What is your view for stock markets on 28th December and how did the Nifty and Sensex gain so sharply from lower levels on Monday?

It was a day the markets showed a lot of resilience, bouncing sharply from the lower levels. In fact, in terms of numbers, the Sensex jumped by nearly 906 points from the low point of the day. The close was strongly positive on both the exchanges. The big casualty was RBL Bank that touched its 52-week low and closed almost 20% lower.

In terms of the market structure, the advance decline ratio was favourable at 40:10 while the India VIX manage to edge higher to 17.12 levels due to the sharp bouts of volatility in the markets on Monday. The big gainers were the defensive plays like IT, pharmaceuticals and the FMCG stocks and that appears to be the underlying trend.

Foreign investors net sold equities worth Rs.1,038 crore while domestic funds and LIC bought Rs.956 crore of equities on Monday. In global market cues, the Dow rallied 352 points and NASDAQ was up 218 points. European markets were positive, except for flat UK markets, while SGX Nifty is trading with gains of 50 bps in early trades on Tuesday.

The RBL Bank case is likely to gravitate a lot of investor interest towards sounder large banks like ICICI Bank, HDFC Bank and Kotak Bank. That trend was already obvious. However, question markets over the valuation of financials will remain as the world enters a hawkish era. Investors will have to be extremely cautious on financials at these levels.