India Morning Report: Budget day sentiment likely to collapse

Sorry, the bears are here. Even as the India Morning Report moves away from Posterous forever, Post having turned off autopost services, PC’s sense for India Inc and financial markets digesting a moderate budget are the ones that are likely to get the chop on Budget day trading or immediately after. The rally did provide the right exit to everyone in the last six months and retail investors are no longer enamoured to their equity prowess given the attractiveness of the VIX segments i.e. Derivatives and the attendent risk and inflation proving to be too much of a risk. Even as Kotak is identified as a going away story for the earlier heady growth rate of India in 2004-2009, Uday Kotak himself talks about the higher hurdle rate for retail as his bank prepares to reach wealth with new structured products that are unlikely to be offered in retail tranches of les than $10000 and thus will be available to only top 1% of the Wealthy and not the real rich salaried class that pay the taxes and carry most of the country’s disposable personal spend.

Organisations like Nestle waiting to increase profitability thru Operations and increase royalty to parents or like ITC waiting for the ‘plateau cap’ to lift off their consumer brand portfolio and allow for portfolio growth are likely to receive more longer term investments int he hope for India markets reaching scale but the rally’s expectations of more traction from policy refinement announced has run its course and no budget innovation is likely to lift off the shackles from this market. The next leg of the bull rally even technically will be preceded by news of growth from banking companies and new bank licences so Bajaj, M&M, IDFC LIC Housing Finance and apparently Srei and Shriram are likely to be winning bets in 2013 to add to and replace stocks in the banking portfolio esp the dead PSU ones except for a downward rating and survival of BOB and All Bank that have possib;y the scale to recover. However, IDFC and ICICI Bank offer a window to that growth which is unparalleled by others on offer including Axis and HDFC Bank which despite its hold on India’s Financial market purveyors remain a little stymied by being the role of a leader and SBI which remains a pariah to foreign investors as it symbolises all that is wrong with public banks globally and the mountains of debt they have been operating.

Most analysts like me would still be surprised no end if real hikes are effected in Freight and passenger travel in today’s presentation as Indian Railways battles with losing relevance in freight and losing quality in passenger transport despite the price gap with no public funds available any longer to seed the revival of the Railways or the Air India infrastructure in the country.

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