India Morning Report: Rupee completes its big move (2 days before June NSE FO expiry)

Rupee seems to have stabilised at 60 levels and markets will probably continue the positive drift from yesterday which yielded a top(tilt) of around 5670. The post expiry environment as mentioned has a risk of running a negative return for 2-3 days and that is keeping positive sentiments subdued. Also though markets in general are condoning the changes in market regulations for buyback offers, one can note that such regulated buyback offers equally defeat the purpose of the buyback in terms of lending a positive aspiration to share rices and improve return of equity to investors as the prior format which was misused by promoters to empty pronouncements.

While earlier stock prices would have been depressed before the buyback and the sentiment not catch on because of no excess liquidity absorbed by the promoter, the new one is targeted at just the backpack promoters whose intent is lost in 255 already committed to escrow and buybacks thus trading at inflated rates and/or again subdued market sentiment caused by the fact that the buyback is not a true return of capital to investors, nevertheless inviting shorts because of the artificial opportunity created for them. Shorts always trade on publicly available information and succeed because it can be seen from publicly available information that the prices are ‘undeserved’The nexus between backpack promoters and equally unworthy lexus brokers has to be defeated by regulating any block trades over the 1% cut off thru vigilance esp before buybacks start and so on.
Banks should be prime investments and probably governments should consider (only half joking ;o) )buybacks for wasted public efforts in our public sector bank infrastructure so that banks that are expanding quality assets can be suitably rewarded with new capital infusion when required. But structural parameters apart, India equities are well placed for a recovery which is at least three months away and one does not see markets losing any more premium because of that gap despite not expecting better June results as one can se a lot of bull strategies standing against the wall of negative showers in the previous fortnight and as the initial run from US bonds is indeed capped well under 3%, at 2.5% currently which were th e low rates in the middle of th crisis and have allowed most shadow bankers ad banks to reduce their US bond positions

MSCI index trading would have lost its significance a week ago itself and one should not follow those global indices once the big moves are over as it is impossible to see any discernible correlation in such broadbased indices except on event. Global etf volumes are likely to keep small gains from the bull move overall as the over enthusiastic inflows n later months can be assumed to have left ( responding to Aberdeen team on CNBC 18)

The jump in Gas prices seems to be only one of other factors behind ONGC and RIL moves so I would be following global energy rices to check if any trend reversals and those with data access can probably comment on trend reversals in the pricing. There are signs of consumer demand reversal expected by US refineries in US data released yesterday overnight.

Exporters incl Auto and Pharma segments could see the same select list we have identified from Bajaj Auto and Cipla to Lupin, Cadilla and others benefiting inthe second half of the year. IT remains under a cloud with big changes in Visa fee accompanying the gang of eight proposal expected to be made into law in the next couple of months.

Interestingly, the only scrip based shorts have rolled over in SBI in June till now. Bank applicants from IDFC, LIC Housing finance to private sector promoters including Spice and Aditya Birla (Nuvo) are almost on tenterhooks as NOFHC requirements could still throw different owners in some cases and foreing investments get discussed around only Japanese and Malaysian investors with M&M walking out on the proposal and none of them seem big enough for capitalising on their small town infrastructure immediately

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