The story on Wednesday was all about the special stimulus announced by the RBI governor to boost the economy. In the aftermath of the stimulus, the Nifty gained 121 points on Wednesday as the liquidity available to COVID projects benefited pharma companies, banks and MFIs in a big way. These were the big gainers on Wednesday.

For the banks, there are again concerns that the introduction of the fresh moratorium may be credit negative for the banks. However, this is a risk that the RBI will have to take at this point of time. The question is whether this will be followed up with a fiscal boost, which could be the real big story for the markets.

FPI action was once again negative on Wednesday with overall net selling of Rs.1,111 crore. Surprisingly, the normally bullish domestic institutions also sold Rs.241 crore of equities. In the last 4 trading sessions since the last trading day of April, the foreign investors have taken out Rs.8,700 crore from equity markets, which is not an encouraging signal.

The tech-laden NASDAQ index in the US was a tad week on Wednesday but there was optimism in most of the other markets. The Dow was in the positive, albeit marginally. Even most of the European markets ended with deeper gains. SGX Nifty continues to be tentative and the VIX staying above 22 and rising COVID cases are clearly not too comforting.

As a trader, it is possibly best to stay out of short term trading. But if you have waiting power it is the right time to take delivery in mid cap stocks in select stocks like pharma, sugar, specialty chemicals etc.

Bajaj Finance has recently got approval from the RBI to launch its own digital wallet. Bajaj Finance can issue and operate semi-closed prepaid payment instruments or PPIs with perpetual validity. It must be remembered that wallets have seen their popularity wane after the UPI phenomenon took over in India in the last few years.

For Bajaj Finance, the digital wallet fits into its larger strategy to diversify into the payments segment at a future date. Bharat Bill Pay system is already live on Bajaj Finance it goes live on the UPI interface from May this year. The digital wallet will just complete this palate of offerings. Wallet customers can store Rs.2 lakhs and withdraw cash too, so it is like a bank.

Aarti Industries is one of the leading specialty chemicals companies in India with a leadership position in the production and sale of Benzene. It hit a new high of Rs.1787 on 05 May after it announced plans for a bonus issue. Aarti Industries had issued 1:1 bonus last in 2019. It will be ratified in the 11 May board meeting.

The Mar-21 quarter is expected to be a bumper quarter for specialty chemicals companies, like Aarti Industries with profits expected to grow at 15% CAGR for next few years. But the immediate price trigger surely comes from the bonus expectations.

On 05 May, the RBI governor announced a slew of measures to soften the impact of COVID resurgence, which has already taken a toll with joblessness at 7.97%. RBI announced COVID funding package of Rs.50,000 crore plus an extension of moratorium for loans to individuals and to businesses, with special focus on the MSME sector.

The entire COVID package will also get priority sector status and thus help banks meet their targets. Nifty and Sensex gave thumbs-up celebrated, led by the Pharma index rallying 4% and the Bankex rallying 1.6%. Sectors like banks, SFBs, MFI and pharma were major gainers.

Oil prices rallied for the third day in succession as Brent Crude inched closer to $70/bbl. The big trigger was the easing of lockdowns in the US and Europe which promises to boost demand for crude oil and gasoline. The crude rally was also helped with American Petroleum Institute reporting 7.7% fall in crude stockpiles for the week. In short, the US and Europe are making up for weak oil demand from Japan and India.

This pertains to the Cairn case and the favourable arbitral court ruling they have got. Indian government instructed PSU banks to ring-fence and protect their dollar deposits after Cairn Energy PLC threatened to seize India’s offshore assets. Technically, Cairn can push for impounding such Indian assets like bank deposits, aircraft, ocean liners etc.

In case India refuses to honour the arbitration ruling of $1.2 billion, Cairn has other options although these are rarely used. Cairn can either negotiate with the Indian government or it can impound assets or it can monetize the arbitral award to a third party.

S&P Global Ratings cut India's GDP growth forecast for FY22 to 9.8% from its original forecast of 11% due to the possible impact of COVID resurgence. According to S&P, this resurgence could derail economic recovery and credit flows.

However, S&P has not offered any comment on the status of India’s current “BBB-“ rating, which is already just 1 notch above speculative. Economists warn that a combination of weak growth, high inflation and mounting fiscal deficit could trigger a downgrade.

For Thursday, I am not really suggesting any changes to the portfolio for the time being and am asking to hold on to positions as you are a lot lighter. For Tata Power and for Mazagon, the prospects are still quite good, so you should hold on for longer. Here is my view.

· Tata Power at Rs.104 (CMP-102) – Suggest to hold

· Mazagon Docks at Rs.211 (CMP-211) – Suggest to hold

Let me turn to your query on what to buy. For Thursday, I suggest to buy two very niche and focused players; one in pharma and one in sugar. You can buy Sun Pharma Advanced Research or SPARC at Rs.185 for targets of Rs.230 in 2 month. In addition, you can also buy Dwarikesh Sugars at Rs.49 for targets of Rs.65 in 1-2 months. Remember, these are momentum stories so don’t get too involved with them for the long term.