Markets have rallied to historic highs largely on the back of earnings optimism and a Biden victory analysts have said.
According to broking firm, Motilal Oswal market has remained strong on the back of good Q2 earnings and positive global backdrop for the past few trading sessions. Q2 FY21 Corporate commentary is positive on demand recovery with discretionary demand seeing an uptick during the festive season.
"Nifty Universe's EBITDA/PAT growth are well above expectations. Out of 37 Nifty companies that have reported earnings till 4th Nov'20, 21 have beaten EBITDA margins (excl.estimates while 7 have missed expectations. Financials) expanded 390bp YoY to 18.5%. Operating margins expanded for every sector on YoY basis," Motilal Oswal has said in a release.
Here is quick reading of the other factors according to the brokerage house:
US Election Outcome - Impact
Biden's victory means we shall have more expansionary fiscal policy with focus on redistribution, reviving blue collared jobs and green infra, which is positive for global economy. Overall a conducive demand environment creation will help and lead to a stronger reflationary pulse versus the deflationary environment of the past few years. For corporate America likely increase in the tax burden, regulation and labour costs may dampen the margins, but a good demand environment will offset some of these pressures. Global inflation and consequent weaker dollar should be positive for Emerging Markets like India.
Bihar Election - Impact
Exit polls indicate the possibility of hung assembly in Bihar. This is bit sentimental negative for the markets. We should watch out for Spirit (liquor cos) as there is a possibility of lifting the ban in the state if there is a non NDA Chief Minister.