- The bounce in the market was more of an afterthought after the 9-day correction, which itself is an 8-year record. Since the VIX remains around 27 levels, one needs to be suspicious of the bounce in the Nifty and Sensex.
- The CPI and the IIP numbers combined with the WPI announced on Tuesday make a strong case for a rate cut in the June policy. In fact, the debate is more on whether the cut will be 25 bps or a more aggressive 50 bps.
- FIIs were net sellers to the tune of Rs. (-2012) crore while DFIs bought Rs.2243 crore on Tuesday. FII selling in May has gotten close to $1 billion in the equity markets and one can expect more volatility ahead of election results.
- The impact of the likely trade talks was only visible in the afternoon, by which time most of Asia had closed. Hence the bounce was visible in India, Europe, and the US. SGX is flat and Wednesday is a new day altogether depending on Asia.
- We reiterate our negative view on most of the vulnerable companies ahead of counting for elections. We suggest short positions in Zee Entertainment, IndusInd Bank, Yes Bank, Dewan Housing and on Maruti.
- We are negative on Sun Pharma with downside targets of Rs.380 and Rs.360 in two phases. One can look to short the stock around the 425 levels. The US lawsuit and the insider trading allegations are likely to be the overhang.
- With tech stocks looking uncertain, the one stock to focus will be HCL Tech. With good growth in the last quarter and reasonable valuations, this looks the best bet for the coming quarter with targets of Rs.1200 on the upside.
- Trade war noises could be the key to the markets tomorrow with the hope that the cues will continue to be positive. Domestic overhang continues.
