India good for cherry picking: Macquarie - Mark Matthews

What is your prognosis on Greece and Portugal? What is the impact it is having on the euro?

Mark: We had a lot of coordinated intervention over the weekend from the BoJ and Federal Reserve which was unexpected. I don’t think people expected those two big central banks to get involved. But I think trust in the system is still very very weak and the way markets in Asia have reacted this morning is much less of a rebound than anticipated. I would have thought markets would have been up 3-4%, but they are up only 1.5%.

So what is that telling you about equities as an asset class?

Mark: I think there is probably some short covering that needs to be done. So markets can go higher in the medium future. But longer term we already did so well last year, Asia doubled, the S&P went from around 700 to 1200 and I think even if the European crisis has not happened. Markets would still be going up very quickly today. You know China is the economic engine of the world and the Shanghai market is down about 15% in a year to-date. I don’t think markets are going to go up very much in between now and the end of the year.

Call on the euro at this point?

Mark: I think we have to read the details of the plan that is coming out to get more clarity. I don’t think the euro deserves to stage a really big rebound. Even if they do manage to contain the crisis and it doesn’t spread into other countries in Europe, the fact is that now the cats are out of the bag that they have this huge deficit. And they have to reign in these deficits by cutting spending and that’s going to mean less consumption, both government and personal consumption in those countries. And that won’t help the euro.

What does all this mean for liquidity coming into markets like India?

Mark: The interesting thing is that people are naturally attracted to the Indian market because it is one of the few large stock markets in the world where you can buy growth which is not correlated to the rest of the world because exports as a percentage of GDP are much lower in India than they are in most of the countries in Asia. But the irony is that its precisely because India’s economy growth is uncorrelated that the stock market attracts a lot of foreign portfolio money and therefore that money can easily be withdrawn when risk aversion increases as it has in the past two weeks. So the irony is that though India is a very protected economy from the rest of the world and it has very good domestic attributes, the stock market can suffer more than others in Asia because foreigners invested in it for its independent growth.

EU Impact: Sensex gains 560pts

Positive global cues (the nearly $1 trillion European Union bailout plan) saw the Sensex open with a positive gap at 16,799, which turned out to be the low for the day. Buying in heavyweights and metal stocks saw the index zoom to a high of 17,356 - an intra-day gain of over 585 points. The Sensex finally snapped a five-day losing streak and closed near the day's high with a gain of 561 points (3.35%) at 17,330. The Nifty was up 175 points at 5,194.

All the sectoral indices closed with gains. The BSE Realty index gained over 6%. Breadth was bullish - out of over 2,965 scrips traded, over 2,255 logged gains.
eliance Infra, which had dropped 7% on Friday after the SC ruling on the KG basin gas favouring Reliance, gained 8% to Rs 1,063. Metal stocks were in focus: Tata Steel and Hindalco advanced nearly 8% each to Rs 602 and Rs 175, respectively. Sterlite added 6% at Rs 756.
Heavyweight Reliance moved up 4% to Rs 1,080. M&M, Wipro, Grasim and ACC also closed with gains.

Cipla dropped 6% to Rs 320 after brokerges downgraded the stock to SELL on lower-than-expected Q4 numbers. Hero Honda was down marginally at Rs 1,886.

Debutant Talwalkar was the most active counter on the BSE with a turnover of Rs 289 crore followed by RNRL (Rs 166 crore) and Reliance (Rs 151 crore).

Global cues hold key

The markets opened with a gap down and treaded lower mirroring the fall in the Asian markets. Anticipation of a gap down opening in the European markets only made matters worse. The markets hit intra-day lows immediately after the European markets opened weak.

Aggressive short-covering, along with emergence of some fresh buying in sharply battered stocks, led to a vertical upmove till the penultimate hour of trade. Thereafter, profit-booking at higher levels and apprehension of carrying forward long positions to the next trading day capped the momentum. The small decline in food inflation number against the previous week also provided some support.

Volatility ruled the roost as uncertainty over the Greece debt issues and its contagion effect on other countries added to the uncertainty.

Meanwhile, IT stocks witnessed profit-booking after yesterday's display of strong resilience while metals, capital goods, realty and power stocks continued to face selling pressure.

Though global concerns have not eased, negatives, to an extent, seem to be discounted. Global markets (especially Europe), too, can be termed as oversold to some extent if not bottomed out given the fact that they are now trading near their 200-day moving average (strong support levels). The downside thus appears to be limited unless some major adverse event unfolds.

Domestic benchmarks, too, made sharp rebounds from the day's lows and remained above the support levels by a comfortable margin. One would thus do well to keep a close watch at the long-term support levels (200-day moving average for Nifty @ 4950) and start accumulating some quality stocks that seem to have been severely battered.