India Morning Report (June 25, 2012) – Managing expectations without exiting the rally

The rupee is still in a sour mood apparently despite RBI and MoF promises over the weekend to substantially improve its prospects today. Consequently, the equities going down from 5150 will be filled in by more depreciation to the rupee, speculation at its ‘best’ 

Report card

state concerns – none 

new reforms expected – none

consumption sector – degrowth to continue as inflation picks up, crude is still as expensive for us because of rupee depreciation

downside – limited. WHY?

I can seem multifold reasons for the markets improving actually. Also I think the real reasons for markets going don is just tweedledum and tweedledee. That implies that if there were new reform announcements like why Ikea agreed to plan for 25 indian stores ( likely as local sourcing restrictions were lauded for flexibility in their lobbying with the Ikea investors/founders) there would be an upmove and otherwise markets will drift lower.

Banks still have an upmove, in stock specific picks as the sector’s performance is exemplary despite pressures from the mostly indigent and disingenuous ratings folks at Moodys’ and S&P. India however does not attract investing flows because of ratings and banks have not faced any challenges with Capital programs. Maybe our homegrown agencies should forget JVs and build out a Chinese rating agency like presence? just kidding.

The multifold reasons for optimism, shorts are at a loose thread but watch out they can be loose cannon, the rains are okay, the anti reform bus is mostly off the highway and it does seem India’s rural engine is much more accessible than we thought it would be, with autos, consumer goods and even DTH surviving onthe good news. The dorp in auto sales and likely personal credit is the most scary however and we will be watching


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