)
Markets have broken the 3-day losing streak and have rebounded in trade today led by bank shares.
Banking shares are in focus after the Reserve Bank of India (RBI) decided to allow banks to transfer SLR (statutory liquidity ratio) securities to HTM (Held to Maturity) category from available for sale (AFS) / held for trading (HFT) categories up to the limit of 24.5% as a one-time measure.
Investors will be watching the release of the Federal Open Market Committee’s July meeting minutes today for hints as to when the stimulus withdrawal will begin.
Government bonds were headed for their biggest gain in at least 15 years, while the rupee remained under pressure on Wednesday after the Reserve Bank of India (RBI) said it will buy bonds to ease a cash crunch, and relaxed bond holding rules for lenders.
By 1200 hrs, the Sensex was up 140 points at 18,376 and the Nifty is 43 points up at 5,444 after having touched a high of 18,567 levels and 5,504 levels, respectively in intra-day deals.
The broader markets are out-performing the benchmark indices in noon deals today. The BSE Mid-cap index has gained 1.11% at 5,399 and the small-cap index is also up 1.07% at 5,279.
Among key midcap gainers, Amtek India, Oriental Bank of Commerce, Sintex Industries, National Buildings Construction Corporation, Multi Commodity Exchange of India, Essar Ports and Gitanjali Gems have gained between 5-7%.
STOCKS TO BUY
According to Ravi Shenoy, AVP-Midcap Research, Motilal Oswal Securities, “Upside will depend on the decline in inflation and the consequent fall in interest rates. At present we are focusing on stock specific approach. RBI’s move to restrict liquidity measure has impacted the midcaps to a great extent because the working capital cycles tend to become even longer and interest costs higher.”
Shenoy has recommended stocks like Swaraj Engines, Suprajit Enginerrings, Finolex Cables, Gruh Pinance, Bajaj Finance and Repco Home Finance for investors with high risk appetite and a longer horizon.
Adds Ashish Chugh, Investment Analyst and author of Hidden Gems, “Markets have become hugely polarised – on one hand you have many large cap stock especially in the Pharma & FMCG sector which are trading at PEs of 30 to 40 and on the other hand you have many businesses run by good managements, having healthy balance sheets & Good Corporate Governance & good future potential available at 3 to 5 years of Cash Flows and 5 to 8 PE multiples.
I believe such a wide gap between smallcaps & Large Caps, especially Index stocks is unsustainable & we expect the gap to narrow down. So forget Nifty & Sensex, money will be made through the selection of the right stocks – and the current markets provide ample opportunities.
We like Vadilal Industries in the consumption space, Selan Oil in the Oil & Gas space and GVK Power in the Power & Infrastructure sector. (Disclosure – Have investments in above stocks)".
A K Prabhakar, Sr Vice-President Equity research at Anand Rathi feels quality Mid-cap has seen big sell-off making it very attractive for long term investor. He prefers stocks like Cadila Healthcare, Andhra Bank, Dena Bank, Havells, ING Vysya Bank, Sun TV, Siemens and Thermax from the mid-cap space.
