Markets failed to respond to the positive global cues as local factors dominated the proceedings. Food inflation came in at a high of more than 18% and that largely spooked the marketmen. The interest rate sensitives that were already under pressure further bore the brunt on fears of impending RBI action. Banks, Realty and Autos continued to lose ground on sustained selling. SBI and ICICI bank fell to almost 4 months’ low. Bajaj Autos and Tata Motors led the decline in Auto stocks. Fertiliser stocks expectedly reacted negatively to the postponement of Urea policy and were amongst the leading losers for the day. Chambal and NFCL lost more than 7% each. Some other names on the losers’ list were BGR Energy, Escorts, Ultratech Cements, Praj, Ambuja, TVS Motors, EKC, Unitech, HOEC, Dish TV, BOB, Bombay Dyeing, JSW Steel and Nagarjuna construction. IT heavyweights did provide some support to the indices as did RIL. Even some banks also managed to buck the overall negative trend and posted some gains. Some prominent gainers were Jain Irrigation, KTK Bank, Sun Pharma, Ind Hotels, Jet, Hindalco( new high), TCS, IRB, Petronet and Bharti.
Nifty continued to slide and severely tested the support at 6030-6040 and barely managed to close above this zone. Market has retraced around 33% of the rally from recent lows of 5720 and there is a high probability that it would find some support around current levels. Banks have been under pressure for almost 6 weeks now and current down leg could be the last one before a sustainable support and rebound is seen in most banking counters. This might coincide with the expected hike in interest rates by RBI. What this means as a trader is that one should be prepared to close shorts and perhaps go long in banking stocks once the hike is announced. Some other stocks that look good for next few sessions are Ind Hotels, Hindalco, Petronet, IRB( above 234), Bharti, RIL, Tata Steel and NCC.
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