India Morning Report: Keeping the faith or sticky inflows

Given that this is a downtrend much hoped for, it is ofcourse a little too quick off the blocks for us to reiterate the strengths of the market for a good open on the following session open as was witnessed today at 9 am but the portends are clear. Jubilant’s freak cuts in the morning are witness of a pragmatic rerating of consumption expectations and even as capital markets driven headlines of India’s solitary remembered (yet, despite a not so wweak nos. 2 and 3 from Business Standard, mint and even the Money from DNA) business broadsheet , ET shouting against broader direct provisions in S&M budgets of soaps, shampoos and detergents.

The more important review includes rerating of not India’s Business Services exports as H1B demand picks up but that of China’s policy nod to transition to a domestic consumption based, factory exporter in search of cheap foreign labor that will now catch speed unlike its last decade’s investments in infrastructure for empty cities and disaster struck high speed rail or congested roads to Beijing. India will correspondingly strengthen the same legs based on its welfare economy and grow travel services and consulting exports among others to substitute for the pre crisis phase of Business Services expansion(IT/outsourcing) London is again open to Indian students looking for a reestablishment in a foreign legion and Europe is looking to survive with 10 weak developed economies feeding off its currency demand in a classical non Keysian non post modern Galbraith measure still to be studied in its entirety.

Currencies like Indian rupee though stronger based on the last (demand for passive Euros) will survive only if they can grow the US Dollar, Renminbi and Yen portion of the trade and its honeymoon with European long over in the years leading to the crisis brought on by patriotic Commission restrictions on labour and frankly racism at its worst as Europe hates to admit to its aggressive pro terrorist stands in the post NATO irrelevance in International trade. Probably all it means is the death of Indian Textile Exports like its Tea industry in the previous decade. Fortunately we are doing better in exports in Autos, coffee and even Development Capital, a clear role for us in International trade perhaps a new prism for us to look for opportunities to steam up that 5% cuppa of GDP growth.

The Euro having lost its relevance those positional trades that feed off the Euro cross rate are the only possible linkages to Europe that will survive for India inc given the global capital flowing to India and staying despite the EM exits seemingly looking more derivatives driven currency neutral in the coming years, or probably one is just hoping for two distinct trend wins along the new silk route,a s usual India feeding off as other Frontier , Emerging and Insurable industrious markets get aligned to being the tour de force of the global ramp up, elusive because of the fractured OECD centers of Europe and its erstwhile leading banks like BNP and Deutsche Bank.

Recap the bear cut day

It was in a way a proud moment for one to hear SD Sharma of Global securities on TV18 able to influende the market psyche to a deep bear crush on the Indian exchanges after the market open. In a way, even as the bear minority pushes its way out of the last 8-9 months in an underground nuclear shelter, it is a stable market that accosts viable and unviable economic data and dissatisfied domestic institutions as they wait for a 5300 market to go for a buying spree. However, these are not just dissatisfied investors but for any mathematical or qualitative modeling along fundamental and technical forms, they are also losers who bet on recoveries from Suzlon, Tata Motors and engaged in the same speculative position based research reports on unviable bets and suspicious corporates as they blame others who are bullish on the market no. Of course, some of his expectations of immaturity and malafide or job security motives behind bullish research are almost jurassic in their relevance and definitely no longer contemporary but still similar vies are yet commonplace in lounge conversations about our markets esp when Gold buying is on, one still believes to be just a veneer to lose uncomfortable facts and cut to the chase.

However, Rupee as expected is recovered to mid 54-55 levels and results expectations are indeed low with Consensus estimates on the Sensex PE ere so low in report previews yesterday that the expected 5-6% limited earnings growth in Q4 earnings has more or less taken care of bearing expectations and with historically low Sensex and Nifty PE multiples on 1180 and 1400 earning s estimates respectively, it could be that this buying market for investors may also see a build up in long trades ith Put call ratios historically never lower than the current 0.80. One does not expect you or your investing family to sell puts on the Nifty this week or next though even if the firstfew results beat expectations well, as these expectations underline the rerating of end 2012 bullish expectations and Global funds have exited India and EM ETFs to the extent of less than $1 billion but it is still a significant cut from inflows of more than $-3 B just months ago and this money is likely leaving without any profit booking in the short period after emerging markets hit a plateau in the very begining of the new year

To it however, e still expect to balance our CAD with foreign inflows and thus you can do the math that positive inflows to India will continue to outweigh outflows in 2013

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