NIFTY BOUNCE MAY BE MISLEADING

  • The Nifty bounce on Monday may be largely misleading as it was in the midst of a volatile day. The sectors like metals and banking are likely to stay under pressure on global slowdown concerns.
  • With the RBI likely to impose additional maturity mismatch norms for NBFCs, these stocks may be in for some real hard times. Focus on banks like Kotak Bank and HDFC Bank which will benefit from these tighter norms.
  • FIIs were net sellers to the tune of Rs.(-1805) crores while DFIs bought Rs.1974 crore on Monday. FIIs have sold close to Rs.12,000 crore of equity and debt in the first 5 days of October and that will be an overhang on the rupee.
  • European markets took deep cuts after Italy once again turned defiant and threw hints at seceding from the Euro. The IMF has confirmed a slowdown in the US and China due to the trade war. That will be the overhang on SGX Nifty too.
  • While traders need to be cautious, it is time for investors to take out their shopping basket. The focus should be on oil refiners and on consumption stories that have are now available at really low prices.
  • One can seriously look at very specific IT stories to buy at current prices. Tech Mahindra looks a good bet with an upside target of Rs.950 over the next one quarter on the back of 5G visibility and a weak rupee.
  • We stay negative on metal stocks in the light of the likely slowdown in China. The Chinese stimulus is also an indication. We are negative on stocks like Hindalco and Vedanta and play for 20% downsides on these stocks.
  • Markets are likely to stay under pressure in the aftermath of the Italy defiance and also the trade war development in the last few days.

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