Though prognostications of Valuations are not supportive are not entirely unwarranted and the rally has been one sided before the correction last week, markets have more or less established their range at 7500-7800, with a 1-10% increase in downside for the best failures of last week. That means that markets will stay here or move on up till 7800 at their pace or take a breather again till 7500 rewarding risk investors stuck in the middle of nowhere in the breach on Thursday/Friday. Options have quickly moved on to 7500 plus again (Put floor) and should keep 7500 calls (Call ceiling) out of business after the decimation on Monday. China’s out performance too, likely not an intention on investors’ part.
IDFC took honours and Anil Ambani stocks kept pace, showing the importance of the ceiling to the market range in the latter case and making investment baskets again in the transition to the bad boys for the good side, as they remain the easiest to short come 7700 or 7800. Adani Port mandatorily becomes the lynchpin of India’s mid cap Infra strategy, the only one capable of tracking political and cocio-scultural risks the bane of ill equipped Mid Cap infra sector plays. With GMR and GVK also not making the route to ready deleveraging, IDFC and REC remain the spearheads of any such portfolio that read the infrastructure policy locus of the country. Longer term Infrastructure Financing is not here yet per se and a lot more needs to be done but Macquarie ( not the equity/invst desk) and 3i infra funds need to be supplemented by more long term debt, continuing QIP and execution on the ground.
TV18 reports on the short term positions built in REC and PFC point to quick gains as these fail and wind down. REC bottoms out at 283 at the worst case and is probably going to be a big move.
ICICI Bank is also back in a short rodeo ride to 1460 but will wait at lower levels in earnings season as it habitually reports later in the cycle. Bajaj Auto earnings report today for the quarter. Page and P&G (together on the ticker) look extremely promising too. I am yet not sure of the moves in Petronet LNG and GAIL after the PSU scored to 430 levels. Kotak earnings today continue to report increasing NPA (Gross) and NII but the NIM lead over competitors with a large retail portfolio continues to be a business driver again, volumes for the bank have refused to move substantially in more than 5 years now and it is sitting on Tier I Capital closer to 20% currently with a 15% jump in Net Worth on year. CASA for Kotak’s high interest accounts has moved to INR 190.4 Bln. Corporate and SME Banking has made a substantial date from Q1 to Q2 however, up 27%