India Morning Report: Markets jump to 7400 on Counting day as Asia tanks

Global markets tanked probably because of the strong showing by Japan in Quarterly GDP as Japanese bonds strengthened and the strengthening currency started a cascade conveniently allowing US markets to reatct negatively to good news in Asia ( highly reductive and downbeat prognosis)

However, markets will equally take to Indian news positively when Europe and US open later as India starts the call auction markets with the expected 100 point jump to the open. Apparently nearly 10- stocks can already be expected to reach 10% , 15% and 20% circuit breaker limits in the morning.

NDA’s strong showing in the polls means the political stability mandate can well start a lasting bull market for the next 10 years in this part of the world. The Euro’s woes add on to chances of a global rally from this point as Corporates outperform the French GDP and take due credit for the survival of the Western paradigm.

Banks and Power NBFCs will likely lead the growth with Reliance and SBI joining ICICI Bank, Yes Bank and others in the rumination on results all day and most attention will remain focussed on leads and what outgoing and incoming members of the lower house have to say on the new government and the mandate from the people.

The Nifty will definitely see a 7350 mark during the day as F&O ranges have moved to 8000 on the higher end and salutory OTM hedges have also reached 6000 on the lower end, the 6000 puts getting expensive at above 50 in anticipation of additional hedges required by new longer term inflows into the markets.

Arun Jaitley as Finance Minister is likely to be a positive for the markets for now and the man is likely to keep his mouth shut for the period of government formation so ther markets have definitely set 7100 as base for the rally. ICICI Bank is the easiest pick after Bajaj Auto results for Q4 were indeed tepid and cyclicals for us now restricted further to the earlier mentioned Bharti and ITC.

PSUs and L&T will be the fodder pick for fattening the markets and will not face any resistance in up moves ( HT Ashwini G. / ET Now)

The currency has moved below 59 after a long time and may see stronger trades though Fixed Income markets will likely not trade heavily this entire period of government formation for at least a week to ten days as institutional investors do not require daily trades and retail investors are unlikely to come in without deeper markets being available.

CDS spreads if traded should hope to touch record lows nearer 110 basis points on the turnaround taking hold.

Oil prices may offer a risk trade that will toughen up the ask for the incoming government and rating agencies / fund managers are unlikely to change opinions in a hurry.

India Morning Report: Global investors go long on India’s new regime

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Even without the new government in place most would benefit from a big long tomorrow. I agree with SS that the NDTV poll was a definite watermark for those waiting on the fence and Nifty futures and long calls / short puts would pay off well tomorrow with the markets settling down at 7100. In case the 279 mark is achieved, the bang is anyway likely to take a rain check at 7200 mid afternoon on worries of government formation as the so called Modi vote is finally for stability, the one worrisome miss for UPA2.

Thus in either case global markets are long on an India recovery and though this may not translate into any “reduction” in the frozen anti India sentiment(sediment?) and other emerging markets would retain their weights being at a virtual bottom from here, global allocations would easily make this a record breaking year for FII and probably FDI inflows (the latter for Fiscal 2015) Also, the banks and other metal and minerals sector interest prove that currently investors have not come in to the market which is dominated by punters looking to jump on to the subdued PSU brigade.

The networks (CNBC TV18) also saw a ranking of under invested PSU banks like IOB, IDBI Bank and UCO Bank which to prove my point haven’t seen any resulting increase in stock sentiment thence in morning trades. The Rupee predictably, celebrated the relative certainty after the NDTV Hansa exit polls back at a firm 59.50 level instead of worrying about Friday In bank stories, Bank of Baroda easily fooled the most investors with their troubled couple of quarters last fiscal (FY2013) making many worried about their outlook. The bank has however stemmed the rot within 6 quarters and Gross NPAs have come under 3% after Q4. The scrip could have benefitted from better guidance earleir as well, but has celebrated investor faith nevertheless with a steep rise in the last few days. PNB on the other hand with smart provisioning that got it re-rated earlier is likely to lose the crown ( best besides SBI 😉 ) again with NPLs making it really weak and late provisioning rather hurting the profits despite treasury profits that could have won it over. BOI reports today and may further marginalise the PNB play if it reports the turnaround.

