- The bounce in the Nifty on Thursday was driven more by short covering and a bit of value buying in pharma stocks. Consumer stocks essentially continued to be under stress on broad valuation concerns.
- Pharma continues to be the sole sector to stand out and that could be the one sector that may stand out in the midst of a strong dollar. Mid cap IT still has pockets of value but large cap IT may be quite richly valued already.
- FIIs were net sellers to the tune of Rs.(-455) crores while DFIs bought Rs. 612 crore on Thursday. FPIs are overall cautious on emerging markets as a whole due to currency concerns and that may not change in a hurry.
- Globally, the NASDAQ continued to see immense pressure even as European indices were sharply down. The SGX Nifty is in positive but we may see rapid closure of positions today on week end concerns.
- As we said, the big focus will continue to be on the pharma space. Aurobindo looks good after the recent Sandoz unit acquisition and the stock could see another 20% upside from current levels. We also like Lupin at current levels.
- The joker in the pack could be the power sector stocks. The two big beneficiaries could be NTPC and Power Grid who could end up financing some of the capacities as fairly attractive hair cut prices. Look for 20% upsides on both these stocks.
- Zee looks very vulnerable with its Zee5 investments unlikely to yield anything positive in the next 4-5 years. This will add to cash flow problems among media companies. Look for downside targets of Rs.400 on the stock.
- While FPIs have been selling in EMs, there is still not a deluge of outflows. That is what Indian markets will have to watch out for.
