As markets try to lower the limits of the range, the recalcitrance of investors to withdraw from the market presents an important increasing risk as the political flux remains in focus. Though the most probable case is still that UPA survives a no confidence vote, the government is likely to be living out a daily lease if DMK does not return to the fold and quick elections at this point would definitely engender chaos in the markets and in the long term economic threads, likely rupturing the fabric of India Inc’s almost exclusive positioning with its select friends (Foreign investors) likely to be as disruptive a withdrawal as any domestic policy action or non action has been
Mid Caps are showing early signs of the breakdown awaiting markets and there is an increasing possibility that a concerted effort by the Opposition now ill yield them dividends in the last leg of the race barely months away and probably brought forward by the events of this week even as Karnataka goes to the polls in May and shows the writing on the wall to BJP after having been a BJP state for years on end.
However, the tenacity of India Incs recovery will figure prominently in all no go decisions from here as the bedrock of recovery is unlikely to be disturbed by the political theater with both sides and the regional partners lacking the depth to understand this country’s strong will and determination and their continuing illusion that they are relevant in either yesterday’s avatars or even the jaded youth on offer. However, politically Congress remains a unified force after the amendments to the Food Security Bill. Also despite the inflation scare continuing, consumption plays and continuing tie ins between credit and nominal GDP growth will feed the positive Economic cycle going forward.
Private Banks are thus a good investment, with the SBI and PNB from the public sector and NBFCs could be a good bull to ride as well. Individual shorts remain unwieldy in the remaining correction and Nifty options and Futures look good to hit another run today though there may not be any continuing move in the remaining downward slide as volatility withdraws to lows.
Shriram Ventures’ new PE investments on the non Finance side and the group’s banking venture remain good bets to look forward to. Glenmark may keep most of the gains for another burst in 2013 and infracos are on the verge of having put their worst behind them while mid cap real estate expecting a record year in FY14 are still best avoided. The Auto stories are probably at near lows esp for Bajaj, M&M and Maruti in cars as exports return to normal and real growth pressure is pushed back to FY15
The strength of the rupee however precludes any strong market performance from the IT pack and then the Economic normal globally might need to be corrected for more degrowth in Europe in Q2 and the first half of Q3.