- The sharp rally in the Sensex and Nifty on Monday was more than the wildest expectations of most traders. After a tepid start, the short covering in banks and financials took the markets sharply higher on Monday.
- Global cues need to be watched keenly on Tuesday. There have been positive cues from China and also from Iran where France has tried to defuse the Iran oil ban and if that happens then even the geopolitical risk could come down sharply.
- FPIs were net sellers to the tune of Rs.753 crore while DFIs bought Rs.1272 crore on Monday. The sharp selling by FIIs highlighted that the market rally was still driven substantially by short covering rather than by fresh buying.
- Most global markets across the US and Europe bounced back in the second half of trade on positive cues from China and Iran. However, China has been more circumspect on the trade talks. Asia is mixed even as SGX Nifty is higher.
- We remain positive on auto stocks with focus on Eicher and Maruti, where we see another 10% upside from these levels, especially after a fairly positive auto package and promises that the GST would also be rationalized soon.
- With steel output likely to touch a 3 year low, pressure on the steel companies on volumes and price is likely to continue. China situation likely to tighten. Sell JSW Steel at Rs.215 for targets of Rs.195 and lower.
- ICICI Bank again looks overpriced at current levels and it is time to start selling the stock at the range of Rs.415 to Rs.420 with downside targets of Rs.380 and second target of Rs.350. Keep stop loss around Rs.445 for the trade.
- The rally on Monday may have taken steam out of the short covering ahead of the F&O expiry. Expect a positive but more subdued market on Tuesday.
