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Indian benchmark indices are likely to remain in consolidation mode, despite wobbling at record high levels. Robust GST collection for August month, better sales figures and the IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) at 52.3 in August (though down from 55.3 in July) signal a strong rebound in economic activity.
Quality stocks outperform
What stands out in the recent rally of above 400 points on the Nifty is the outperformance of high -quality stocks, said Dr V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
“It is important to appreciate the fact that the eight stocks - RIL, HDFC Bank, HDFC, Infosys, ICICI Bank, TCS, Bajaj Finance and Bharti Airtel- which have been doing well recently account for 50.7 per cent weight in the Nifty. Therefore, spike in these stocks can lift the Nifty disproportionately. The underperformance of the mid- and small-caps, particularly the removal of the froth in the segment, is desirable even when the market is racing to lofty valuations,” he added.
SGX Nifty futures is currently hovering around 17,123 (at 8 am), as against Nifty futures Wednesday’s close of 17,096.95 points and the Nifty spot close of 17,076.25. Asian markets present mixed cues with Japan Hong Kong, China and Australian markets gaining marginally and Korea and Taiwan ruling in the red in early trade on Thursday. The US stocks also ended on mixed overnight. S&P 500 and Nasdaq ended in the green even as Dow Jones Industrial Average closed weak.
Domestic stays strong
Domestic equities look to be modestly good as of now. High frequency key economic indicators for Aug’21 in the form of GST collection, railway freight, auto sales volume despite semiconductor issues and fuel volumes indicate a sustained economic recovery on y-o-y comparison, said Binod Modi, Head Strategy at Reliance Securities..
While concerns over global growth due to recent rise in delta variant Covid cases in different parts of the world continues to persist, we believe that underlying strength of domestic market remains intact. However, considering current macro scenario, liquidity driven market rally might take a backseat in 2022 and therefore investors should be advised to focus on quality companies with strong fundamentals, he added.
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