Friday Afternoon Report: July 11, 2014 – Banknifty breaks down as Infy cant carry market

As IT sector has been dropped out of the reckoning for the Bull run to be in 2014, the exit from markets remained predicated on a continuing lack of interest post 7800 for the couple of weeks past and Banks and cyclicals responded in kind to the call for making an early economic recovery happen with the Budget belying any quick opportunities to improve the outlook for markets to take to investors.

The impactful score of the Budget comes from renewing older policy motifs from a youthful government in steed, with REITs , though not of their own choice allowed to invest in smaller projects of 20k sq mts, and $5 mln minimum for capitalisation with REITS expected to remain exclusive to larger investors and benefiting from tax incentives.

Whether REITs take up the chance to get listed and traded remains to be seen as the inherent partnership structure of REITs is essential to the projects even for Affordable housing projects incentivised by the new FM, Arun Jaitley. The resulting rally in DLF for example should be reflected upon by markets ad DLF is still deleveraging and REITs and real estate investors would actually expand the developer space yet again in India as markets do note the focus on Infrastructure and realty in more concrete terms in this budget

A promise of INR 120 Bln for Housing emphasises where the new government can score for India inc with quick investments, but some media reports ont he REIT sector seem disingenuous , esp the one in Livemint yesterday afternoon

(We missed the morning edition of this report on Friday)

Markets will close the week at below 7500 levels with Banknifty erasing gains as RE financing and Infra Financing get their own space in the india debt space, but Banks will probably dismiss this breakdown int he markets next week as credit growth returns to normal, but the correction in SBI was a long time coming and likely to drag the rest further before BOB and other PSU Banks try and make a comeback with the Priavate Sector weighting in the index coming up again int his churn as the private sector abnks power ahead with better flexibility and response ratesto corporate and continuing Real estate /Infra financing. IDFC will likely be a good buy at 150 levels as well, but a probable corection below 150 can provide bigger opportunity at 130 levels

Infy reported a good set of numbers with INR 28.86 Bln in Consolidated PAT but with IT and Pharma returning to Defensives the likelihood of them carrying a rally was obviated in morning trades. The Sensex as candidate abocve 25,000 closing levels for the week, means a greater traction for the tried and tested trading ranges next week.

The Power sector tax holiday was the critical piece of the reform machinery to be on view but budget day saw exit from Power NBFCs on the announcements signifying a probably locus around their roles as Means of Finance, however we back the Power NBFCs and their ability to raise QIPs as a key strength that will enable them growing their Balance sheet exposure to high yield assured return projects as Power stays a priority. The Insurance IPOs (49% FDI will increase concomitant foreign partner participation) coming will soften the impact on debt participation in retail as tax measures are tightened. Debt settlement measures don’t mean much without India getting on to a Debt index


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