India Morning Report: Holding 7300, markets set to establish further gains

Debt outflows continued for most of April and May despite the improved rating of India globally and thus new inflows could again target the macro led Indian debt markets to the extent that there is a much greater (90%) likelihood of yields falling from 8.8% here and allocations become available from exits in US bonds and High yield and LL markets in Europe. Equities in the meantime a little more optimistic on/ignorant of  CPI data and IIP among others will continue to be buoyed by the recent change in Government as Mid Caps hold up on Indian equities having delivered 15% gains annually in a crisis period for growth since 2008 and Auto sales also likely to score much higher in May after having missed out on Election expense fueled April

Meanwhile SBI again heeded warning bells and fell a score from 2650 levels to 2450 on Wednesday, spurred by real shorts on PNB targetting a fair priced PSU bank pool. However as the Banknifty indices responded in kind real hedged trades in Indian banks are impossible and the Banknifty is thus likely to experience a mildly accelerated fall even as investor interest in private sector counterparts and the Indian economy increases in real time, capping the index at 15100 levels even if the YES Bank, Axis, ICICI Bank and HDFC/HDFC Bank respond on the positive side.

The IT recovery yesterday was the only sign of a sing song derogatory treatment of Indian markets by its insiders and is unlikely to last the week as Bajaj Auto shone in trades ably supported by increased business in ITC, M&M also improving from 1000 levels to 1150 in 2 days when indices were yaw yawing at the top and will shine on Thursday as well with exports again in motion. Gold rule relaxation is likely to bring back titan and manappuram investors

Bank of America is backing Titan as consumer non discretionary and discretionary remain in focus otherwise for being overvalued/fairly valued. however despite the improvement in outlook this year and the fade out of Gold import restrictions expected, Titan may not be the horse to back with mainline consumer businesses continuing to showcase good earnings and defensives unlikely to offer the flavor of a real bull market. ttk similarly is still consolidating business this year after a volatile 2013 from change in gas policy

Real estate stocks are a good short even as Mid Cap indices rise oas markets are likely to inspect the broad based rise for sustainable propositions and individual candidates concocted in the recent rally without basis will be jettisoned in a single trade/session. Energy cos in Oil are done with the correction while Power NBFCs still holding new levels likely first beneficiaries of a new dispensation Stocks like Federal Bank/SIB and City Union Bank could be in focus for news on Q2 business, mostly positive.


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