India Morning Report: 6250 mark to prove daunting again

While Hero Moto has indeed skipped over Bajaj Auto again to try and pull through at the cusp of Auto Sales recovery expected from March, with sales overall remaining dull keeping manufacturers unwilling to pass on excise decreases means Auto Sales along with the overall economic sentiment may not pick up at all in March. The unequivocal thumbs down to Economic data dragging growth in December /January data with IIP reporting core manufacturing and infrastructure growth dragging at 1.6% still shows the hopes of bigger numbers in India’s imminent recovery trade meaning net inflows at 6200 levels itself will likely keep India’s comparative advantage in Global equities in 2014

India’s overall PMI, led by the weakness in manufacturing grew to an anemic 52.5 in February and the GDP growth will beat expectations if Q1 and Q2 growth is revised to compensate for a lower base effect in the dull 2012-13 prognosis of this extended “lowest growth” phase for the Economy. The Oil Bill(not the Act or Law, but the invoice for our profligate spending) pinching has already moved up India’s currency risk levels and the Rupee wearily awaits the news of the wind down of the situation in Ukraine

Use the sells in Private sector banks and Power NBFCs quartet to accumulate more of the stocks, including REC which will not go below 183 and buying will predominantly happen at 185 levels, similarly for PFC. Both enjoy undisputed 5% NIMs on an expanding base unlike Kotak’s saturated advances since 2007.

Banking License trades continue to fox with a focus on the dark horses like Shriram Transport, we favor LIC and IDFC trades which will outlast the license news as the number of new licenses is likely to be limited. A writer of 6200 puts may be steeply heightening his risk exposure but may prove to be a bigger winner in current trading conditions. However, such moves are likely to be the focus of the market after midafternoon open in Europe as markets get updated with the current policy moves on Ukraine, any sanctions on Ukraine likely to tighten the upward spiral lock on Oil and agric commodities, where India continues to hold  a distinct price advantage.

DRL is in focus as a good 15% of its business is in Exports to Ukraine. Nestle seems to be a good pick, starting off the return of Pharma trades to the mainstream even as the new crisis masks underlying positive moves in market flows. Index shorts continue to increase for FIIs and their use as a hedge is  likely to increase even as calls written on the indices get extinguished with the PCR still continuing lower from 0.9 levels on Friday

Meanwhile Switzerland seems to be pushing on India’s request to put an end to its woes fighting other Global Banking regulators unsuccessfully adding to India’s basket of embarrassing foreign policy quirks. Oilcos are likely to mainatin price levels as they are able to pass on increases but are unlikely to capitalsie on the opportunity to increase profitability

FII debt buying was limited to Stock exchange listed(traded) debt , with listed business focussing on buying in the 10 – year 8.83% 2023 Bond. Bank of Baroda continues to stabkly trade at just below 550 levels but its NPA situation has not stabilised neither for other players down the ladder like Union Bank of India

Volatility can move up two notches more, meaning markets can face sharp daily declines to 6150  levels depending on news from Europe in this week and next

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