Economy, markets, FIIs, chemicals, IT and Pharma - Make money, as India powers to new highs | EXPLAINED

Indian markets received a second month of record FII flows in December, powering BSE Sensex, NSE Nifty and other indices to new records. The rally was driven by continued strong FII inflows in December which stood at a record Rs 62016 cr on the back of Rs 60358 cr inflows in November 2020. Continued improvement in underlying economic conditions coupled with a global risk on environment post the US elections has led to record flows into Indian equities.

India’s economic recovery has been quicker than expected. High frequency indicators like PMI numbers, power demand etc. continues to point to a quicker than expected recovery in the economy. Indian manufacturing PMI for December came in at 56.4 as compared to 56.3 in November and marks the fifth continuous month of expansion. Moreover auto companies also continued to report better than expected monthly sales numbers for the month of December 2020.

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Government’s stimulus measures along with RBI’s easy monetary policy will support the recovery of Indian Economy. The Government has announced various rounds of stimulus measures including the most recent Rs 2.65 lk Cr. Atmanirbhar Bharat 3.0. The RBI in its latest MPC meeting has guided that they will maintain their accommodative stance well into FY2022 despite high inflation. The various fiscal and monetary measures announced by the Government and the RBI will support the economic recovery.

Vaccination and US stimulus package leading to a risk-on environment globally. After months of delay the US Government has successfully passed the second US stimulus package of USD 900 bn which is a positive development for the markets. Moreover various countries like the US and UK have started their vaccination program which gives us hope that the Covid situation should improve significantly by the second half of 2021. Positive developments on the vaccine front along with continued fiscal and monetary support from Governments and central banks is leading to a risk on rally despite a surge in Covid-19 cases globally.

Angel Broking expects the broad based stock market rally to continue for now. The market rally in the past few months has become broader with more sectors participating in the rally. Angel Broking expects the rally in cyclical sectors will continue for now given the risk-on environment globally and expect sectors like auto, BFSI, consumer durables and cement will continue to outperform. 
While Angel Broking expects cyclical sectors will continue to do well, Angel Broking also continues to remain positive on chemicals, IT and Pharma given strong revenue visibility in these sectors.