Goldman Sachs:: NIFTY ends flat again (+0.5% wow) and RBI hikes (25 bp) in line with market expectations

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NIFTY ends flat again (+0.5% wow) and RBI hikes (25 bp) in line with market expectations
 CNX Info Tech. Index gained 2.9% wow amid continued depreciation of the INR vs the USD.
 Ytd foreign inflows of US$0.3bn and domestic inflows of US$4.9bn as of close of Sep 14, 2011.
 We lowered our Sept-2012 target for NIFTY to 6400 from 6600 given more conservative valuation expectations.
 We suggest taking advantage of low implied vol, skew & higher rates by going long short-dated puts.
Overview
NIFTY rose for three days to end in the green
(+0.5%) wow. Markets benefitted from the ECB’s
announcement that it would coordinate with the
Fed, the BoE, BoJ & the SNB to conduct further
US dollar “liquidity providing operations” with a 3
month maturity.  The RBI on Friday raised key
policy rates by 25bp, in line with consensus
expectations. WPI for Aug came in a tad above
expectations at 9.8% yoy while July IP growth
showed a downside surprise at 3.3%yoy.  
NIFTY price performance
NIFTY ended up 0.5% wow, down 17.1% ytd
Source: NSE, DataStream, GS Global ECS Research.
Foreign and domestic flows
Foreign investors sold US$ 286mn wtd while DIIs
bought US$ 38mn wtd (as of Sep 14, 2011).
Earnings sentiment
MSCI India Materials saw the weakest EPS
sentiment (-6%) wow.
Commodities
Energy (+4.3%) & Agriculture (+3.5%)
outperformed commodities (+2%) wow.
Focus
 1) S&P CNX NIFTY Index changes w.e.f Oct 10,
2011
2) FTSE Global Equity Index Series - changes to
investability weights w.e.f September 19, 2011