India Morning Report: Its not going to be another day on the bleachers, Mr Jones

Mr Jones, being the aphorism creating reference from the white explorers of the 15th century in a smart tag often used in everyday winners dictionaries.

Well, most participants in the market will vouch for a slow and steady influx returning to the Indian markets as we wait for the data to pour in. As buying did occur at the lows after mid morning trades on Monday, the markets continue to try and fail at locking vacuous prices for new buyers and leave a large intra day range on the indices, but it will still be mildly positive on increasing OI in the new series ( from rolled over levels that are near normal) esp. with PNB back to an able Lieutinant to SBI on the bourses and no one daring the Indian lead bank despite continuing horrendous numbers extolling pain on its balance sheet which will continue till the best recovery scores are in late next year.

BHEL and SBI investors are unlikely to back out till a knowing FII dares a big short, not required in the limited weightages and expectations from Indian markets. That only I can grant a s confusing because with a preponderence of average joe opaque hedge funds most Dr Jones would benefit from shorting to create funding in this market, and that speaks volumes to  the limitations of doing business having created this market impasse that is going to keep activity tired and lethargic at 7300 levels as markets fail to recognise it as a new high or a restful break to higher levels, dithering because only of the waiting game as DIIs are definitely not going to extend buying unless thre is a sufficient impetus in individual stocks, markets having caught up on fair value.

But FII points of view and Midcap rage apart, there is also a requirement to underline the coming recovery showing in data with a leading data series or more than one that actually cann see the recovery ont he ground, leaving Auto sales to do the morale boosting this week with inflation at Core CPI baskets continuing to rein at 8%

Investors still holding longs continue to win in the new government’s settling in period, a classic for enticing new investors with real results,retail traders let down by the Interest winding down in IT but also a fairly shallow level of business reporting from MidCaps which braver ones continue to ignore in market punting herds but is even showing on the portfolios of accomplished investor traders like Rakesh Jhunjhunwala. Ultra HNIs look forward to the big long in Gold coming back again at 7300 levels, much like they were busy trading Oil, Silver and Gold after the winding down of the big trade  at 5500 levels of the Nifty

Hero Moto as expected is winding down after a double header staring in Festive season , ramping up on distribution and models in rural strongholds while Bajaj Auto celebrates the coming improvement in exports and domestic sales. In 4 wheelers even as Nissan and Ford ramp up exports to near overall Hyundai scores, Maruti has probably been treading dangerously overbought levels ahead of a slightly better number in May, with April not being a lesson enough for the trade.

NBCC results continue to be consistent but not to the outperformer level needed to compete in MidCaps to enable the making trade while JP Associates also turns out to be a damp squib in the expectant Large Inra plays coming out of a large dormant shell since 2009

Banknifty is unlikely to rise faster or higher again but is strong at 15000 levels with most banks happy to trade further from these levels YES Bank being in fact still undervalued for being ignored or pushed down on lack of comparative vbusiness volumes with the other large trade candidates like ICICI Bankand HDFC Bank and one suspects the Indusind trade, despite their patchy oneuppance one quarter a year, is still expected to be another vibrant day or two in the coming series.

Infy buyers will probably hope for sub 3000 levels again as TM follows down and one sees in this scenario anoither strong month for Relinfra and IDFC both together with NBFCs like LIC Housing leading the way up from here and Banknifty back to highs supported by Domestic cyclicals but bellwethers like HUL vs ITC vs Bharti splitting the individual gains.

Havells results confirm it as one of the favored trades, we personally having being wrongfully waylaid in the earlier trade from 2012 because of some patchy quarters and a corporate campaign confusing another section of the erudite newby market watchers, so unable to predict targets. Jyothy Labs has recovered its merger costs and is operating some good fine tuned scores but Oil India and other Energy results are likely to keep important rallies waiting for a day or two. If one were to look for shortlisting winners again from that half dozen one would add IOC only to GAIL and let the BPCL story be for the time being after their gaiins in this rally and thus again a lot of disinterested watchers on the bleacehrs when it remains in fact the better buying opportunity of this year.

