India Morning Report: HDFC Bank can’t keep up pace of expectations, Markets cannot let go of the rally

Markets are headed to 7000 from here, double digit Earnings increase in good Indian companies helping the fast and even rerating of Indian markets after a stuck up score since 2004

The Bank Earnings season headliner is missing from our content factory this quarter but that is because of our personal time commitments. HDFC Bank however went a notch below expectations polled and would probably like to regain that control over analysts it only has itself to blame for ignoring the bank’s own overcautious and mostly overzealous private circle conversations about their results. The bank did outscore the 25% Net Income mark with NII at INR 49.55 Bln and 4.4% NIMs for a more than 5% loan spread, but as tax incidence increased on all the expenses (many expenses are now no longer part of NIM calculations either) it posted a continuing stream of disappointment on what we consider a paucity of Fee Income avenues even as loan growth of 20% and above is way above industry growth rates and is evenly matched by Deposits to 4 T (INR 4 Trillion = 4 Lakh crores = #5 in Indian Banks including all PSEs) The CASA is a respectable 44.8% and the Gross NPAs thankfully have staved off the challenge from increZsing short term risks for corporates and stayed at 1%

The indices showered attention on an increasing options position again on Tuesday as HNIs moved on Anantput Industries hoping to make another large INR 500 crore plus multibagger after the success with USL and most profits taken in this rally continue to be ploughed in with DIIs also buying after selling off their IT winnings. Bajaj Auto is good to go for this week as is YES Bnak which moved higher and insider trading remains tough to catch in Indian markets especially around Deal news such as obfuscated rumors about L&T Fin approaching both promoter families at YES which in corporate governance terms is not a strain on YES Bank in our culture and time

Results season accelerates from here as two other important banks report within the week. Biocon and Maruti report this week and may have short expectation rallies today even as YES Bank dials in the latest quarter’s growth in CASA, while ICICI Bank and IDFC report together on Friday and will at least maintain yesterday’s levels at 1250 and 120 respectively. Both M&M Fin and L&T follow YES Bank results today ( may report earlier on the wires)

Get out of IT stocks by end of day today as there are too many stocks to allocate and India weights remain the same. The MNC Pharma growth stories fueled by Global dealmaking may see a little damping of domestic stocks but we maintain the move in Astrazeneca yesterday is not just out of proportion bu tunwarranted as MNC pharma in the country mirrors global frustrations memes strong in the India context even as India and Indonesia markets break out from the EM pack on larger GDP and larger local market participation. Indonesia of course has a long way to go in terms of providing a deeper Capital Market.

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