RBI#39;s move to allow retail participation in govt securities will ease burden on banks: Rajeev Srivastava of Reliance Securities

Market Outlook

Invest in a basket of stocks with consistent growth in revenues and profits with free cash flows, and avoid companies with high debt, promoter pledge, and poor corporate governance, Rajeev Srivastava, Chief Business Officer at Reliance Securities said in an interview with Moneycontrol’s Kshitij Anand.

edited excerpts:

Q) A historic week for Indian markets! The S&P BSE Sensex touched 51000 while the Nifty50 surpassed 15000 levels (intraday) for the first time. What led to the price action?

A) The Nifty50 scaled a new all-time high of 15,015 as the Union Budget 2021 provided a renewed optimism with strong outperformance across sectors and stocks.

The Union Budget was growth-oriented with a focus on the infrastructure sector to facilitate economic rebound and fiscal support to boost the economy.

The expansion of production linked incentive scheme, privatisation of few public banks, and a sharp increase in capital expenditure gave a shot in the arm for the markets to gain by 9.5 percent for the current week.

Q) The Reserve Bank of India (RBI) on February 5 said that retail investors can directly participate in government securities. Do you think this would expand the ways in which retail investors can participate in the fixed income market? And, will it be popular?

A) The Reserve Bank of India (RBI) on Friday took a calculated approach keeping policy rates unchanged at 4 pecent and announced a number of measures that will not just infuse more money in the system but also fuel growth.

The RBI also created avenues for more retail participation in funding India’s growth. The RBI said it will allow retail investors to buy and sell government securities directly via its Retail Direct platform.

This will ease the burden on banks and financial institutions to fund government borrowing. We believe over a period of time it will be popular as it gives access to one more avenue of risk-free investment to the retail investors.

Q) How should investors position themselves post Budget 2021?

A) We believe markets have moved up sharply post-Budget, so one should follow a SIP approach for fresh investments. Individual sectors and stocks offer better risk-reward in the broader markets.

Invest in a basket of stocks with consistent growth in revenues and profits with free cash flows. Avoid companies with high debt, promoter pledges, and poor corporate governance.

Q) What are the key levels to track in the coming weeks? What is the target you foresee for the February series?

A) A sharp run-up of 9.5 percent in the Nifty50 over the past one week indicates some consolidation and sideways move from current levels.

The Dollar index has stopped declining and a breakout above 92 levels could put pressure in emerging markets.

On the higher side, the monthly resistance is placed at 15,150-15,200 levels while on the downside, supports are in the range of 14,380-14,470 gap levels.

Q) Q3 earnings have been better and strong commentary from the management also lifted sentiment. Any stocks which posted results beyond expectations.

A) The strong third-quarter result also continued to provide tailwinds to the overall broader positive momentum with stocks reacting and moving higher in the range of 8-10 percent post announcements.

There is an upward revision in earnings with upbeat commentary for sectors like IT, Banks, Cement and Autos.

Among stocks, Bajaj Auto, Tata Motors, ICICI Bank, SBI, L&T, Ultra tech Cement were the outliers.

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