Happy Thursdays! Inflation by the week, doing it without the banks

Yes. Despite rationalising everything in “Happy Thursdays” we could find you confused about it so we pointed out the things that don’t make markets happy. The Thursday excuse of retail inflation reports is working out well for markets looking for a daily see saw till Thursday afternoon to decide where India will be based on those sweet inflation numbers, which is really overdoin it, but then as long as turnovers are good, this seems to be better than any other way with the investment schedule quite stable for most investors after the FY12 downgrades made possible by a 5-10% PAT growth reports from almost all sectors led down by big cash governments in SBI and ONGC. India’s headline inflation crept up to 8.66% and bank rate hikes may yet turn out to be the least of our worries ass the commodities trading cycle are intact in most assets like Silver and even Copper. 

The results season confirmed as post analysis in the media suggests, that Sales momentum is still at 20% growth yoy, and interest rate sensitives have just set lower benchmarks and thus taken down the entire indices o a lower bottom to start off the bull races. Banks and Autos thus will remain on watch, losing that Sales momentum others have and winning on cost reductions ( Citi and Deutsche have a global program for cost cutting to improve ROE, DB targeting 25% ROE in the CIB business with 5% from cost improvements as RWA weights go topsy turvy and need to get in line befor eBasel III Capital improvements burden the bank). In all sectors input costs have gone up to 36% (Mint analysis of index companies) we remember seeing input costs figures as high as 45% in results gone by

Weekly Food Inflation whipsawed again keeping analysis waiting for a secular trend , down to 8.06% for the week ended May 21, Primary Articles also climbing down 74 bp to 10.86% but Fuel inflation persistent at 12.54% with another bigger jump coming after the Diesel and LPG hikes next week. The new guard is taking up jobs wt most Investment Bankers and DEalmakers as the remaining i.e. MS, Citi and GS come back with an active team to proposition deals. Deal Flows in India remain stunted with the random deals in Africa from mid tier Retail Lifestyle companies like Godrej and Dabur and FDI in India less than $1 bln fo the four months compared to $8 bln for April alone in China. Even after the $18 bln filight of Capital from Egypt, the Middle East expects FDI inflows of $55 bln for the year, so India and the other Emerging Markets have to do much better than wait for everone to get into China investments. Encouragingly, those in the US might be replacing investments in China with some in India apart from the newly active Indonesia and Vietnam as China manages its FDI calendar much without US help this year. Also, the US Fed is expected to continue exerting downward pressure on the Dollar as the recovery gets weaker and weaker every week. Time for that beer! 

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