- While the Nifty held on to the 10,500 levels on Wednesday, the big overhang was the sharp rise in NPAs of PSU banks and the $1.8 billion fraud at PNB. Both these are likely to dominate the market sentiments today also.
- As we had mentioned yesterday, it is time to be cautious on PSU banks till there is greater clarity on the NPA front. Also the higher yields will mean losses in the books of banks and that has to be factored in for most banks.
- FIIs were net sellers to the tune of Rs.(-729) crores while DFIs sold Rs.(-153) crore on Wednesday. The FPI volumes are likely to be tepid till there is clarity on how the SGX Nifty volumes and open interest can be shifted.
- The sharp rise in US inflation brought the growth story back and markets across the US, Europe and Asia has reacted positively. IN early trades, the SGX Nifty is also nearly 80 bps higher and the positive trend is likely to continue.
- Combination of the PNB case, higher NPAs and higher bond provisioning will mean that banks are going to be under pressure. One can hedge their bank holdings by purchasing put options on the Bank Nifty in today’s trade.
- The two stocks in the financial sector that look less vulnerable to the NPA menace are Indiabulls Housing Finance and Bajaj Finance. This is the time to accumulate both these stocks with 10-15% upside targets in 1 month.
- We reiterate our buy call on Tata Motors at Rs.375 with target of Rs.450 in two months and Rs.550 in 4-5 months time frame. The global spending revival aided by higher US inflation will be a big boost to JLR sales globally.
- With the banks coming under pressure, one has to be selective. Focus on buying Tata Motors, Bajaj Finance and Indiabulls Housing for today.