Jet Airways could be a good trade in a quarter or two and should continue to benefit from accumulation by investors as seems to be the case for Divis lab and Auro Pharma . The Sun Pharma trade is dead? Also, earnings plays this late in the earnings season with Q1 of the new fiscal set to close soon is really expecting too much allowing promoters to target a more fatter passive investor book for themselves by just ignoring quarterly and annual report periods

The IPL qualifiers/Semis however are going to be damp squibs in the 1-3 2-4 format with two strong teams riding it out and KKR’s late fightback as one of the best wasted in alikely clash with Mumbai Indians later

Currency based impacts should not douse interest in Mid Cap Pharma which remains the big story in the recovery year with some big drug molecule markets under the belt and are far superior to Mid Cap or Large Cap IT stories which are anyway flat on revenues and slower on profit aheadof the backing out of Rupee gains from the business jotted down.


India Morning Report: Correction day, follows Indian Markets predilection with “Modiphoria”

Hat Tip – FT’s demure casual and below the belt rough Indian journalism that helps them along as they staff other shallow EMs

Though others have been very supportive of this rally, shorts may not be able to get in to this section of the rally’s correction for much either. The Bull rally continues of course bu t the intra day mark of 7500 was lost in rather a hurry in a single session, revealing empty profit taking induced price bids and probably leading the markets on to a stronger hope for a sharper correction to tear down the bull phase per se, as evidenced in the 7500 Call OI build up. ( which means 7500 is now being sold down)

Thus except for the couple of PSU Banks being unshod ( Karnataka Bank, Hat Tip Tulsiani) which are being dropped from buy trade lists in F&O ( hence, unshod) not many other scrips will have any tradeable targets down and will just trade wat their Friday/this rlly ‘s stable marks than lose momentum or give way to short traders waiting in the wings with or without a DII mandate for lower prices. Kotak has another announcement from the RBI requesting it to pare promoter shareholdings to 30% by December 2016 and it joins HDFC Bank in waiting out current regulators for what they believe is a temporary hiccup, with the whole market waiting with them for the next few months as the new Cabinet digs into the high chairs in North and South Block

The Cabinet, we agree with most watchers was a best effort and not a radical change from normal polity, though it is obvious that Narendra Modi has a defined agenda some of it targeted at the outgoing government style of the Congress to drive in his advantage with the electorate. PM Narendra Modi will have to walk a thin line when he expands the Cabinet in 4-6 weeks, though with large portfolios being shared at the Cabinet level, the exercise is still a unique attempt in the direction of downsizing government and likely to be lauded in the first year and more as he plays out a defined point by point action plan from his own Office.

That would bode well for our recovery as well, though it is probably safer that markets begin from 7300 levels and that means most great policy pronouncements will not get another standing ovation from the markets as they get down to the serious business of maintaining fair value markets. Eventually performance only will be able to allow the markets to beat 7500 marks ont he Nifty and the 25k on the sensex. When it does cross the mark again, it is obvious that that would be steamed by existing shorts now back on the index options,  and would easily cross 7800 or 26500 on th Sensex to the court of broker dealers betting on the magical 30k pronouncements and will likely end the year at all time highs comfortably above 7500

F&O strategies at this time could thus easily avoid the short strategies and go back to a new straddle every week starting with a looser straddle bullish at 7300 to 7500 using the existing leverage in 7500 to build the smaller range from 7200 and 7300 sold puts.

