Sentiments Improve; Earnings Momentum To Accelerate In FY22

Corporate India displayed tremendous resilience in FY21, with the Nifty ending the year with a healthy (15%) earnings growth, which was unthinkable a year back, Motilal Oswal Institutional Equities has said in a report.

"The second COVID wave in Apr-May'21 has soured sentiments and impacted economic activity. Since restrictions this time around was localized and less stringent v/s the lockdown in CY20, we expect the impact in 1QFY22 to be contained. We expect earnings momentum to accelerate in FY22 as the pace of vaccinations picks up and the economy opens up further. BFSI and commodities are expected to drive FY22E earnings.

The market has been strong and largely looked through the second COVID wave on the back of strong liquidity and robust participation from non-institutional investors," the report said.

Highlighting the sectors that performed well, Motilal Oswal reporetd noted that Technology (+8%), PSU Banks (+4%), Consumer (+2%), Real Estate (+2%), and Media (+2%) were the top performers in Jun'21.

"The Nifty touched a fresh high of 15,916, ending Jun'21 ~1% higher MoM at 15,722. The Nifty is up 12.4% in CY21 YTD. The rally was on the back of strong FII inflows, receding of the second COVID wave boosting confidence in an economic recovery, and an in line earnings season. FIIs continued their buying streak in Jun'21 at USD1.5b. DIIs saw inflows for the fourth consecutive month at USD1b. Midcaps/smallcaps outperformed largecaps by 3.7%/4.1% in Jun'21," the report said.