India Morning Report: Markets set to recover the tailwinds

India specific interest in Emerging Markets investors remains buoyed by yesterday’s events in Argentina even as Brazil gets downgraded in growth projections again and UAE floats some debt among Asian and European investors/bankers.  Argentina lost 10% as expected after the rush into Turkey and Argentina prompted our comment on the same last week and EM debt remains in flavour making the necessary soft touch for the new Modi government weeks before their first budget. Markets in Asia will however continue to ignore India and index fund allocations are not changing anytime this season, the MSCI India index probably our bread and butter despite the floating troubles on that dessert.

New Road infra rationalisation leads the way on the Modi agenda as UPA welfare schemes and Ministry staff come in the way to a fully functioning government till now making its mark with unique ideas in every pronouncement since V-Day (May 16) At least the exercise on Paid tollways is going to be relatively transparent though only media seems to be getting a dekko.

It might also be rough on the government that they wait for a Cabinet expansion till Budget day so there is no remaining positive tone for the markets, yet untried, the correction having subsided at 7500 however. Mid cap gainers may remain in trouble as sector specific news is substituted for sentiment in the shallow business on the exchange there in, leaving Domestic pharma picks and YES Bank and IDFC stronger and better for the lack / surfeit of stock selection in the markets in the last 12 months. REC had a good Monday as Powergrid took turns to correct and both may finally correct to better buying levels but for no one completing shorter term trades anymore in any of the Power NBFCs, unwilling to miss the bus as it makes a vertical move up. Sun Pharma seems to have shaken off bears as Pharma gets secular sectoral thumbs up from QFIs but the sentiment on the stock is likely to get set up by a surfeit of bears again in 50 more points, joining the now tepid DRL as they become the wrong poles in pairs with Glenmark and Cadila, Auro Pharma and Strides Arcolabs also making a comeback.

GAIL has made a good trade in the week, probably a bite from substitution by ONGC investors as ONGC cedes higher royalties after a court decision in favor of Gujarat and Net Crude price realisations suffer despite the upbeat global sentiment on Oil. The currency trade suffered a big setback on Monday as well but higher levels might recede again as new Currency bulls enter at these levels, despite rumors of the new fat rupee levels at 65 in the midst of the Oil price push which is already just a $1 from its likely (2/3) peak at $114 on the Brent

The OMCs Victory march is also unlikely to sustain as the interest created by a Oil rally subsides this week itself. I also recommend you start buying into ICICI Bank at 1400 levels and the bullish banknifty trade is well nigh here, today or tomorrow. ITC is ready to go up again. I would not bet on a short but the interest in Kotak has definitely subsided at new unwieldy highs for the stock.

Update: Though I did studiously ignore them, L&T nd BHEL have cracked in the call auction session , markets looking to wipe the inefficient again after a big bump up when no real candidates were known for the recovery juggernaut in motion in 2014.

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