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Markets will continue to defy gravity, as bulls are in complete in charge globally, thanks to easy liquidity. Benchmarks across-the-globe are either at peak or near peak, signalling broad-based rally. Domestic markets are likely to open positive on Friday but in a range, indicates SGX Nifty. All eyes on Nifty and Sensex as they are tantalisingly close to psychological 18,000 and 60,000 respectively.
With Accenture reporting a strong set of numbers and outlook, experts believe IT stocks in domestic markets will remain in focus. ACN reported very strong growth and margins at scale, with continued revenue growth acceleration (in CC) stronger than what seasonal trends would imply.
“Q1-F guidance implies continued growth acceleration at the high end, also driving FY22 guidance of 12-15 per cent, well above Street expectations and typical mid-to-high single growth for initial guide. While attrition picked up sequentially, the company continues to expect 10-30bps in margin expansion and strong EPS growth. We expect a positive stock reaction despite the stock trading at its all-time high multiple of 35x NTM earnings,” said JP Morgan in a note.
Stretched valuations
But analysts are nervous, as valuations are quite stretched. Most of them advise investors remain cautious despite abundant liquidity.
Mohit Ralhan, Managing Partner & Chief Investment Officer of TIW PE, said the market continues to be in the bull phase with buyers coming in at every dip. But, with market touching new highs, the risk has increased, given that there is an event risk associated with the unfolding debt crisis at China Evergrande Group and impending start of tapering by US Fed.
“Although the Indian economy is recovering as per expectations, given the global cues, we have turned a bit cautious and believe that the best action right now is to wait for the market to indicate a directional bias,” he said.
According to Deepak Jasani, Head of Retail Research, HDFC Securities, Nifty closed at another record high after a great day when it just kept rising hour by hour without any major corrections. Advance Decline ratio is sharply positive, though lower than that in the morning.
“Nifty is marching towards the 18,000-mark slowly and steadily, unless some global event (like Evergrande) upsets this momentum. Evergrande is due to pay $83.5 million worth of interest on a dollar-denominated bond on Thursday. It’s not clear yet whether the company will make that payment, and it had not commented by the close of trading in Hong Kong. Anything negative on this front could impact global sentiments,” he added.
SGX NIfty is ruling at 17,844 at 8 am; the Nifty futures on Thursday closed at 17,833.