerpts:
Q) It was a volatile week for markets but both Sensex and Nifty managed to hit fresh record highs. What led to the price action?
A) The Nifty50 scaled a record high at 14,367 in the first week of CY2021 with gains of 2.4 percent on a w-o-w basis led by broader markets positive momentum.
CNX Midcap crossed its 2018 highs outperforming to gain by 5.2 percent for the week. Strong FII buying of Rs 6,030 cr on the last trading day and IT sector up by 7 percent ahead of the quarterly results from TCS and other companies led to gain.
Q) What are the important levels which one should watch out for in the coming week?
A) The Nifty50 should face resistance near 14,700 levels which is the monthly R2 pivot. We expect some consolidation after a strong move of nearly 8 percent from the recent lows of 13,150 levels.
On the downside, the trend reversal is placed at 14,000 levels which is the last expiry close.
Q) Small & Midcaps outperformed in the week gone by. What is supporting the broader market indices?
A) The broader market indices would focus on the third-quarter results and commentary from the management for the next year.
We are maintaining a positive bias on midcaps and small caps since the start of the last quarter post opening of the economy from the lockdown and we believe it will outperform the large caps. Valuations are catching up with the larger trends sectors and will improve further.
Q) What is your view on the December quarter earnings? Do you think the road to double-digit earnings will only broaden from here?
A) After a strong quarter of Q2FY21 earnings the expectations are on the higher side with improvement in macro data, demand recovery in manufacturing and cyclical sectors.
We expect Nifty earnings to grow by 39 percent and 20 percent in FY22E and FY23E, respectively. The NIFTY50 is trading at 20x FY22E earnings, which is ~13 percent premium to its historical valuation.
Q) FII flows seems to be losing momentum something which can be seen from the week gone by. Do you think the momentum seems to be fading?
A) The FII flows momentum is strong over the last one quarter with more than 1.45 lakhs cr of flows. There could be some momentum fading in inflows if the dollar index bounces from its multi-year lows of 89 levels or any change post the New President of USA policy announcements in the latter part of the month for the global liquidity.
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