HDFC Bank in the meantime benefits from having made a clean breast of it in the markets earlier even as MSCI brings down weightages to 1.89% and confirms the possibility of deleting the bank stock on RBI restrictions due to FII limit being reached. Hat tip to Ashwini G. ET Now, for remembering the PSU rush this week, and a reminder to Nikunj of the reason why HDFC Bank will not worry about the MSCI pronouncements)

 

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Those instead believing in Tech Mahindra are likely to be disappointed, like in Genpact 3 years earlier which remains a GE business driven company and stylises the fact of inactive uninteresting Indian listings on the NYSE and the NASDAQ  even as Banks listed overseas shake it up a little. M&M however recovers a little and may be a good buy as consumption stories return and Auto sales buoy up from the bottoms reached in April. Sun and DRL seem to be riding the wave even s the A/D line again confirms 3:! after dipping to 1.7:1 yesterday, a very comfortable score for equity investors to end up choosing the wrong bets in arally year as the markets end the discrimination and stock specific phase.

Gold prices in India look to celebrate instead of following the global cycle of getting subdued on news of an Economic recovery and Global markets esp look to India to let the commodity price firm up further even as China disappoints after becoming the largest industrial user of the metal. PIMCO continues with large outflows for the year (trailing ten months now in excess of $10-20 Bln) but has made another smart macro recommendation on China, where growth rate may all to 6-6.5% the levels also expected of us in FY15

Infrastructure stories are also good for the last mile, but may consider prolonging the rally to confirm NDA action as it seems to be relying / planning on focussing on railways ( A diamond quadrilateral) and current infrastructure pipe needs to be taken up on priority instead to make the story work. Tomorrow selling 7200 puts would work well given the markets are unlikely to fall off the saddle anytime soon, but 7100 calls may start off earlier today afternoon and for retail investors offer lower risk equations as 7200 puts would keep rising in value thru the month. No post-counting scenario is likely or even improbably look at a Nifty score under 7100 or Sensex under 24k

Lastly, I’d request the NDA policy making teams “Please do not appoint MM Joshi or Yashwant Sinha to the Finance Ministry”. It may not be that bad an idea to give it to a young Amit Shah as we have a very able team to help him.

India Morning Report: And here’s how we do not make a bubble?

sinbadThe run in IT stocks , sudden and abrupt also might be a harbinger of not so good tidings as stupid money, unusually attributed to ingenuous retail investors in the Indian markets by experts ( of for my juniors, it is culturally appropriate to attribute to senior experts) , rushes in. It is nevertheless a cultural folly (run retail investors are coming) that is the Indian quirk bringing the need for caution into play faster than others. However Puts have moved on their markers as well from 6800 which lost 800k in OI yesterday to 7000 which gained 550k, making the Ringconfidence indicator at 70% (RingConfidence=OIaddinmidpointofnewrange/OIaddinmidpointofoldrange, just invented here) give us confidence in the rally having moved on with speed, but also rising too fast even as market Vols fell 20% on Monday itself to 30% on the India VIX. The rise is probably the result of a market segment trying to accelerate profit taking in the markets, earlier expected to be at the end of 2014. The usual rollover ringConfidence for example in the period since 2004 has been 59-63% highly unsatisfactory in my personal opinion but perhaps more pragmatic than the usually faster optiions track where traders having doubled down and not found the markets expensive, are already in waiting with 7100 sold puts gaining currency overnight

