NIFTY CRACKS OVER 100 POINTS ON RATE IMPACT

  • The Nifty reacted late to the rate hike impact with banks and auto companies reacting negatively to the rise in repo rates. The overhang of the global trade war also hung over the international markets.
  • The 25 basis points rate hike by the Bank of England is, probably, an indication that central banks do not see merit in keeping rates low any longer. That does pave the way for one more rate hike by the RBI, if the data so demands.
  • FIIs were net sellers to the tune of Rs.(-640) crores while DFIs sold Rs.(-340) crore on Thursday. Over the last few days, the domestic mutual fund have also been net sellers and that could be a slightly worrying sign for the markets.
  • European markets cracked sharply on the back of the BOE rate hike and worries that BREXIT may end up being much messier than original imagined. NASDAQ celebrated Apple crossing the $1 trillion market cap mark. SGX Nifty is up.
  • With all the short term concerns over rate sensitives, the focus may shift to more defensive plays like pharma which are still reasonably valued. We like Lupin on performance turnaround cues and target Rs.920 in 2 months time frame.
  • With oil stabilizing in the $73-$75/bbl mark, the short term worries over oil price rise may be overdone. This is likely to be positive for stocks like HPCL and BPCL where we see 25-30% upsides from current levels.
  • After the sharp correction in the stock price of NBCC to around the Rs.70 levels, the stock may be a good bet, being the largest beneficiary of the current process of infrastructure expansion. Buy with target price of Rs.110 in 3 months.
  • While markets may stay around the current levels, the mix of global factors could weigh. Stay hedged at higher levels.

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