One does not again see anyone missing the chance to go long in cash equities all day today and the fall in indices should fool no one. The best outcome ofcourse which could define such simple price discovery all day would be if DIIS step in to buy even in salutory quantities on longer range buys in Pharma and Domestic cyclicals which have hitherto been tom tommed by us as Bajaj Auto, Bharti ITC and even Non discretuionary consumption builds like Colgate, Britannia and Dabur Marico with the HULs as the private banks get back into the saddle on the Banknifty, YES Bank probably continuing without a break alongside Financial services companies closer to yesterdays high marks as they are still likely to look undervalued in the recovery strike. Some DIIs are probably even waiting for Cipla and Lupin again but many will move on to building positions in Glenmark Pharma and Cadila, waiting on Sun Pharma, Orchid, Aurobindo Pharma and Stride Arcolab (DRL and Ranbaxy are that might falling arrow sign i.e.down all the way)

More than earnings data it would be worries about the real agenda meeting reform as Energy stocks start with questions on if subsidies would indeed be tricked out again instead of being wound down as per plan as the NDA finds its Welfare feet in the magical Mansarovar of deficit financing.

Also, sooner or later the honey moon with the markets is likely to wind down for the Modi government as it refuses to be led by Markets like all institutions in Emerging markets are wont to publicly end up showing in their winning hand. Also cuation reigns on the performance of India in governance given the political pitfalls of sharing a Rajya Sabha in Congress majority

Yesterday’s quick exits probably resulted in FII outflows pressuring the rupee back to near 59 levels on Tuesday’s open mark. SBI on the other hand may not see any moves out and continues up from 2650

The step to combine Finance, Commerce and Corporate Affairs under Jaitley is probably the most positive and ambitious move by the new government that should be a commitment from PM Modi and Jaitley will have to walk the plank to cross a real issue or two of mis coordination in evidence of late. Rather Nirmala Seetharaman should work closely with FinMin Jaitley to make it work. Also, MSME has a separate Minister all by itself (KM) and Modi has kept pension affairs with personnel and science departments in his dhoti. Inderjit Singh’s portfolio of Programme Implementation would additionally have been something I would have moved to priority levels in a new aggressive India that should probably look at more 2030 and 2050 targets with a renewed vigor in Planning ( anathema yet to the NDA government?) The implications of that are not lost on a Chief Minister coming from leading a progressive state still relying on Central Planning as much as Private investment. The Ganga rejuvenation programme will probably be closely watched too for someone iwth a record of execution having given the portfolio to a sangh loyalist. We will probably continue to pop surprises to the world from Defence and Ext Affairs mandates with India deciding on a long term commitment to Modi aided by a performance beyond just an earnings beat from India Inc

India Morning Report: And Then The Markets Struck 7500

Well, the mouse ran up the clock and Global markets will rock around the clock this year i guess. So someone banked an ugly appreciation of the Rupee with an ugly depreciation of it three years ahead of time and today it starts back to 57 levels hurting a lot of weak economy stocks. Almost like the Pied Piper played it. Still, a lot of Indian Economy watchers are just looking for rats who are actually losing in this and the best short candidates would be IT and I guess the fact that Pharma actually has a future coming up which fundamentally at lower levels even IT can justify will probably play in favor of Pharma only after a one day break when the markets correct. The negative US GDP is similarly likely to be treated like pure chaff by global markets waiting for a big Q2 release.

The MM Joshi rumor mountain is past. We will have a lean cabinet, market volatility(to the extent reported by VIX which technically is not real vol)  will be at an all time low and probably we will be so optimistic by end of the session when we ring the bells for 7500 being reached on the Nifty and 25000 again on the sensex that someone will try a pansy bull trade to 7800 instead of looking at the facts and we will have a silly wall breakdown to deep 7300 levels ina fast session. More likely howebver, markets will take a break – not a flat onbe for consolidation, but a break that actually is negative to 7300- levels and in the worst case, right now we will not correct below 7100 before the budget comes to pass. Or the Rajya Sabha impasse comes about in any critical case ( RS is controlled by Congress)

Anyway, I’d say the analysis above is not a casual out of body experience but a critical admission that needs to be made before any investors go walking into the netherworld for having seen a “Miracle” nbeing performed on the banks of the holy ganges.

