- Despite a surprise 25 basis points in the rate hike, the Nifty recovered most of its losses to almost close flat. However, rate sensitives like banks and autos are likely to be under some pressure today also.
- The INR strengthened to the 68.34/$ as the rate hike absorbed of the rupee weakness. The 10-year bond yields also retreated from higher levels to 7.70%. Markets may react positively on Thursday in response to INR and Yields.
- FIIs were net sellers to the tune of Rs.(-96) crores while DFIs sold Rs.(-562) crore on Wednesday. There is likely to be more conviction buying after the Fed decided hold any rate hike in the August 01st
- While European markets were slightly tentative on Wednesday, the US markets did show strong signs of an uptrend. Asia is still flat but the SGX may benefit a stronger rupee and lower bond yields as was evident yesterday.
- With all the short term concerns over rate sensitives, the focus may shift to more defensive plays like pharma which are still reasonably valued. We like Lupin on performance turnaround cues and target Rs.920 in 2 months time frame.
- The sharply higher production of coal in this last Core sector report clearly is a positive for Coal India. At Rs.270, the stock looks set to scale levels of Rs.320 in one quarter. Dividend yield is also attractive for the stock.
- We stay cautious on most of the front line tech stocks like Infosys, TCS, Wipro and Tech Mahindra. In fact, our recommendation to investors to shift to HCL Tech which offers much better margin of safety at current levels.
- With the RBI front ending the rate hike and Fed maintaining status quo, markets may look at a renewed rally in the Nifty and Sensex.
