India Morning Report: Contracting PMIs in China and the SBI Report

Today’s India moves are uncharcteristically interlinked with global, I almost waking up to the pre open quotes on Sun as a probable topping off on the scrip but realising that apart would not explain the weakness today, markets having been stable at 6150 almost for the week. Our global update is indeed due tomorrow but Asia is trading deeply lower today after setting three month highs on Monday. The Rupee of course continues on this week to ‘above’ 57 levels at 55.75 today. Asia reacted to manufacturing PMI data from China falling off from the 23450 high on Hangseng, 15700 on Nikkei and 1994 on the KOSPI. The Rupee has chosen to take a block depreciation against the dollar at a time when the Dollar index has retreated to 84 ahead of known negative GDP reports from Europe and expectedly low PMI data in europe as bond buying remains a preferred investor action in euranope pushing up the Euro

China manufacturing receded under 50 again and Asia led by Shanghai is having a bad time, down by 3% on average. Coming a t a time when the Dollar is ready for a deep cut again, the rupee is shoring up and Indian markets could not dream a bounce back, instead just whining quietly at 6080 today with the Sensex a tad under 20,000. However the resutls season is still busy here and good mid cap results throw up wonderful opportunities like Tata Steel, Zee entertainment and even Jyothy labs. Though a broader cut of index companies may reveal some holes, the better performing companies have set off a flurry of rerating upwards even as Sun pharma and the Cap Goods companies weather out the storm and/or top off their lifetime peaks on limited gains in real outlook for FY14 and FY15. Jet seems to be able to survive the control clause scare with its moves likely seen as befitting concessions for a large shareholder than loss of control on the SEBI notice received by the company.

Bernanke’s testimony was pretty clear on taking any unfortunately precipitous moves for our candidates in the USA but commentators are now looking for a bad market day in almost all silver linings in the coming US economic data as Dudley and Bullard’s comment on not just needing the QE2 and never exiting it per se or on increasing QE injections almost fell on deaf years, twitchy trading finger busy trying to outsmart that final day of reckoning after four years of recovery as per Republican Brady in the House Jt economic committee yesterday while minutes predated the falling retail data in April

SBI reports its worst ever quarter all over again with INR 80 bln added to restructured loans giving a likely boost to shifts in to private banks, an increasing stock of which is now available even as PSU bank consolidation also gathers steam in a government push. NII at State Bank is weaker at INR 113 B even after credit growth in excess of 18% at the bank with the gross book including contracting corporate commercial loans books staying above INR 10 Trillion this quarter but net slippages recovery is still maintained in consensus estimates. That might be a sharp downside tick in the afternoon if the bank ‘chooses to’ push good news to coming quarters and reports near 0 profits instead of the INR 36 B expected ( Rupees Three thousand six hundred crores only). NIMs have been contracting on increasing costs of deposits for the bank

Phaneesh is of course still what Phaneesh will be but the repeat order is likely to boost noise around the failing enterprise of Phaneesh and of Patni-iGate which remain weak insipid bidders if allowed and IT services is unlikely to make a comeback ith no relation to this little escapade report or the meat cleaver events in London as UK dulls down after the bright Q1 GDP report. As expected the quarter denotes a big push in the fourth estate towards cutting ratingsco S&P, Fitch and probably other as mortgage investor banks reveal how little their ratings of Agency debt has meant this time around ( subscription required)

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