Not only will the market thus become cautious over today, it will probably chew (not eschew) on the additional inflows in the markets now till the DIIs go back to being net buyers, having taken a slice out yesterday ( INR 6 Bln) Given a mix of caution and optimism, this could improbably not unlikely, try to extend the market range on the Nifty and the Sensex further at least for end 2014 if due pragmatism lasts, and may thus keep rising if it is possible without IT. IT sector at this point is under threat from the stronger currency and though markets are trying to replicate an earlier era’s confidence in face of a strengthening currency, a complete superimposition of 2004 is likely seen as foolhardy and will be beaten down esp if market is seen as ripe for profittaking in the real rally scrips , in the cyclical sectors. The Euro’s weakness and new stimulus may have driven buoyancy in sentiment on the IT crowd, but the same is also not sustainable, barely enough to take the bulwark sector out of the dumps, not for a new surge of growth as Infy’s public spectacle of restructuring management is emulated by others in rebadging units and recent acquisitions non eof them including HCL creating real new business in the past few quarters and after due consolidation below par compared to the nineties, still living the Java era long past.

PSU banks and DRL proved that bad earnings stories will remain part and parcel of the market fabric, the let down from PNB and BOB sharp and while PNB suffered for making late provisions, with profits down 30%, it also failed with new restructuring worth INR 44 Bln and slippages of nearly INR 20 Bln in a single quarter. PNB’s Gross NPAs are now 5.2% while BOB has reduced Gross NPAs to under 3% stemming the rot even as both PSY biggies reported less than lukewarm Net Interest Income growth from loans. PNB has not sold any of its burgeoning bad assets to ARCONs while BOB has sold INR3.94 Bln this quarter with more to come. both banks will likely be supported by large recoveries as well as the market environment improves.

However bad earnings are unlikely to be tolerated by the markets, even for BOB with a 10% growth in income or nearly flat profits not a sign of good business and private banks will continue to rerate the PSU companions out ont he Banknifty which has nearly peaked as expected at 14300 levels albeit for a breather.

The coming budget among other new policy pronouncements will likely see a rechristening of new welfare schemes to replace the UPA deals. Banks and cyclicals will likely strengthen their leads in the market post budget ( and post the 2014 World Cup in Rio) Bharti and ITC thus seem perfect candidates to get ou tof the defensive clutch slow track as the revoery numbers come in.

Power NBFCs seem to be getting a tad over optimistic but may be duly rewarded with the budget focussing on low hanging fruit in infrastructure. However, a real rally is likely to ensue in IDFC, Relinfra and JP Associates, with GMR, GVK and these three depending on new financing options to deleverage their current balance sheet.

DRL’s performance is unlikely to weigh down on the sectors performance which is still underpriced given the real domestic market opportunity and the flip out from the continuing patent crossovers into generics thru 2016

Currency and Bond markets will continue buoyancuy when markets open at 9 AM, with other Asian markets also getting into recovery mode post elections and in the case of Japan, discounting the coming El Nino, also important for India’s agri-economy

Again it is improbable but not unlikely that markets hit 7500 on Friday itself before counting is over. If you are still looking for hugely mispriced opportunities looking at India much like Russia and Poland of the eighties and nineties, you can probably just wait for Maruti to hit 2200-2300 whence it would be a delicious short with SBI. Maruti has apparently started down and so even if you like me have not been tracking the stock you can get in on shorts, though the overall market remains positive through today and tomorrow, the ubiquitous A-D line going 3:1 on this slow day.

GolBoot (GoldmanSachs) has sold its stake in M&M felling the puppet’s streak, while Kotak is celebrating a probably unactioned and filed Nayak report recommending banks be incorporated in the Companies Act, allowing it not pare its stake as PSU banks ignore the report recommending a NOHFC structure not unlike the Chinese Huijin with govt stake below 50% and age limits for CEOs and WTDs in Banks both public and private.

