India Morning Report (July 09, 2012) : FDI in retail, hope for UB more for Consumers

The stark indicator of penury in the Indian Stock markets and in the policy bag which cannot be expected to  pull out the rate cut trick again is in the Consumer Price inflation index at 10.22% the highest in the region which boasts of 98% of the global groth except the 2% in the US. Latin American troubles have come home to roost on excessive rate cuts and government intervention, while South Africa is sitting by and Middle East and Africa are groing banking and resource partneerships globally but on a low denominatoe. India’s M&A volumes are down 80% in the first half of the year, and the $3B of transactions are nothing to write home about as buyers struggle with instability and policy paralysis outside India as well.

However, consumption being the fount for growth  most Indian consumption stocks cannot be yet ritten off despite the inflation as Dabur and Marico expect to get more price hikes in thru the Doo and AC compoanies like Voltas and BluesStar have scorched the AC Market retail and commercial volumes in the quarter ready to report. A Nestle is stil able to price premium at will, maintaining margins and tracking consumer fortunes is key as we look at Monsoon forecasts and ‘slowing growth’

Government talking to the Global Top 5 in retail to figure out the norms for retail FDI with states like Punjab Delhi Haryana and even Gujarat ready to welcome Multi Brand FDI is a great sign for policy hawks to back down. Buying volatility should be a good trade and that means worrying about uncerrtainty and adding puts or sold calls to your portfolio of index options as the markets wait for a reason . But really most of the donside is priced in so edo not expect the rally to die out and do not buy at the top i.e. right now.

UB sale mechanics are an interesting story but i ould dissociate myself from taking bets in the market on that or the SESA Sterlite story


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