The Rupee’s rise as shalloiw as the fall isnot backed yet by debt buys. Fixed Income yields continue at 8.8% and will head south in due course. A new fiscal target is more or less pre approved for the new Cabinet Minister and welfare programs are also insured by BJP manifesto objectives, making subsidies an easy scapegoat for the required changeover and a new edition of the FRBM guiding the government. A large disinvestment program with Shourie back in the saddle compares with another younger minister leading the able MOF team and implementing DTC and GST first.

The Friday rest allowed an uncomplicated market move in a market which is almost too easy to read despite the depth and complexity of the textures in this market. Most retail and MF investors therefore remain overtly cautious and the rally benefits no one.

IDFC having reached 150 levels all Financial Services busineses like Infra, Power or other auto/gold seem to be off color in Monday trading. But the Banksw wil not be able to take  aslack unless you have a overflow into bad PSE banks before the markets lose these new levels again ( earlier intraday rummages scored high on Election Friday) Real Estate is also overvalued esp in Mid Cap. Mid Cap profit booking should start the downhill oil slick sometime next week if not Thursday. That period will see where the easy volatility trade firms up on the indices. This time I’ll be watching before showing what the strategy will be.

State Bank results proved the markets like NPAs off the books more than anything else. Yes I do not think the FII limit in other banks is important either. The markets are just stuck on an old bad habit andfinally no one will attempt to short the bank till it scores 3200 or even 3500 whence we can find out the final profit taking levels which the markets would ( no hope really!)like to spin today and tomorrow). I am watching the Banknifty , probably at 16,200 or 16300 I am a sure short bet on this tripe.

Monday is again one of those days when Bharti and ITC are both in the long trade, but the bank investment limit confusing people or the news of Debt index or that inflation target thing are unlikely to make the agenda in this NDA-I (Modi-I) dispensation.

From the looks of the late morning session, the markets can also stick around 7400 allweek and make the final rush last trying (unsuccessfully) to bump up the IT trade as a strong one , probably instead waiting tillt he auto data for May turns around. Markets have some profit takers getting a free rein and most analyst shorts on Pharma look to be early failures  with not many institutional holders yet in Pharma making that probable strong long trade in 2014 despite the currency moves likely lasting as they will be on most buy lists.


India Bank Earnings 4Q2014: SBI dresses up battle wounds for a smart total

To be fair to the largest Indian Bank they did grow NII 16% in the quarter and Net Income was better than INR30 Bln beating expectations on profit and also growing other income after a long impasse to INR 65 Bln from INR 50 Bln However, the near 30% improvement in Net NPAs and Gross NPAs to under 2.6% and under 5% was actually more through sell downs of written off assets. INR 56.94 Bln worth of write offs reduced NPLs while INR30.5 Bln in real recoveries and another INR 50 Bln in upgrades of doubtful assets helped the bank screen out new fall throughs to NPA of INR 79 Bln, smaller than the last quarter’s slippages of INR 110 Bln but not really good for the course.

However, the street celebrated the profit numbers on the closing session of the week, the bank ready to post better results as it continues at 27% market share of mortgages and 16% of Deposits market share as the Largest and No 1 in key retail markets in the country operating over 135,000 (135,863) automated kiosks

The Bank also continued to improve Net interest margins and scored on operating efficieny with cost control as it set in moton a large scale review process at the branch level to map villages and individual SME loans of smaller value.

One expects the INR 57 Bln in write offs to be paid in by ARCIL and thus recoveries down the  line will continue to be a robust writeback to Net Income

India Morning Report: Really, you’d want to short the markets right now?

