SHORT COVERING HELPS SHARP RALLY IN NIFTY

  • The Nifty closed within striking distance of the 11,700 mark on Monday as a mix of short covering across counters took the markets up sharply. Metals and power were the gainers as a tempered Fed statement helped sentiments.
  • With the Turkish Lira crisis still a reality and the rupee again cracking beyond the 70/$ mark, the pressure on the market fundamentals is going to remain. It is advisable to be cautious at higher levels.
  • FIIs were net buyers to the tune of Rs.252 crores while DFIs bought Rs.1117 crore on Monday. FII activity could be under pressure on the debt side as the EM carry trade shows signs of unwinding. Domestic buying is returning.
  • Markets across the US, Europe and Asia were in positive territory as US growth coupled with tempered voices from Jackson Hole boosted sentiments. SGX Nifty is already trading above 11,750 levels in early trades.
  • It is time to be cautious on banks with stretched valuations considering their underlying NPA exposure. Apart from the power sector woes, higher rates by Fed could put pressure on stocks like Axis Bank and ICICI Bank.
  • SBI with its rising bad debt mountain from sector looks stretched at Rs.306. One can look to sell futures with stop loss around Rs.315. Alternatively one can also look to buy SBI 300 put options in the September series.
  • Medium term investors appear to be missing out on LIC Housing Finance at the current level. Despite slower growth, the company looks the most attractive bet in housing finance. Buy with target of Rs.570 on the stock.
  • Watch for the rupee after it showed tremendous weakness on Monday. The Turkish Lira could be the currency to watch out for.

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