A lasting short covering rally as the rupee rises – India Morning report – The Monday Morning Pre Market Report

India’s Financing continues to catch up with global coprorations ith three Indian banks accessing the Dim Sum bonds market this year to raise CNY 2B or $300 mln including a small taste maker bet from ICICI to take advantage of the 0.5% lower costs even for Indian companies.

Fixed market yields are range bound and Domestic credit has also picked up with the stock of Cheap ECB credit despite depreciation at $40B. Also rupee is likely to follow the downfall in the Dollar indices to some extent as the Eurozone gets ready to fund EUR 100B to Spanish Banks as requested on the weekend by Spanish FM De Guindos.

Domestic credit growth is of couse still 14% levels after the jump in the last week of March and has a long way to go with NBFC exposures pared. The stock of bad loans is expected to grow from the current 2.3% albeit at a very small pace and unfortunately, because the rate cut is not coming and the market is still hoping it will follow after global easing moves in May, I exited prematurely at great losses on the 5000 and the 5100 Condors/Straddles at the 2 pm see-saw in the market on Friday. The FII strategy of buying futures with 5000 puts remains safe, most can not necessarily bother with buying any puts as the market look unlikely to turnaround before 5150. Banks are good long term investments but before the weekend policy announcement the markets are likely to lean towards there won’t be a rate cut or accentuate the massacre on Monday

Demand from China has picked up including imports of Copper up 65% Y/Y which include a genuine pick up in demand as it was planned for long time. 200,000 tonnes of stock were reduced in Shanghai in Feb 2012 and any physical transfers at LME prices to Shanghai may not explain the complete pick up in demand leaving Copper happier from current los. India does export most of its stock ( not refined copper) to Shanghai,, so it should have more cause to cheer. The gap in Shanghai and LME prices continues to be more than $1000 a tonne and Oil prices keep falling even as Dollar now is a week into its roller coaster down leg with or without more QE from the Fed


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