- The Nifty and the Sensex gave up its early euphoria as the spectre of a rate hike on June 06th kept the market on tenterhooks. Markets are worried that a rate hike combined with a hawkish view could push yields beyond 8%.
- The focus will be on the non-rate sensitive stocks. While banking, NBFCs and real estate stocks will be under the scanner, consumer driven stocks in the auto sector and the FMCG sector may be less vulnerable to the rate hike.
- FIIs were net sellers to the tune of Rs.(-158) crores while DFIs bought Rs.474 crore on Tuesday. After an odd buying day, the FIIs are back to their selling ways and that is the trend that is likely to continue.
- Most of Asia was positive while the US and Europe were flat to tentative. The SGX nifty is already under pressure and the Nifty spot could drift closer to the 10,500 mark and could drift further if the rate hike is backed by hawkish view.
- We expect some of the NBFCS to come under pressure if the RBI hikes rates. Expect pressure on stocks like Bajaj Finance, M&M Finance, L&T Finance and select HFCs like LIC Housing and DHFL. Trade these stocks accordingly.
- Our top picks are still the FMCG picks of Hindustan Unilever, Britannia at current levels. Despite quoting at expensive valuations, they are still the best play on rising rural and urban income levels.
- With oil prices again drifting down to around $73/bbl, the pressure on HPCL could wane away. We like the stock at Rs.317 with a price target of Rs.400 in the next 1-2 months. One can also look to buy BPCL and IOCL at current levels.
- While the underlying trend is unlikely to change, the rate sensitives could come under pressure if the RBI puts out a hawkish view.
