- A lot would depend on how the government clarifies on the impact of the higher surcharge on select group of FPIs. This was the factor that really spooked markets leading to the Sensex losing 1200 points in 2 days.
- Keep an eye on strong NBFCs like Bajaj Finance, LIC Housing Finance and Shriram Transport. They can now raise funds in the bond market without creating debenture redemption reserve, which will reduce cost of funds.
- FIIs were net sellers to the tune of Rs.402 crore while DFIs bought Rs.321 crore on Monday. There was some debt market selling visible on Monday as FPI preferred to stay risk off in the current scenario.
- The Dow and the NASDAQ were weak on Monday on global growth worries even as Europe continued to be tentative ahead of the BREXIT outcome. SGX Nifty is flat but it may depend on clarifications coming from the government.
- Biocon continues to trade substantially lower than its peak price. At current price of Rs.240, the valuation concerns are largely addressed and one can look to ride on its bio-similar business for targets of Rs.300.
- We are now having 4 top picks in the financial services space. In the PSU banking space we like SBI and BOB as our top picks. On the financials space, our top picks continued to be Bajaj Finance and LIC Housing with 20% upside targets.
- Another pharma company to look at is Glenmark Pharma at the current price of Rs.430. It is available at around 7X P/E which is the lowest valuation that we have seen in quite some time. Target Rs.500 on the stock in one quarter.
- The markets will be awaiting a clarification on the applicability of tax surcharge on the FPIs as it would be the key to the future direction of markets.