Immediately, though the error margin mentioned in the various exit polls is larger, it will not likely be a harbinger of uncertainty but more for the mascency of the science in India, their will also be post noise and due scandal on cooked figures no more than is the ritual commonplace in established research markets like the USA. Did you know even Global Beer sales have no record before 1992 and thus the data’s margin of error remains bigger and unwieldy allowing for science to be inspired by personalities and perspicacious commentary. Equally improbable, and yet not unlikely, is a flare up in Oil prices, as the tab starts ticking up , threatening to jeopardise the fiscal balance with the new government eager to show down the performance  of the UPA though the continuing increase in Diesel prices is great news.

India Morning Report: India’s “coming of age” a likely takeaway of 2014

Nifty moves on to 7200, the Sensex to 24000 on the bright sunny Tuesday morning even as the Banknifty runs out of moves and the Nifty looks around cautiously after the open at 7100. Foreign investors will double down on India bets as the currency again starts under 60 at 59.70 and Bond markets will likely oblige with a secular move down in sync with the growth rate picking up and a likely upward rating for India in credit, bond and equity markets as well as a lovely reprieve for Foreign Banks invested in the Rupee this year. Global investors are likely to oblige with larger allocations as the US trsrys get crowded and finally start up from 2.6% levels towards the end of 2014 , Bond investors finally moving into other avenues after neglecting the taper and crowding out the High yield markets to the extent that even Junk Bonds pay under 5%.

In the meantime Nifty option traders continue to enjoy a expanding range and the 8000 Calls have come into fashion with a big slam on Monday translating into an exit poll 272 led continuing of the rally in the intervening 3 day period before counting on Friday.  FIIs have also sold a few positions in Options in the meantime , to make the out of the money end of their deeper long bets as they chirp up on the news and get into their choice dozen and if CLSA is to believed some not so fundamentally sound “typical” India stories like Ultratech, L&T and SBI

As mentioned above, Bank stocks may be running out of moves in the melee esp as PNB gets ready to report another quarter of increased restructuring and slippages while others like Canara seem to have come out of the long dark tunnel into the light. BOB reports today as well and with its woes already a big negative, it may on the other hand even with bad results , become the pillar of expectations for the average Joe Punter out in the “virtual” pits , electronic trading making instant analysis easily available

HDFC (for HDFC Bank) and ICICI Bank continue to lead sentiment, Axis taking on the almost traditional role of substitute as the large cap stocks start capping out on slowing momentum after a precipitous rise in the prodigal rally as the Electorate returns a decisive result with a likely encore for the new government, improtant for power and other infrastructure sector investments.

Positing on Maruti in these climes looks the unfortunate thing that will grab and crush a few balls if indeed markets continue without succour and so interest is likely to remain superlatively in affinity with the new winners in the dozen like Yes Bank and IDFC even as we wait for real results from the Auto sector and the rally continues after the government formation is over and consumers return to an atmosphere of certainty albeit in a new government with equally dictatorial memes as the autocracies in China, setting up for some interesting dog fights in the public media within India inc and within the government with or without having to buy the last few members into their coming NDA 3.0

A word of caution for baiters among Joe Traders out there, “MODI TRADES” are unlikely to offer short opportunities even in inopportune and pretty ramshackle choices like Jain irrigation and may hide a few upcoming gems like Zee and Adani which will likely also shine because of fundamentals making them FII darlings down the line apart from the ratchety cling from government patronage. Reliance will be interesting to watch esp with the new claims on an old government’s pricing policy while it also enjoys the fruits of India’s recovery and an expanding corporate and retail consumer business to finally back its expansion in Energy and now retail, Banking and broadband.