Traders might face active discouragement with home cooked trader tools available on the wider price range in the markets today, very much unlike those HFT and algo inspired automatic anti-trades outlined in the new Michael Lewis book. (Narnia was written by CS Lewis ;)) Seriously, though the business of going bullish on India hasn’t begun much and some segments of the market could not be blamed for looking for an early correction. however markets are likely too low at 7250 and today’s moves would depend on all important results for Murli Manohar Joshi, State Bank of India, BOI and ITC. While the first two are likely going to have a neutral to negative impact, the latter two would take the markets as a whole higher. Sun TV also reports earnings as the Media sector is likely on the hot button list of plus movers right now as the short list on Consumer discretionary gets exhausted. Bajaj Auto is still hot on news of exports resuming with the shiny metal stocks running out others yesterday. Pharma and Healthcare businesses still offer fundamental value on explosion of size in the Domestic market.

I think Indian markets are mature enough to signal their dissatisfaction, if MM Joshi sneaks into the young cabinet, even as they remain tolerant of the new dispensation, because like the vote, they are today populated mostly by a younger generation, unlikely to fathom a failed patriarch in the midst of Modi’s scheme. LK Advani getting Home and Defence portfolio for example would have been a neutral action.

Back on the Financial news trickling in, SBI has probably overreached itself as has been the stock’s wont recently and would get primed down to 2400 levels post-earnings in late afternoon as it posts a flat loan book or increasing NPAs or both. ITC’s sales are expected to rise on retail and consumer businesses while BOI has turned the corner and markets will probably get an expected 20% increase in topline and a flt if not positive growth in Net Income with some NPA sales to the business.

HDFC and HDFC Bank priced itself out of the MSCI index as the bank scrip exits MSCI on continuing resrictions on HDFC Bank being declared a foreign entity and limits probably reached in HDFC as well. The expected double digit dip in SBI Net Income is unlikely to be neutral either given the PSU banks competitive comeback this quarter. Thus the Banknifty is short intra day but if larger positions increase attention on the Banknifty we could see cash flowing into the flagship movers of this bank rally in ICICI Bank, Axis Bank and YES Bank/Kotak.

In unlisted business, the expansion of amazon in India now has a competitive baseline with a INR 20 Bln deal from Flippkart to buy Myntra. Flipkart has already jettisoned 20% of its staff to get leaner for the fight but with bpth players relying on a marketplace model with independent shops and businesses creating a dispersed ecosystem, both are likely to grow independent of each other almost having usurped ebay’s model and business in this new ecommerce fortress/market among India’s Gen X and GenY( under25).

Power NBFCs and other Financial Services (Auto loan) businesses remain an investors delight any corrections good for further position increases but the current levels may hold for some time. Markets are likely to close above 7300 for the week but if a fast rise stops on lack of steam near 7325-7350 there may be a sharp correction in the coming week after markets open on Monday. IDFC is headed to 150 levels slowly and steadily


India Morning Report: Holding 7300, markets set to establish further gains

Debt outflows continued for most of April and May despite the improved rating of India globally and thus new inflows could again target the macro led Indian debt markets to the extent that there is a much greater (90%) likelihood of yields falling from 8.8% here and allocations become available from exits in US bonds and High yield and LL markets in Europe. Equities in the meantime a little more optimistic on/ignorant of  CPI data and IIP among others will continue to be buoyed by the recent change in Government as Mid Caps hold up on Indian equities having delivered 15% gains annually in a crisis period for growth since 2008 and Auto sales also likely to score much higher in May after having missed out on Election expense fueled April

Meanwhile SBI again heeded warning bells and fell a score from 2650 levels to 2450 on Wednesday, spurred by real shorts on PNB targetting a fair priced PSU bank pool. However as the Banknifty indices responded in kind real hedged trades in Indian banks are impossible and the Banknifty is thus likely to experience a mildly accelerated fall even as investor interest in private sector counterparts and the Indian economy increases in real time, capping the index at 15100 levels even if the YES Bank, Axis, ICICI Bank and HDFC/HDFC Bank respond on the positive side.

