India Morning Report: Here the bounceback, there the banks and airlines

Anjum Bharti - 01
Anjum Bharti – 01 (Photo credit: Adarsh Upadhyay)

A short and quick stab on Monday will show that efforts continue to keep India Inc juiced as Q2 will likely return a broader cohort of companies that increase their bottomline based on continuing decrease in non food core inflation, and a small measurable uptick in production.

Most of the market business still returns to banks at their low point of the cycle and struggle is on for a better run rate for deposits on the growth. The only negative skew to this cycle being that banks cannot cut any rates of lending as they maintain interest bearing deposits to an edge to market investments or hope for better borrowing rates for themselves despite the professed rate cut forced on the Central Bank

Taxation changes to mutual funds that till now paid Capital Gains have leveled the playing field somewhat  the in the new budget but the banks cannot make up for the loss of money market deposits placed by large corporates earlier so quickly. Retail unbinding of savings rates have already scarred the proposition for mainstays like ICICI Bank and HDFC Bank as new business is the most important of all business segments in any industry and esp so in retail banking. Short term Mutual Fund investments now bear 24% tax.

Bulls remain in Auto (Bajaj Auto not Hero moto, Maruti and M&M but Tata Motors too) , ITC, Bharti and IDFC and may not exit healthcare or enter infotech for longer than intraday business

Allowing competition in International flying with a fleet of 10 is good news and low fares have been promising in the off season too. Rupee remains strong and will likely climb outside the 52 range too if foreign investment portfolio flows indeed do not ebb as March seems to promise. Again a caveat to Domestic institutions to keep cash for such rallies and not miss the bus or their overall performance base will erode faster than they have the opportunity to ride another big multiple growth wave that last ended in 2006-7

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