A broad-based market rally is “unlikely” because the 50-share benchmark Nifty is already buying and selling on the year-end goal of 15,000 factors, the report by Bofa Securities mentioned.
The markets ended within the pink for the fifth consecutive session on Monday, with the NSE’s benchmark Nifty sliding to underneath 14,700 factors on Monday.
“We …see rising bond yields and potential localised lockdowns as dangers for markets forward. With Nifty already at our year-end goal of 15,000, continuation of a broad based mostly market rally seems unlikely,” the analysts wrote within the report.
They mentioned sector rotation may also help generate returns for traders and most popular corporations in industrials and supplies sector which may profit from the capital expenditure push, and financials which may get sooner mortgage development.
In the meantime, the brokerage mentioned 31 corporations comprising practically half of the 50-share Nifty’s market capitalisation are uncovered to commodity danger and this reliance may result in a consolidation imminently.
“Thus far, corporations have not seen full influence as that they had low-priced uncooked materials inventories, however we see this as an imminent danger. Discretionary, supplies, staples, power, industrials sectors, in that order, are most in danger,” the report defined.
Healthcare and utilities ought to have the ability to cross on commodity price pressures, the brokerage mentioned, including that it sees no influence for financials & IT companies sectors.
About 54 per cent of free float weighted market cap inside Nifty, represented by the companies sectors (financials/IT/Telecom), don’t have any publicity to commodities, 6 per cent of market cap has restricted publicity at lower than 20 per cent of gross sales, whereas the remainder 40 per cent market cap has excessive publicity, it mentioned.
Metal, cement, crude, coal, copper, aluminum, iron ore, palm oil and caustic soda are the important thing commodities related for Nifty corporations as a result of they’re up by as much as 75 per cent since June 2020.