India Morning Report: The Budget(ed) Roadshows, the royalties and the burden of the beast

That beast dropping the burden into the nether world could well be market participants once the RBI Governor reaches the comfort zone of “Sorry, no cuts” later this week before Bank Policy Tuesday strikes markets 2 days prior to expiry. FIIs brought in almost $3 Bln to Indian equities in January and while money flows to bonds had picked up again after being usurped by equities the lack of a rate cut could well force some selling into the 8% yield mark in Indian Bonds.

Meanwhile FinMin denizens with P Chidambaram have started on roadshows that sell new reforms including the ever awaited GST rollout by FY2015 end and the raising of ceiling on Corporate bond investments further to $25 bln. Nonetheless, This market could see Nifty topp(l)ing before 6150 as a disappointment is near certain and the clamour to get back into HUL this morning is now a merry part of the same rerating saga as ITC and Bharti nurse there recent high levels and HUL is still the lowest royalty paying established MNC out there with more than a $1 bln in  Consumer staples sales in a quarter. ITC’s brand portfolio is surely chugging along as nicely as well. Almost as much as the bigger soaaps and detergents portfolio of HUL.

English: India's Minister of Finance Palaniapp...
English: India’s Minister of Finance Palaniappan Chidambaram is the special guest at a plenary session titled Risks to India’s Economy in a Post-Crisis World held at the World Economic Forum’s India Economic Summit 2008 in New Delhi, 16-18 November 2008. (Photo credit: Wikipedia)

India’s consumer consumption jump story could still be just around the corner further along in 2013 before the next Festive season rerates expectations of the secular growth trajectory for India and how China is indeed different.

China and Japan’s markets may not see the expected rush in equities again and it is back to the smaller markets and some of that rerating might again positively influence Indian inflows because of the same reasons. I am intrigued therefore , (as an analyst and a commentator albeit because I have had a punting background) by the consolidation in ICICI Bank as well as YES Bank and IDFC. Not just (a) alone but all of (a), (b) and (c)  could be headed for new levels for consolidation which are more than three times their current high ‘stratospheric’ pricing as their valuations not only underestimate India’s potential but these scrips flag the best examples of trailblazers in India Inc which can ramp up on volumes, new business and secular growth almost effortlessly for the investor as we head for a comfortable 2-3 years from the bottom of the cycle

Of course the related depth of research sitting alone might produce limited results immediately as most is internet only kind of info but one is certainly confident after seeing the fate of erstwhile trailblazers like Kotak and HDFC Bank (incl HDFC) which have been forced to stay down with excuses of sterling quality after they could not catch the earlist kindled growth in any of the last 4-5 cycles they have been a part of. They would probably choose inorganic progress from here to get back into the saddle in the meanwhile as Energy and Pharma also need to prove their mettle as sectors and Aviation and consumption are the only mavericks worth backing right now.


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