India Morning Report: Insurance, GST and the Winter Session

Our morning report was something we wanted to title India is back on the high horse again with the index at 8500, and as you can see that sentiment inside has indeed keeled over, making wary investors challenged at every new level. One wonders ghowever if there will be a correction, and in the normal course without a parliament in session ( hardly gets in the way of governance, that, having democracy already entwined into the processes, Haryana indeed showed there is a simpler way forward without having any of these elected members entrusted with any active discussions at all. However, fun banking aside, the Parliament will meet in the winter session and some key implementation issue may yet not become a thorn in the market’s side given these are simple 5 year old discussions with a likely consensus, even for the hairbrained scheme of not implementing DTC at all, which is in fact not slated to be discussed at all.

It will be difficult for any Congress or non majority to ever make a comeback and the bureaucracy will take over implementation of the business at hand so investors are likely to just ignore the ?Heady heights marker? at 8500 as they should in which case, markets may merrily jog along to that 9200, 9500 or 10000 level prediction which has been placed by sell side brokers. Markets will not correct beyond 8350 levels this week

Banknifty has finally shown at 18,000 levels that it duly deserved the lions share of the $22 Bln in portfolio flows till October (CMIE) Real FDI is also a good $18 Bln in the year from April and is trickling in in good measure because of the confidence engendered by Modi’s pronouncements and as the slow recovery cycle forces RBI’s hand s markets are more likely to time a sizable correction with Raghuram Rajan’s refusal to ‘award’ the markets a rate cut later next week.

As we shortly mentioned in our holiday week pronouncements last week, the Kotak ING deal is abig mover in the markets and will never be a short candidate and yet that is never going to accrue to much in terms of benefits to any shareholders or proponents of the deal a marriage required to defrend the sluggish growth rate for both mature market models and the larger entity will chug along at much the same pace with 1400 branches and a credit book of two minions not likely to add to anything big on the overall. Not an industry shaler, no!

We remain positive on YES Bank, IDFC and ICICI Bank, HDFC Bank might start back again after discounting the premium coagulation from the merger revue out last month

The Rupee remains important to watch and with any stasis at even 8500 levels threatening the market from sleeping bears a currency rush to 64 in light of the stronger Dolla r all year and the continuing turn down in the Euro (and no downturn would be incorrect usage here) is likely to deepen the market blues and hurt some unintended parties again on the way down, but the traders are still in favor of the longs than trthe shorts, the correction again just around the corner as we reach another all time low for volatility this week

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