Today is a big day for the market -- the Reserve Bank of India (RBI) credit policy and it becomes big in the context of what governor Raghuram Rajan did last month, surprise rate cut. So this morning another rate cut is an outlier. The market always gets excited if an outlier event takes place.
If there is rate cut from the RBI, today as well, make no mistake, this market will be back to all time highs sooner than you expect and maybe will hit 9,000 as well at some point.
Even if there is no rate cut, in that case, the market still is in control of the bulls. The last two-three days have been a bit weak, foreign institutional investors (FIIs) have been selling but the FII number looks worse than what it is because yesterday also FIIs sold about Rs 630 crore in cash market but if you take a look at the gross buy and gross sell number, the gross buy number still remains large. It is the gross sell number of Rs 60-70 crore which is taking this net sell number higher. Why is that happening? That is happening because there are three-four stocks or sectors where there is earnings concerned or their stocks have been outperforming and there is some profit booking in those. ICICI Bank is the prime example. Yesterday there was delivery base selling of Rs 1,000 crore in ICICI Bank, in two days Rs 1,500 crore. Asian Paints, Coal India, some of the stocks driven by news, fundamentals where you have seen some selling and some money has moved out from these large stocks to some stocks like an Axis Bank or some other stocks, which are relatively smaller compared to the larger peer. So that essentially is it, don’t read too much into that.
Foreign institutional investors (FIIs) selling in Futures and Options (F&O) market is also something you have to analyse closely. There is a large selling in stock Futures; stock Futures selling at early in the series is always arbitrage because the stocks have high cost of carry or stocks looks good, some smart traders get a chance to make 20-25 percent annualized return. Why not, so that’s pretty much there – don’t read too much into that.
This market is still in control of the bulls, this market still want to seek higher levels, traders, investors are still looking to buy and not sell and the sense I get is that that the market would be back to all time high sooner than we expect. However, the market may consolidate a bit between 9,000 and 9,100-9,200 or between 8,900 and 9,100 but this series would be about midcaps. So, you need to identify good quality midcaps and they are going to give you big returns this series. This series, in a pre Budget build-up, it is going to be all about midcaps and if you get your stocks right, you will make a lot of money. Don’t make a mistake of shorting this market, this is a market which you have to buy; you have to look for buying opportunities and the buying opportunity would come. It may have already come in individual stocks; it would come for the Nifty as well at some point.
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