• The rally on Thursday was typically driven by short covering as stocks like SBI and ICICI Bank saw a lot of short positions getting covered on F&O expiry day. Maruti did come under pressure due to aggressive analyst expectations.
  • There may be some caution building up in two-wheeler space as there could be price cuts going ahead. Bajaj has already indicated that and we could others like Hero, Honda and TVS also joining the price cut fray.
  • FIIs were net buyers to the tune of Rs.2454 crores while DFIs sold Rs. (-2716) crore on Thursday. The higher volumes indicate a clear preference for domestic MFs to do blocks with FIIs on select counters.
  • Dow and the European indices were positive but NASDAQ a bit hit on the back of the 20% correction in Facebook after disappointing guidance. This could raise questions on FANG valuations. SGX Nifty indicates an open above 10,200.
  • Consumer stocks may still be the big story from here on. We like Hindustan Unilever and Britannia for further 10% upsides from current levels. Apart from food, paint companies also look to make the best of GST cuts.
  • 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.
  • Vedanta has taken strong support around the Rs.200 levels. With the heat over the Tuticorin protests behind and the commodity cycle unlikely to be affected in a big, way, it may be time to buy Vedanta at around 218 levels for a target of Rs.260.
  • While the underlying trend of the Nifty appears to be higher till at least around 11,400, we suggest hedging downside risk with puts.

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