Indian Morning Report: Markets catch the bad eggs early, Modi sworn in on Monday

Markets caught the listed Morning Report villains early yesterday with PSUs getting a big early correction and markets sustaining the up move rather than jump to 7400. SBI however, probably with reassuring noises from Modi and Shourie insiders, caught fire again and closed at 2600 levels on being treated as a jewel in the crown and getting the required recapitalisation on priority. As of now however, technically no one from the new government is actually in position to deal with these issues as sh Narendra bhai Modi decides on his first team over the week.

Markets will continue up from 7300 and there may be a small correction in SBI too but shorts should exit the stock till it reaches new stratospheric levels beyond 3000 (when they will still risk getting trapped as Sensex targets have crossed to 31000) In the meantime the bank will be jettisoning more bad eggs to ARCON and other bad asset buyers. PNB also got an early reprieve yesterday on the same counts and followed SBI to an above 1000 close. PNBis a great short ( confirmed by Ashwini in the late morning picks)

Pharma companies, also as noted yesterday, came back with a big bang and IDFC provided momentum to the positive side of the market move while the PSUs including Coal India were rerated down after  a mindless rush on the upside over the weekend. Glenmark and Orchid Pharma are probably positive as Auro Phara remains subdued. Divis labs starts back from the bottom while IPCA joins in late s both follow Torrent and even Jubilant Life identified late in the rally.

In two wheelers we are still betting on the Bajaj Auto – Hero pair trade, Bajaj Auto remaining near 1900 levels after being ignored in the rally at its traditional top at 1948. ITC seems to be the one to be accumulated by institutions in the non IT businesses.

Mid Caps continued to rule their positives being easier access to financing as the growth memes take root again and markets , according to us , still looking ata  big risk as many cannot support the coming phase of steep growth fundamentally and choice of speculative multi-baggers opens the proverbial well (kuan vs khai in Hindi, the frying pan and fire being the universal translations of the metaphor) of despair led by over leveraged real estate and infra picks like IRB which have not completed asset sales to deleverage their current businesses. GMR continues to rely on aviation to get out of the rut.

Sun Pharma as always followed up on good news on Gleevec with the release of a warning letter from US FDA, consistently defying its backers for the last 20 years even as rival DRL lies in disarray

The stem in the rise of the Rupee brought gains back to IT as well and the same might continue a mindless exertion to the plus side today risking the fundamentally stronger banks and the down in the dumps auto/two wheeler stocks for the switch as indices will like to stay close to 7300 like yesterday till late afternoon. The top of the rally is above 7400 where markets would like to build a new level instead of keeping a bull rally correction, which is currently the expected result.

Chris Woods, continues to bat on the edge of rationality at CLSA, making smart comebacks as the easy rally remains simple to define and choice of available sectors is broad. Consumer Non Discretionary sector remains strong inthe indian GDP charts and may not be ignored in this rally. VIP and Zee Entertainment are likely to bat expectations of great results and at least the rally in Zee likely to survive in the longer term. Jubilant Foods may be out of favor but another short on it probably will cost the hype trades

Advance Declines may continue to try and balance out after a week of lopsided bullish ratios but opens at near 5-1 levels Energy companies and OMCs continue to face profit taking with Hindalco after DIIs confirmed they would wait for dips to buy.

That means the day will see Financial Services compoanies and Power NBFCs carry the burden of the bulls after a subdued week.

Off the bourses, the @PMOIndia shutdown may not be unwarranted as PM Manmohan Singh’s state representations are definitely not transferrable to the incoming PM but I guess Twitter can work on a generic solution. Till them I have no issues looking up @PMOIndia Archive instead but wonder what the official account handle should benow. I guess we won’t be chaning PMs in a hurry again!

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