- The Nifty did show a smart bounce on Friday to get closer to the 10,700 mark but the recent exit poll outcome is not going to be favourable for the markets and one can see some panic selling and hedging on Monday.
- What the markets may have to worry beyond state elections is the inversion of the yield curve in the US. Historically, it has indicated a recession and that is not great news for any of the emerging markets including India.
- FIIs were net sellers to the tune of Rs.(-817) crores while DFIs bought Rs.243 crore on Friday. FIIs are likely to shift to safer currencies like the Yen and SFR if the US yield curve stays inverted.
- There has been a virtual carnage in the US markets in the last one week with nearly $1 trillion being wiped out. Bigwigs like Amazon and Apple have been among the big losers. SGX Nifty is also deep in red due to exit poll outcome.
- The negative yield worry in the US spooked metal stocks as these are the most vulnerable to a slowdown in global growth. We stay negative on Hindalco and Vedanta and estimate another 20% downside from current levels.
- Keep an eye on Colgate. With the recent acquisition of GSK Consumer India by HUVR, FMCG stocks are back in focus. Watch out for Colgate which has been in a range for a long time. Buy at 1225 for targets of Rs.1500 in one quarter.
- Muthoot Finance is turning out to a smart play in the revival of NBFCs and also the stronger position that gold loan companies will find themselves in. Buy at Rs.472 for targets of Rs.550 in one quarter.
- While the state elections will be the short term trigger, the long term trigger will be whether the US slips into recession, considering its inverted yield curve.