The IT recovery yesterday was the only sign of a sing song derogatory treatment of Indian markets by its insiders and is unlikely to last the week as Bajaj Auto shone in trades ably supported by increased business in ITC, M&M also improving from 1000 levels to 1150 in 2 days when indices were yaw yawing at the top and will shine on Thursday as well with exports again in motion. Gold rule relaxation is likely to bring back titan and manappuram investors

Bank of America is backing Titan as consumer non discretionary and discretionary remain in focus otherwise for being overvalued/fairly valued. however despite the improvement in outlook this year and the fade out of Gold import restrictions expected, Titan may not be the horse to back with mainline consumer businesses continuing to showcase good earnings and defensives unlikely to offer the flavor of a real bull market. ttk similarly is still consolidating business this year after a volatile 2013 from change in gas policy

Real estate stocks are a good short even as Mid Cap indices rise oas markets are likely to inspect the broad based rise for sustainable propositions and individual candidates concocted in the recent rally without basis will be jettisoned in a single trade/session. Energy cos in Oil are done with the correction while Power NBFCs still holding new levels likely first beneficiaries of a new dispensation Stocks like Federal Bank/SIB and City Union Bank could be in focus for news on Q2 business, mostly positive.


Indian Morning Report: Markets catch the bad eggs early, Modi sworn in on Monday

Markets caught the listed Morning Report villains early yesterday with PSUs getting a big early correction and markets sustaining the up move rather than jump to 7400. SBI however, probably with reassuring noises from Modi and Shourie insiders, caught fire again and closed at 2600 levels on being treated as a jewel in the crown and getting the required recapitalisation on priority. As of now however, technically no one from the new government is actually in position to deal with these issues as sh Narendra bhai Modi decides on his first team over the week.

Markets will continue up from 7300 and there may be a small correction in SBI too but shorts should exit the stock till it reaches new stratospheric levels beyond 3000 (when they will still risk getting trapped as Sensex targets have crossed to 31000) In the meantime the bank will be jettisoning more bad eggs to ARCON and other bad asset buyers. PNB also got an early reprieve yesterday on the same counts and followed SBI to an above 1000 close. PNBis a great short ( confirmed by Ashwini in the late morning picks)

Pharma companies, also as noted yesterday, came back with a big bang and IDFC provided momentum to the positive side of the market move while the PSUs including Coal India were rerated down after  a mindless rush on the upside over the weekend. Glenmark and Orchid Pharma are probably positive as Auro Phara remains subdued. Divis labs starts back from the bottom while IPCA joins in late s both follow Torrent and even Jubilant Life identified late in the rally.

In two wheelers we are still betting on the Bajaj Auto – Hero pair trade, Bajaj Auto remaining near 1900 levels after being ignored in the rally at its traditional top at 1948. ITC seems to be the one to be accumulated by institutions in the non IT businesses.

Mid Caps continued to rule their positives being easier access to financing as the growth memes take root again and markets , according to us , still looking ata  big risk as many cannot support the coming phase of steep growth fundamentally and choice of speculative multi-baggers opens the proverbial well (kuan vs khai in Hindi, the frying pan and fire being the universal translations of the metaphor) of despair led by over leveraged real estate and infra picks like IRB which have not completed asset sales to deleverage their current businesses. GMR continues to rely on aviation to get out of the rut.

Sun Pharma as always followed up on good news on Gleevec with the release of a warning letter from US FDA, consistently defying its backers for the last 20 years even as rival DRL lies in disarray

The stem in the rise of the Rupee brought gains back to IT as well and the same might continue a mindless exertion to the plus side today risking the fundamentally stronger banks and the down in the dumps auto/two wheeler stocks for the switch as indices will like to stay close to 7300 like yesterday till late afternoon. The top of the rally is above 7400 where markets would like to build a new level instead of keeping a bull rally correction, which is currently the expected result.

Chris Woods, continues to bat on the edge of rationality at CLSA, making smart comebacks as the easy rally remains simple to define and choice of available sectors is broad. Consumer Non Discretionary sector remains strong inthe indian GDP charts and may not be ignored in this rally. VIP and Zee Entertainment are likely to bat expectations of great results and at least the rally in Zee likely to survive in the longer term. Jubilant Foods may be out of favor but another short on it probably will cost the hype trades

Advance Declines may continue to try and balance out after a week of lopsided bullish ratios but opens at near 5-1 levels Energy companies and OMCs continue to face profit taking with Hindalco after DIIs confirmed they would wait for dips to buy.

