The India WPI data for March opened a yawning gap with the new CPI series to go under 6% for the first time since 2009 and yet the drop in food inflation to 8.73% may not be enough to encourage policymakers to cut rates again and stay on the reverse repo rate in line with falling market yields responding succesfully to a 7.82% mark after the release. Equerities have better reason to move up on sentiment however and as policy day for RBI is quite near, it may again become a speculation game on ‘who can kick up the Rao’ (or down the case maybe)
TCS and HCL will report 3% and 2% lower profits respectively because of the performance of the rupee however, with TCS still adding new public clients in Europe and even North America counting larger renewals it will likely keep the lead on margins. Also TCS will be reporting a 110 bp lower in Net Margin this quarter because of a legal settlement outgo in the US.
Domestic investors are not buying the larger market yet and despite the build up in sold puts at an even 5500 to speculate on a healthier PCR in the March series, more operators have joined the clamour of a larger move down before the US and Asian markets respond to worsening economic data for Q2 and the rest of 2013 from a fortnight later. Gold is bottoming out at least in India even as the pair trade in JGB(Jap Government Bonds) and USD Treasuries led by a buying in JGB continues to emerge as the important trade. However March data in the US shows buying in US Treasuries with China returning to the buyers table and Japan following its earlier stated mandate
Buying in gold may likely revert by June in India apart from the surge during festival and marriage seasons OMC stocks continue to excite the market even as UBS continues to be sceptical about their profit potential but the successful execution of the minute Diesel price increases with food inflation in control is likely seen by institutional buyers already accumulating the exciting levels for most scrips. Bajaj Auto has returned to the bullish candlestick for a longer innings in 2013 even as EU FTA again looks like India Auto has the wrong end of the stick. India auto makers would probably want to add export volumes in global markets but the cut in import duty of 6.5% in an OECD market like Europe is unexciting for double digit drops in auto sales markets in these countries.
The CERC decisions are also key to returning policy bullishness and though 5600 may become a source for new shorts on the Indian market not many of those are likely to pay traders and speculators esp when compared with market performance of results season outperformers like ICICI Bank, YES Bank, SBI, PNB, ITC IDFC and the power NBFCs as well as Reliance Power and Tata Power leaving me again unconvinced on the attractiveness of Tata motors to longer term investors.
For the Economic turnaround however, one needs banks to start reporting better credit pick up and also a cut in deposit rates though Fixed investment formation is still week on the Q4 data available