India Morning Report: To below 7850 or to follow Banknifty that is the question

The Banknifty has decidedly turned nose up positive and is a big buy, and the market was mostly holding 7850 thru trading all day comforted by buying from investors and FIIs even as volatility traded down. However IT and Pharma in its wake traded down as IT was expected to ahead of results season. There is a lot of disappointment in this recovery even as stalled projects take off and a secular rally probably wants more firm up indicators before the final moves start happening, traders still finding value in banks alone and overall economic indicators including the one month wonder of IIP or the slow 51.5 on the Services PMI implying a lot of caution in the 7.5% plus CPI and the positive trade on India Bonds that is likely to last the entire Q4 unlikely to pressurise the RBI Governor into an earlier move. The Rupee also went beyond 61.5 before pulling back yesterday and has reached the point where inefficient exporters again look for a free momentum from the currency.

That said more than a solitary segment in the markets obviously finds value at 7750 – 7800 levels and markets may not wait given the trading pick up in Banks. Futures outstandings in the derivatives segments saw more cuts in positions effected by FIIs and the small net positive in Options could well bear more looking into

10 am update: A big jump to 7950 however surely means a cut back to 7850 from 8000 and thus a likely low before the festival/new year turnabout starts in earnest. Trade out the peaks on a daily basis and stay invested in longer term investments like ICICI Bank, IDFC and Yes, Bharti and ITC or your Pharma pick for this up cycle from 2012 to 2017 (likely)

Although not my own research, one can safely see Force and Linc pens following where Havells was in 2009 and hopefully the PE and non PE private enterprise basket in Midcaps will provide a big line up for investment bankers to bring to market in the next two years..

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