I would continue to back Bajaj Auto, Bharti and ITC for now among the non infra, non financial services sectors. I see no hurry in rushing Power NBFCs from where they have already reached at 9.30 and no undue reason to enter markets now even as indices definitely look to close 2014 above 7500-7800. Markets also look deeper into the IIP and CPI data as the Core CPI data includes Services which continue at around 8% higher and food inflation is looking at “new windows of opportunity”

Goldman Sachs and others also back the doubling down in the Bond markets even as the Rate Cut analysis is likely to become prime fodder in the debate with the Guv who is likely to hold out on rate cuts given the consumer markets staying subdued with sharp inflation pressures. Fixed income yields will have to lead from the markets for the macro to heal even in the confidence on the new dispensation. The currency trades will automatically give a fillip to both bond markets and long standing illiquidity in the CDS markets as the availability of the attention variable allows easy comparison and tracking of India yields globally before its eventual consummation into any EM or Global Asia index. If Exports start and continue a rhythmic recovery , the currency may well return to 54 marks where it could not sustain in 2010-11, last in 2012.

India Morning Report: 6859..6900..7000..Markets celebrate the Democratic ritual

F&O bets have moved on to sold 6900 Puts along with a bigger stable midpoint at the 6800 puts, with calls making the market top range at 7500 no longer looking really out of the money as they were probably intended without any euphoria in sight yet, making it possible the rally will , cautiously from here, last the four days till counting, when internecine bets made by punters translate into hostile volatility on Saturday if there is a special session indeed.

Some such confused plays not backed by fundamentals, now exclude PSE banks as the better ones like PNB are clear to watch for and back along with Canara Bank, but include plays on Maruti which posted its lowest monthly sales in April, much below even subdued analyst expectations. IN PSU Banks Central Bank and United Bank  definitely remain the worst of the worst and thus rerating of the index components will continue in favor of Private sector banks led by Yes Bank which may be near a laybye soon at 460 levels or below 500 before the next surge as big caps HDFC Bank and ICICI Bank (lower but improving spreads) come out after some long months of rumination on their price charts range bound till now at 700 and 1300 respectively. Axis Bank and BOB cannot be ignored and the weakness of the bull candle will be underlined by excessive moves in such good but unproven stocks with their results far behind other banks.

Results from Torrent on Cymbalta Sales and a better guidance just about stayed abreast with competitive results from Glenmark, still paying dearly for a local acquisition gone wrong. PSE banks cemented the feeling of punters holding back, that the worst is over as they focussed on Modi coming in and making a new stable government. The Rupee will likely repeat its Friday moves below 60 except that the CPI and IIP data due today are largely expected to be above 8% and negative growth in poroduction respectively esp after IIP’s earlier year series was revised upward by 7-8%. Yields are likely to continue tracking down from 8.75% already down perceptibly without any recovery showing in the macro data series except the usual jump in utilities (electricity) and the dulling of food and fuel inflation

This move however cannot be confused as a rally as most market volumes stabilised in late April itself and there is no reason for investors and traders to add or book early profits before the counting gets underway. The chances of a profit booking, I would reassert have not increased in this move, helped by the fact that it happened on a weekend close, allowing operators who have dug in their heels to last the week with the bull trade.

The Sensex is ready to move up from newly gained 23000 levels while Shanghai in the meantime is at barelly 2018 levels after morning trades even as Japan’s subdued trade data is more supportive of Japanese moves to get into a domestic market growth phase led by the depreciation of the currency with long term yields at 0.6%

Power NBFCs led by REC are seeing good accumulation of interest, likely to show up as a big bull move if the rally sustains after the anouncement of results, wence Infra stocks like IDFC should also be back with a bang and the fundamental dozen we identified earlier will take over from speculative heavies fueling this comeback push that will underline the new baseline for Indian markets

USL and Sun Pharma continue to trade deal news and more may be around the corner as USL celebrates an Empreador deal for the not so successful Whyte & Mackay acquisition. Bharti and ITC are at tempting levels. The call auction (preopen) markets have opened with the Rupee under 60 despite the impending Economic data as the move is apparently finally ready to disregard opaque clues as most CPI and IIP pronouncements have turned out in the last 5 years.

