Stocks are set to crash in the first hour of trade on the first day of new F&O series. A possible default by Dubai World on its dent might cause tremors in the Indian market. Expect the benchmark index or the Sensex to give up more than 2 percent for the day.
There was blood bath in the European markets on Thursday as fears of a potential default in Dubai sent shock waves through financial markets weighing on European equities.The U.S. dollar off of recent lows as investors sought out safe havens. Asian markets are in red for the second day in a row with Nikkei, Shanghai and Hangseng losing between 2 to 3 percent for the day. One can expect this sentiment to rub off on stocks in Dalal Street.
We advice investors to stay away from Real Estate stocks as there is a likely hood of these stocks getting hammered in the open. We recommend shorting stocks like Unitech, DLF and HDIL as we might see a big fall in this space in the coming days. Investors also should think about cutting their exposure to private banks, especially Yes Bank and Kotak Bank.
Engineering is another space that might take a hit with Dubai World default, as there companies like L&T, Punj Lloyd, Voltas and many other who has exposure to Dubai. These stocks might be hit as there is less likelihood of new business in the near future and also a possibility that they might get stuck collecting their dues.
We advice investors to sit out of the market till the new year and take a call on markets at a later date. We do not recommend bottom fishing or shorting at this time, with the exception of some Realty counters.