That means the day will see Financial Services compoanies and Power NBFCs carry the burden of the bulls after a subdued week.

Off the bourses, the @PMOIndia shutdown may not be unwarranted as PM Manmohan Singh’s state representations are definitely not transferrable to the incoming PM but I guess Twitter can work on a generic solution. Till them I have no issues looking up @PMOIndia Archive instead but wonder what the official account handle should benow. I guess we won’t be chaning PMs in a hurry again!

India Morning Report: A sing song rise to 7400 is almost complete

The move up 65 points on Monday meant today the market could reach the high mark of 7400 with a 100 points rise in the Nifty. Given that the Banknifty rise on Monday left ICICI Bank behind and Axis Bank at 1808 can well rest without impeding this rise, the markets will probably reach the 7400 top mark well before the end of the week and the correction thence , completing the Modi at the crossroads rally with a corrective pitching in Thursday ir Friday allowing DIIs to confirm buying. ICICI Prudential recommended yesterday that the market be bought on dips and that is likely to be the recipe for the DIIs fresh from a profitable trade in IT that suffered a near 7-8% dip  yesterday’s trading in HCL Technologies and Infy. HCL Tech promoter Roshni Nadar is taking the family’s focus to Low cost Healthcare for India’s rural poor, the HCL foundation already active in the field of Higher education

IDFC saw a real uptick in interest since the announcement of the new government rising to 133 and ready to breakout to higher levels within this rally period along with infra majors like JP Associates and Relinfra as things crystallise around the budget exercise. The rise in Maruti is probably good fodder for the shorts to latch on to if the correction does ensue this week even L&T as other Gujarat stocks leave it behind. However, more importantly first the markets are likely to define good upward moves back in the defensives and Pharma companies as well, as Energy companies, Gujarat midcaps and the banks totally eclipsed their big losses yesterday, market operators doing their own quick version of the market re-rating badgering down stocks like ITC to 335 levels and HUL also suffering one thought without reason as the coming of controls on inflation and consumer spending/wages are not an automatic autopilot for the BJP government.

Glenmark Pharma should probably concentrate on growth in domestic market after some setbacks from the FDA and a still resilient positive start of secular growth in the US markets Energy stocks understandably take a breather and with volatility down 20% in the defining trade on Friday and continuing on Monday , one should see intra day ranges return to normal 1% bands than the 4-5% ranges seen last week and Monday. Power company results on Monday will likely be swamped soon about concerns over tariff realisations as the new government digs in its heels. Infra bottlenecks are also unlikely to disappear in the next 6 months as Financing has become tougher and local and state issues are likely to swamp any government quick fixes to kick off the sector in desire for good governance grades in 2014-15

The continuing focus on PSUs and PSU Banks over the big weekend has seen the sector catch up with gains in bank funds and even energy funds that benefitted from the late rally in April and May and the market is indeed looking frothy ont he indiscriminate PSU count though the good news is likely to keep the markets in gain till the month of May is indeed over.  Today’s rise in Mid cap indices is probably a portend of an index correction soon after the rise to 7400

DIIs will probably wait for a further 5% fall in IT stocks before buying back assuming an earnings score rated to the Rupee near 55 than the current estimates around 60.

Similarly, the capping of Private Bank prices in todays open predates a big short on the likes of SBI and PNB to come soon unless there is specific news to back the expectation of a big backing for State enterprises from the new lean government likely prescribed by Narendra Bhai Modi for saving Indias democracy, surely on its last legs at a current GDP growth score of 4%

The big question: Will India’s coming budget make real dreams like the first Bullet Train for India?




