Bulls Keep Up Their Winning Streak
The bulls have traded in a broad range for almost a couple of months, resulting into a quarantine period for them. However, in the second half of May 2021, the bulls were out of quarantine as they moved past the resistance level and since then there has been no looking back as they went on hitting new records one after another. First, the Nifty reclaimed its all-time high of 15,431.75, after a gap of almost three months and then it went on to close above the 15,600 level for the first time ever in history on the weekly options expiry. During the past five trading sessions, Nifty has gained 2.29 per cent, while the Nifty Mid-Cap 100 and Small-Cap 100 have gained 2.56 and 1.28 per cent, respectively.
The latest Gross Domestic Product (GDP) data which was released by the government last Friday has evoked mixed reactions. The GDP for Q4FY21 grew 1.6 per cent, signalling a sharp recovery that started after two consecutive quarters of contraction due to the impact of the lockdown. For the full year, however, it contracted 7.3 per cent, lower than the street estimate. Meanwhile, a sharp contraction in private consumption is a subject to be worried about. The better-thanexpected economic performance has mostly been the outcome of strong government consumption expenditure and large subsidies extended as part of various tranches of the stimulus.
Apart from better-than-expected GDP number, the impressive rise India’s export in the month of May is music to ears for market participants. Exports in the month of May grew by 67.39 per cent as compared with the same month last year. While some may argue the sharp surge would be due to the low base of May 2020, if we take a like-to-like comparison with May 2019, exports grew by 7.9 per cent over the May 2019 levels and this is extremely impressive. Meanwhile, imports in May 2021 rose by 68.53 per cent as oil imports during the month under review rose to USD 9.45 billion as compared to USD 3.57 billion in May 2020.
So, what we make out from this is that for exporters this is not just a silver lining in a dark cloud but a strong bright coat of silver paint and when it comes to export-oriented sectors, they might be one of the leaders of growth in the coming quarters. Hence, keep a watch on this segment. Over the last five trading sessions, Reliance Industries has been in limelight as the stock has jumped 12 per cent. Recently, the company released its latest annual report wherein Chairman and Managing Director Mukesh Ambani has stated, “After record fund raising, the company now has a strong balance-sheet with high liquidity that will support growth plans for its three hyper-growth engines, Jio, Reliance Retail and Reliance Oil to Reliance Chemicals.
The stock is nearly 6.74 per cent away from its all-time high of Rs 2,369.35. We believe once the stock manages to close above Rs 2,240-2,250 it would try to reclaim its all-time high and if this heavyweight continues to move higher the index is likely to continue its momentum. One of the stocks which saw some ferocious movement post the earnings’ announcement and has gained as much as 20 per cent during the week is Muthoot Finance. This is testimony to the fact that it is a very news hungry market and any positive surprise leads to handsome rewards in the stocks. Another piece of striking news which has created a buzz this week was that India has brought forward the target of 20 per cent ethanol-blending in petrol to 2023.
Our view is that the target of 20 per cent ethanol blending would be difficult to achieve by 2023 amid lack of capacities and requirement of changes in engines by automotive OEMs. Going forward we would advise market participants to focus on stock-specific opportunities across sectors as the benchmark could witness bouts of volatility due to the Reserve Bank of India’s monetary policy announcement which is scheduled on Friday. As India’s early-stage recovery has been upset by the second wave of the corona virus, the MPC will continue to focus on growth and is likely to maintain the status quo on policy rates and liquidity stance.
