- It was the second consecutive day of over 100 points fall in the Nifty. The Sensex lost over 750 points intraday. The fall was acutely sharp after 2 pm when the news flows on the banking front became increasingly worrisome.
- The Nifty has now breached its previous low of 10,276 touched on the day VIX had shot up sharply. The next couple of days will be critical for the Nifty as any failure of support now will take the Nifty below the 10,000 mark.
- FIIs were net buyers to the tune of Rs.620 crores while DFIs sold Rs.(-734) crore on Tuesday. Interestingly, the pressure of domestic selling appears to be picking up in the last few days.
- Markets across Asia showed a sharp bounce including Nikkei and the Hang Seng. However, the Indian correction appears to be more due to the panic as the PNB scam spreads across more banks. Time to be cautious on India.
- We reiterate our long short on Sun Pharma versus Aurobindo Pharma. One can look to buy Sun Pharma futures and sell Aurobindo futures against that. The bet will be more on outperformance rather than actual price movement.
- UPL is a stock we have liked due to the positive visibility on the agro chemicals sector. The stock has corrected sharply in the last few days and offers an attractive entry point from a long term perspective.
- In the banking space, we could now see outperformance from banks that are largely immune to doubtful lending practices. For example, avoid ICICI and Axis. Focus on SBI, Kotak Bank, HDFC Bank and IndusInd with good asset quality.
- We believe that the undertone of the market has shifted from buy-on-dips to sell-on rises. Any buying has to be done only with 6-9 months perspective