India however is finally in the eyes of global media again and this promise to NDA to rule for ten years (likely) is going to be a good period for India to finally catch up with the Infra and the business growth that has made it look puny to China which digs in its heels to get into a domestic consumption mode and rural growth , parameters on which we are qualitatively ahead of the big brother ( though we will never catch up in real or PPP terms to China per se)

6859..6900..7000..Markets celebrate the Democratic ritual (the hidden trader’s mind)

What ensues today is a Modern day India ritual, involving corrupt politicians and a lot of cash exchanging hands, to be sure. However, the Morning report celebrates the stock markets, that have indeed achieved good strength in the final rushes as the Public Sector Banks join the big thrust on Monday. Even Andhra Bank was not so bad as last quarter and comes with a promise of a good new quarter till June.

In front of everything, however close, is the fact that banks will lead this rally continuing froma record breaking friday which would put most analysts on caution for a coming fall, equally steep, but the fear is a bit mislaid this time as the roller coaster climbs up the sharp wall of stifled expectations , with the markets, for whatever political reason, laying in wait since 2004 for the time to breakout on continued new baselining of earnings by more than double digits year on year, disregarding a long period of slow growth

Banks will improve further building on the big gains on Friday led by PNB and ICICI Bank.  Also, the networks , to be fair to them, seem to have the handle on the market today – SS got it exactly on tv18 as more than one analyst nodded to banks across networks and lets face it even traders and fundamental investors were horrendously shocked when the index spike happened on Friday afternoon. However, the markets are not wating for a 300 tally for Modi nor will they wait for that mark next week to resume a rally as long as the government formation process is quick and painless. Banknifty will likely move to 14300 levels early before a small sanity check comes in. One does not expect this market to break thru lower than 6700 levels unless NDA performs poorly in the 200-220 seat range

India Morning Report: etihad, Air Asia take to Indian skies.

etihad completed all formalities of the INR 22.5 Bln sale to Jet with SEBI noting that no national regulator had any remaining concerns and that the firm’s agreement with Jet Airways satisfied questions of management control residing in India. Air Asia fends similar questions from the press as it launches operations in India with a locally recruited management and no active Indian partner in sight. Air Asia remains unlisted, while existing Jet executives leave and etihad gets 2 Directors on the board and probably a say in the new CEO appointment

Jignesh Shah meanwhile cooled his heels in prison and the Rupee edged up after causing heartburn at both HSBC and StanC which reported dismal emerging markets business down 35% for HSBC and no numbers released by StanC which has active positions in both the IDR (Indonesian Rupiah) and the INR (Indian Rupee)

Sintex and Amtex Auto in midcaps had a final home run after 25 odd years, Sintex reporting its first INR 13Bln contract for the new Infra Division and Amtek also almost doubling revenues to INR 9 Bln in Q2. ARCIL is obviously back on the Indian networks as banks disposed off more than INR 50 Bln in the period till March ffor quick profits from NPA. Erstwhile sales to ARCIL have been only for final disposal, killing the business model and blocking the flow of assets thru the channel created for the express purpose in the very first wave of reforms in 1995 under successive Congress and BJP governments. Coalition politics is here to stay as markets battle the feeling while sticking around the new 6700 levels.

Glenmark’s 75% reduction in Net Income is not a permanent loss and will be repaired in due course we keeping faith in performing businesses like that in paucity in India. Jyothi Labs may however continue to provide shallow market making and consequent investor troubles as it establishes its brands post SPIC acquisition.

Glenmark is already guiding a 18% dmestic market growth and a double digit growth in US and a core EBITDA in excess of INR 15 Bln on growing R&D spend

Markets thus remain a good buy opportunity thru counting of votes in May and consequent Government making whence the India story kicks in one or other forms

Yes Bank and IDFC remain great picks esp post monsoon thru March 2015 along with ICICI Bank and HDFC/HDFC Bank. The Bank Nifty is close to all time highs again after two consecutive good days to 13120, SBI probably riding the Canara Bank reprieve for the sector till its own troubles become public again with India’s biggest bank unable to stem the rot in bad assets despite aggressive NPA sales to ARCIL and others.

