We all know about inflation. We must admit that weakness is there in the market. It can again be triggered from the US markets. In the US, we see a lot of speculations about the financial intermediateries and everyday we see some of the banks asking for more capitalization.
In India, the true value lies in the madcap sector. Hence, some very good companies are available and will continue to be available. But if the market view is negative and if it goes down then no madcap can survive. Stagger buying can take place since we have good companies, good stock and good management. However, it all depends on the market view. At present, it is negative and so we need to act cautiously.
Interest rates are expected to go up and the CRR hike also would probably take place. Hence, in such a situation, real estate cannot do well. All the FLL’S and big investors will have DLF or Unitech in their portfolio. Hence, DLF or Unitech will be sold as they are the main companies. So, real estate is negative and at the moment and any stocks where FII holding is high, there is a chance for it to get sold.
Technology seems to have come out as a big winner from all that happened in the past 3 months. It is all because of the rupee. Since the rupee fell, technology stocks have been then bought. For example; Infosys is going up quite strongly. Also, MindTree is a second tier IT company to be taken into consideration.
In an inflationary environment, banks treasury income goes down and thus banks try to lose. They will also have to raise the deposit rates to that extent. There is no credit growth happening due to the present high inflation and the general slow down in the economy. It is not a good time for banking sectors.