Though, none of the erstwhile out performers of this rally in sectors like healthcare or even banks are encouraging short positions, markets have lost steam with Nifty rollovers yesterday lesser than 60% and Banknifty rollovers also just 67% of the May series outstanding positions. Expiry was buoyant yesterday and the GDP data has been encouraging at 4.8% with mining worryingly negative at -3% and Electricity growth at 2.8% though degrowing still sufficiently positive to seed better business investment expectations. Nifty was extremely volatile in the last week of May repeatedly breaching 6000 to its ultimate support at 5970 intra day and IDV scores on the index jumping 8% in a day to 20% but nifty remains around 6050 after the GDP announcement surprisingly posits that the already weak manufacturing sector has receded in contribution behind construction activity in this Q4 data. A surprise mostly as Construction data has never yet been key for India watchers with Services in general not reporting apart from financial services, utilities, travel and hospitality services a long held gap of the statistic and backlogs or order pipelines in the services indices including results from Capital Gods and construction companies looking weaker ever quarter since 2009 .
Some obvious big ticket decisions roll off the end of May data reporting, including the obvious rate cuts from the mid june policy ( though the expectation has been pruned to not more than 25 bp) and though the bond yields have come back from 7.3% after the WPI announcement and absorption of the newly launched bonds in auction to 7.22% on the 10-year bond, Indian Rupee has still not completed its correction against the strong dollar , targeting 57 and 57.50/58 at its bottom before joining rest of Asia in buying against the falling Yen and Dollars
The Rupee bond yields are headed lower as demand for Indian debt remains robust and the flurry to convert out of the Dollar debt has not created panic with equities holding robust demand and IPO/OFS schedules comfortably priced thru the week. India’s low reserves hold key to this policy era rupee dollar trade pressure almost every year even as Gold prices firm back up internationally.
Scrips like out of favor HDIL which was erased out of its MIAL contracts and has partaken the last of MIAL obligations or FAR rights and DLF and Grasim, underline the paucity of shorts as speculation in part returns to such indecisive scrips as CIPLA which offers value despite bad results or M&M which has proved itself despite economic challenges and failed trades underlining limitations of old research
to back half houses like Heromoto corp and even Maruti and Sun Pharma struggle at higher levels. One would think GMR and JP Assciate companies have run the loop on bad news and are good buys and while the rupee depreciation has changed some fortunes for IT companies their future has hardly changed.
The week’s biggest moves came from HDFC Bank, ITC and very few others and as indicated they remain at the top of their business game and these winners including ICICI Bank and IDFC /Yes Bank remain trades on fire to be as part of positional trades or pair buys against SBI in most cases as it becmes clear that the bank’s portfolio still skewed towards sme loans is not amenable to any foreseeable improvement in quality while PNB exits the bad characterisatin from rising NPAs and most investors rerate PSU banks downward. Despite increased provisioning gidelines from RBI privat banks in particular remain outperformers
One also sees trades in Kotak and Jet Airways both gaining breadth of interest and thus both scrips remain mandatory buy only trades and regular additions to FII portfolios from th looks of it and should nt be neglected in favor of other industry leaders unless mentioned here. DIIs remain hopeful of getting to inflow trails after the successful OFS/IPO rush takes us thru May.