Talwalkars reported great results, apparently on target to achieve positive cash flows despite a continuing large investment program in n new locations and a new premium gym franchise. Margins are 58% in the current quarter. Wonder La of Bangalore was also listed today.

India Bank Earnings: ICICI Bank 1Q2014 reports subdued growth

The bank reported for the full fiscal year last fortnight and though it has improved its Cost Income ratio to 38% making it best in class, its Asset Book NIMs on improved Corporate Loan performance and control, scoring 3.33% from 2.9% a couple of quarters back, the bank still posted tepid topline increases in low double digits for the whole year. That also meant for the full year, Net income stopped at INR 110 Bln and that amounted to a huge 14.9% roE on one’s guessing a pretty low equity base static at INR 11.5 Bln

The Net NPA ratio, an important drag on earnings in the first two quarters, scorched a more than 25% increase instead of topline growth as fee income in Q4 barely made double digits. However overall Fee and Advisory Income included a INR 5.22 Bln jump in Treasury gains ( over 3.5 Bln booked in Q3 and the rest now) and FX gains from repatriation of earnings from Foreign branches allowing Q4 to report a 35% Non Interest Income increase while NII was hardly up 2% on linked quarter and operating profits flat on the December quarter

The total asset book has grown to INR 3.4 tln and the near 25% growth in retail assets has seen a more than 15% decrease in contribution (size of book) from Auto loans. The Deposits are also upward of INR 3.3 Tln with INR 1.3 Tln in CASA deposits, the bank again satisfied with a 39% CASA ratio.

One wonders if we can get an answer from the bank on how the bank’s Off balance sheetcapital/liabilities have reduced by a similar amount as the increase in Tier I capital eve an Indian Bank reporting a 17.7% Basel III Capital is unlikely to give them the same advantage as another European or US bank which has many more layers of Capital allocation and RWA classification for Borrowings, mostly to the detriment of predatory structures continuingly preferred in those markets by institutional investors and other banks including the new allowed contingent capital structures in Tier I

Net income for the consolidated entity including the dozen odd subsidiaries with INR 120 bln capital allocated was surprisingly down by almost 4-5% from December 2013 with a jump of INR 1200 Bln in Opex in Non compensation expenses bringing year on year increase in consolidated profit below 10%

India Morning Report: Another election day, more robust earnings

sunranbaxynoMeanwhile, F&O trades have squeezed in the range to the likely 7000 mark from just OTM bets on Monday. With lower active Put strategies moving up to 6300 and active Calls moving out of 6700 to 6800, the increasing confidence of the plays is obvious even as individual stock corrections dwindle down. Stocks like Canara Bank, Bajaj Auto and maybe Lupin today could become strong supports to the rally legs on having achieved fundamental benchmarks of sustainability, in the case of Canara Bank after a pretty lean 18 months. The bread and butter of the rally still awaits sustenance from ICICI Bank and Axis Bank making Monday’s move on PSU recovery a soon to be erased play which Tuesday duly achieved, sliding down Monday’s secular gains

HDFC results were the eye opener again, witha healthy Dividend payout ratio keeping the stock ina different investor favorite category not to be touched by speculative only traders ion this rally but remains good for accumulation. A new flag I have to ‘put’ in due course is that despite selling down portfolios, it still has 71% of its book in retail loans. Spreads have bettered again as the consolidated growth of near 15% in advances and profits augurs well for those following the business, likely untouched by regulator or new government scrutiny.

Wednesday does creep into the end game for the Election stew rally that has kept the markets ranged, but we stand by the new bottom of the market around 6700 for now. All Bank and Canara Bank will likely improve prospects for a new all time mark on the Banknifty.

