ALL EYES WILL BE ON THE MONETARY POLICY

  • The monetary policy committee (MPC) meet starts today and the rate announcement will be made on August 01st. While inflation is higher, the MPC may wait till October to see food inflation impact before hiking rates.
  • We reiterate that two wheelers may be in for trying times in the stock markets with most of them having to resort to price cuts in the coming days. We suggest avoiding two-wheeler stocks for the time being till there is clarity on pricing front.
  • FIIs were net sellers to the tune of Rs.(-234) crores while DFIs bought Rs.49 crore on Monday. While FIIs have been net buyers in July, the figure is still too small to make any significant difference to the markets.
  • There was a sharp correction in the DJIA and the NASDAQ to the tune of 0.6% and 1.5% respectively. World markets are a little jittery on the back of US Fed rate announcement on August 01st, especially after the 4.1% GDP growth in Q2.
  • With paints companies almost confirmed to pass on the GST rate cuts to customers, one can expect an expansion in demand ahead of festival season. We like Asian Paints and Kansai Nerolac for 20% upsides from current levels..
  • PSU banks are showing signs that the worst may be over in terms of the NPA cycle. One can look at buying Bank of Baroda and Canara Bank at current levels to ride the bounce in most of these stocks. Expect 30-35% upside on these stocks.
  • 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.
  • Unless the RBI gives a very hawkish view on rates, the markets have already built in a 25 bps hike. The timing may be more of academic interest.

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