- Nifty and Sensex cracked sharply on Wednesday after the Brent Crude crossed $86/bbl and the rupee weakened beyond the 73/$ mark. Bond yields were also up at 8.11% on anticipation of a RBI rate hike.
- All eyes will be on the Monetary Policy Committee (MPC) meeting that commences on 04th and will culminate in the policy on 05th RBI is expected to hike rates by 25 bps but may opt for status quo to encourage growth.
- FIIs were net sellers to the tune of Rs.(-1550) crores while DFIs bought Rs.1402 crore on Wednesday. FIIs have been selling quite aggressively in the last few days on concerns over CAD and oil prices.
- Markets across Asia were deep in the red on rising oil crude oil prices. Europe and the US markets were relatively better off. The SGX Nifty is already showing cuts of over 100 points and the double whammy could hit markets quite hard.
- Traders should look at selectively buying quality auto companies that have corrected sharply. Eicher and Maruti may be good bets and the real boost may come if the RBI chooses to hold rates in the October policy.
- We suggest caution on oil marketing companies, HPCL, BPCL and IOCL. Allowing OMCs to raise up to $10 billion through overseas market is an indication that oil losses may be parked there. Price damage could get worse from here.
- A good space to bet on in the midst of the dollar strength would be the metals space. We suggest buying Hindalco and Vedanta at current prices with targets of Rs.290-300 on both the stock in the next one quarter.
- Keep an eye on crude oil. Shorts could cover quite aggressively on crude and that could push oil prices closer to the $90/bbl mark.
