NIFTY CORRECTS ON WEAK RUPEE CUES

  • The Nifty corrected close to half a percentage point on Wednesday after the rupee showed signs of weakness. Stocks like Reliance Industries, that had led the rally, saw a sharp correction. Expect pressure on markets at higher levels.
  • Even as Brent threatened to go back to the $80/bbl mark, the INR corrected closer to the 70.60/$. With a rapid fall in the rupee in the last couple of weeks, one can expect markets to get jittery at these higher levels.
  • FIIs were net sellers to the tune of Rs.(-1,416) crores while DFIs bought Rs.1,114 crore on Wednesday. The sharp sell-off foreign investors was both the cause and the result of the sharp fall in the rupee on dollar demand.
  • The NASDAQ rallied by over 1% on Wednesday after FAANG shorts covered aggressively as short sellers finally started to give in. Asia is flat overall while the SGX Nifty is positive in early trades. A lot will predicate on the INR.
  • We expect most of the banks to come under pressure with the PSU NPA problem likely to worsen and the private banks to see greater valuation concerns after the rally. Weak rupee and prospects of higher rates could also weigh on banks.
  • With the power sector likely to see a major churn, NTPC could emerge as an unlikely winner with cheap capacity available for takes. Buy NTPC around 165-167 range for targets of Rs.210 in one quarter.
  • With oil prices likely to remain elevated around the Brent level of $80/bbl, ONGC certainly looks very reasonably priced at around the Rs.175 levels. One can look to buy the stock with targets of around Rs.200 in 1 month time frame.
  • The sharp cut in the rupee turns the focus on the RBI. The markets will be looking at an announcement on rates trajectory or an early NRI bond issue.

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