India Morning Report: Just a new Cabinet in play, Markets joust at 7200

There is virtually no reason for markets to hold the new 7200 levels on the Nifty or 24200 levels on the Sensex so there is always  chance that 7100 is reached again in the coming 2-3 weeks, but global markets are agog with the news of a new government in India and there are even some stray rumors of FDI being redirected from China to the Indian basket. However as a few that have rerated markets to 8000 levels would appreciate and Nomura does not in rerating of the growth target to 6.5%, the new Modi trade as yet does not encompass any change in fundamentals of the Economy as it awaits the qualification of India strategies with real strategy motifs from the new PM.

The FII sell trade on the index however as we explained already is a likely deepening of their bets on India as they exit naked index bets and return to stock specific bets while exiting cyclicals ( Citi – Pharma, Consumer Staples, Metals) . Goldman Sachs again, a good index revision to 8300 however no retail investors should be encouraged to enter the markets at these levels, those in play already inside whence the index crossed 6700 levels.

Markets as expected, open slightly positive after a rush to Mt. 7200 on Friday and now sustaining the range between 7100-7400 before fundamentals and a real government allow the move out to 7500 and then only one can say what the new peak for the markets shall be and where it will end in 2014 likely above 7700 and 25000 on th Sensex an easy target . Markets reached 25k mid afternoon on Friday. Global markets in the meantime see the FTSE stopped below 7000 as it along with the European plays changes the fundamentals of the Bull trade from European growth at home to Global growth and the bond trade exits. European markets will now rise on the weakness of the Euro having peaked out their slow growth memes at the 1.40 marks on the Euro. The SU markets after a scary ride down all week closed near 16,500 and still retain a bullish meme or too but only if the Bond trade stops doubling down every week, ten year yields still headed south even as retail reports a buoyant quarter this week.

The currency is headed below 58 with another 30 paisa gain at open to 58.50 even as Arun Shoruie gets another chancce at an Economic portfolio. It is a little discouraging ( intellectually) that the voting masses do not appreciate anyone with real qualifications, though one does not yet mind a man of the masses taking reign as he brings promise of long term stability and thus at least hope of turning the regular recovery to 6% into a big decade for India and India inc,

It almost seems superstition ( see our predilection series’ of 2011) for markets to stand on a 9:2 Advance Decline ratio after having lopped of the steep head of the trade on Friday when the markets understandingly rose 5% mid day to above 7500, allowing analysts to comfortably bat for India bull markets even after the great seeming froth in equities ont he back of a 336 seat win for the NDA. Banknifty hit 15k in Friday trades and the bigger better banks including the 2000 vintage Yes Bank too will continue to reap the gains of renewed investor confidence , allowing Yes Bank to trade around 600 levels and ICICI Bank perhaps 1500 levels as HDFC Bank is already at 800. Market earnings should be taken at around 375 for the Nifty and 1400 for the Sensex as the markets have moved on since August last year and India inc continues to perform.

A great bull run will probably stay stopped in its tracks for a couple of months as consumer staples stop rising even as inflation remains high with consumption the oonly growing GDP component. However as growth takes hold, it is desired (as Riddham Desai makes a case for it on CNBC tv18) that the %of GDP attributed to wages decline in favor of % of GDP attributed to Profits. That would also imply that consumption share of GDP that may keep growing will have lesser role to play as real investments finally make the GDP shine for India a sterling part of selling the new Modi model of global business. However , my takeaway remains that it may be difficult to undermine the role of Pharma, Exports and even FMCG/staples/Non durables in future Indian growth and performances from the sector may well continue to lead sentiment into 2016 giving the market consolidation a reason to not change baskets but remain stock specific after having chosen their favorite banks. China in fact continues to bat for a new dispensation that allows deeper domestic consumption markets where Japan has already moved after a first few futile months, and though analysts and funds start chasing China and Japan almost simultaneously with much bigger commitments, India will scor ehigher than its own previous benchmarks on Foreign inflows and markets will continue to lead business here.

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