• The rate cut coupled with the shift in the monetary stance did not really manage to give a boost to the markets as the Nifty gave up early gains to close almost flat. The higher fiscal deficit continues to be a big overhang.
  • The policy has been a tad too liberal with ECBs, FPI into debt and bank lending to NBFCs. While optically it does look market accretive, what needs to be seen if this leads to further dilution of the central bank controls? That is not good news!
  • FIIs were net buyers to the tune of Rs.418 crores while DFIs bought Rs.294 crore on Thursday. It remains to be seen if the buying trends get impacted by the liberal monetary policy announcement, although FPIs into debt could get a leg up.
  • The European markets too sharp cuts on Thursday after the EU growth projections were quite tepid. EU and UK have now agreed to a more manageable BREXIT and that is good news. SGX Nifty is flat and could react to US markets overnight.
  • The monetary policy and the budget combination will be especially lucrative for the auto sector as lower rates combine with improved demand. We like Eicher Motors, Maruti and Hero Moto from a one quarter perspective.
  • We expect a gap down opening on Tata Motors after the sharp loss reported but the correction could be an opportunity to accumulate the stock for a long term perspective. The loss was more of a one off and that should be ok.
  • One must look at accumulating Tata Steel at current prices after the sharp correction and the expectation of the government likely to support with import duties. Buy around Rs.480 for targets of Rs.550 in one quarter.
  • The monetary policy has been clearly accommodative and the benefits should be visible in the coming days.