Powergrid could be in play today and REC’s new highs with the recovery of sentiment in YES Bank at 435 robust indicators also for infra plays like IDFC which also do well in getting Dollar financing through a wide net of means and have been subdued on grant of a bank license complicating changes to the Op structure for an almost new conglomerate holding on to diverse Financial services interests thru acquisition

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Mutual Fund businesses will obviously continue going thru churn at these new levels all of 2014 as the markets continue to rise further, the highs having come after a gap of 5 years and DIIs will remain residual buyers with FIIS also hopefully looking to increase bets in two weeks. It’s a wonder Rupee has n’t moved back into 59 levels but the FX and Fixed Income markets remain huge longs and even retail can add positions there without fear thru September post new government machinations being completed.

Seriously, Twitter’s promoter selling led breakdown has nothing to do with speculative turndowns in post IPO tenor in India (watch out Nikunj) as just Dial coasts to new levels with institutions still looking to buy the stock in the future,another Dominos’ led Jubilant Foods honeymoon in the making as 2010 IPO plays like Talwalkars, LL, Page and Prestige remain in play for being quality consumer stocks and CRE plays

India Morning Report: You mean making government will already strain credibility!

namo
A controversial new PM already baiting the EC

It is that time of the season when Foreign investors continue to increase their commitment to India albeit with direct plays in Index and stock futures. F&O positions have added on 5500 Puts and 7500 Calls ranging all trades at the 6700 bottom but for not a very big play till May 16. Also all visible indications point to Vols being a dead play at new 34 highs for the markets as markets will hope for a consolidated trade to 19 levels and anther to 45-50 levels ( ‘95% confodence call’ at 45)

Also, one must note the paucity of ‘go long’ strategies except in the index itself has finally converted into viable shorts, on Autos, on Sun Pharma and most noticably on HCL Tech led IT satraps with HCLT finally running a beckoning red line down 50 points in a sesion with room for more. Infy ofcourse is already close to bottoming out and is not really running on short fuel at 3150 levels but that would allow HCLT to come back too early too and that is unlikely. HCL Tech shorts thus carry the week with them at least till today and tomorrow sessions in full jest as PSU banks provide a final exit for the on street traders or the commodity rich HNI versions there of with leveraged margin portfolios finally catching a break as Canara Bank and Unitred post good recovery dataa on the back of another sterling recovery income schedule from IDBI. While IDBI actually recovered more than INR 10 Bln from defined NPAs in the single quarter, Canara Bank reduced Gross NPAs from 2.5% to under 2% and United lost all its INR 10 Bln in losses in a bad Q4. United however has already been caught from all signs even before the call auction trades were over for the fudge not effecting any new realties

Credit Suisse seems ready to admit it had a couple of bad picks and you should get out of Emami nevertheless. Exide’s ING purchase is also unlikely to interest markets as the life co is not really making new business apart from the run of renewal premiums that makes 60% of its income for the period. In sum all mid cap plays including CESC and JSW Energy actually remain shallow market stops that can easily turn into traps and as with markets across the seas, Large Cap Blue chips remain the rush hour excuse for staying in the markets.

Hopefully, energy stocks will be able to keep the indices afloat as market darlings like YES and IDFC continue to fall to create room for a good upsurge back to 475 and 130 levels with Infrastructure definitely a priority for the new government again likely to stay in for 10 years once the job of government making is completed.

Axis and ICICI Bank still remain on hold in most trader portfolios, waiting for the earnings trigge r to take the market surge to 6800, with Glenmark, Bharti and ITC making suitable power plays to sub for Biocon, Maruti and others like Tata Steel unlikely to come back in this Fiscal. Power NBFC trades may not wait for a post election play either.

I do not have the handle on the Hindalco surge so I would guess it is just a retraction of financing plays fromt he erstwhile bellwether. Markets are closed in Asia as the US markets completed a Monday fact check and recovered towards the end

Stay short in HCL Tech, for a target of 1250. Bajaj Auto has also not completed an aborted long play to 1950 levels after having started well on end of month data and will remain positive, making another transition to investor portfolios while remaining a strong trade candidate

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