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.

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!

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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

India Morning Report: Earnings season drills on to new baselines up here

Sun Pharma for example may be under pressure for nothing but quasi “asset stripping” SPARC as revenues at the subsidiary fell40% in the quarter. One would be well advised to not enter SPARC again till there is a clear road map for it post Teva as couple of the earlier drugs planned under MNC marketing agreements had already been withdrawn and now more seems to have moved on since Teva went live, earnings report being a confirmation of the market news undercurrents. A deal in Crompton greaves combined with a hunger for Capex stocks displaces United Spirits from The Dealmakers premium reserve with a 20% gain (updated after open)

DRL may however have limited upside too as the Rupee stays strong at the beginning of the week despite only $5 Bln in overall FII inflows this quarter a similar lower number for FDI at less than $4. However, equities overall just need some good news to keep them moving. Those moving into smaller midcaps will suffer esp with projects like Purvankara in a mini deal in Kochi with Sobha not helping either and V Guard’s improved margins to below 10% Gross and Operating margins do not really augur well for the stock despite the “huge improvement”. Ashok Leyland also reported sales downtick of 20% along expected lines.

Monday morning sees the Nifty and the Sensex however starting from the virtual bottoms of this rally at 22400 and 6700. Another robust move up that awaits bigger earnings stories is still to come. That brings us after a brief respite with ET offering a cogent IPL game preview between Chennai and Delhi tonight, to SS and my favorites in ICICI Bank and Axis Bank that qualify between them a 100 point uptick on the Nifty in this week from 1250 and 1525.

M&M and M&M Fin may be good for another rally soon with M&M sulking on April sales data to 1000 levels already and Maruti potentially short till another 400 points. Market has expectedly gone short with Calls under pressure in F&O in the Fridyay market but they may well lead to more losses for adventurous shorts as markets remains undervalued for the 5 year outperformance in earnings under strong duress that kep the markets from trying for sentiment highs and markets will hopefully rerate around 6700 and 22000 levels only as the new baseline

Again the IT sector has no good news to offer and export data will apparently sustain at the 59-60 levels of the Rupee so the rally may still see a new high for the currency as the bond markets get ready for a big jump from 8.9% levels to 8% in the recovery. IIP numbers for 2013 were also revised by 7-8% last week and similar revisions on this year’s numbers may be due later. Dips to even 6650 are unlikely.

IDFC and YES Bank remain the best investor buys with Bharti , Bharti infratel and ITC following up and making up for bad performance continuing from quasi capex and power bets like L&T and BHEL or non starters in metals like Tata Steel and Cairn owner Sesa Sterlite. IOC and other OMC stocks are in the middle of a long trade wedged in on Friday and may well make aup a good support channel for upside sentiment

India Morning Report: Love in the times of cholera for Airtel, India

Airtel rode the Data market jump as revenues for data doubled as for Idea in mobile data (94% and 110% respectively) allowing Bharti Airtel to showcase once again that ist is the best business and the best business group to run for India and in India. Of course, firming up of prices is a mixed blessing for consumers but the explosion of the data pie esp in mobile data augurs well for companies in this otherwise mature market just waiting for a whiff of good natured mojo for the overall economy to blast off.

Modi’s government is not yet in through the door, his ominous cries for Dil maange more in dissonance with the campaign for mostly informed voters going to the polls in phases 7 and with exactly 16 days to go. However, it is unlikely that the polls will herald any other government in India than a full fledged Modi government that will last 60 months and most of the reforms will not be rolled back abruptly or at least most investors do believe that and look for reassurances for the same.

Markets finally break a 2 day losing streak and return to green making Nifty 6800 an iron clad resistance and support thereafter for the India markets re-rating currently. Merck reports in India tonight and the results will underline why Indian traders should not go for stocks like Alstom and Astrazeneca on global headlines that do not impact the listed business, so often mistaken as pull for the global corps in question. ING Vysya’s results reported yesterday again showed some weakness and have to be inspected for renewed commitment required from their parent in Netherlandas spreads /jaws contract for the Indian sub and the Income growth does show a better traction in new loans

Ashwini and other network commentators have again been baited/baiting shorts after markets almost flattened out at 6720 , some of the confusion spreading over from a long earnings and election season but the selection of midcaps again shows the limited interest in the markets on the long side except for returning to 6800, staying positive on good earnings ( there are no real bad earnings reports coming, bu t that is not being factored early by the markets) and standing waters are unlikely to make enough trading capital queasy to force a down tick in the markets making 6650 probably a safe bottom and sold puts will continue at 6700 levels from Traders and investors alike waiting out the final tally.

I am busy packing my bags in Bangalore and tying up loose ends as I get ready to join campus for a Ph D at Lucknow / Trichy ( thanks for being around)

Infrastructure spend and IPL like sports franchises remain Indias most potent steps as they await an empowered government

India Morning Report: HDFC Bank can’t keep up pace of expectations, Markets cannot let go of the rally

Markets are headed to 7000 from here, double digit Earnings increase in good Indian companies helping the fast and even rerating of Indian markets after a stuck up score since 2004

The Bank Earnings season headliner is missing from our content factory this quarter but that is because of our personal time commitments. HDFC Bank however went a notch below expectations polled and would probably like to regain that control over analysts it only has itself to blame for ignoring the bank’s own overcautious and mostly overzealous private circle conversations about their results. The bank did outscore the 25% Net Income mark with NII at INR 49.55 Bln and 4.4% NIMs for a more than 5% loan spread, but as tax incidence increased on all the expenses (many expenses are now no longer part of NIM calculations either) it posted a continuing stream of disappointment on what we consider a paucity of Fee Income avenues even as loan growth of 20% and above is way above industry growth rates and is evenly matched by Deposits to 4 T (INR 4 Trillion = 4 Lakh crores = #5 in Indian Banks including all PSEs) The CASA is a respectable 44.8% and the Gross NPAs thankfully have staved off the challenge from increZsing short term risks for corporates and stayed at 1%

The indices showered attention on an increasing options position again on Tuesday as HNIs moved on Anantput Industries hoping to make another large INR 500 crore plus multibagger after the success with USL and most profits taken in this rally continue to be ploughed in with DIIs also buying after selling off their IT winnings. Bajaj Auto is good to go for this week as is YES Bnak which moved higher and insider trading remains tough to catch in Indian markets especially around Deal news such as obfuscated rumors about L&T Fin approaching both promoter families at YES which in corporate governance terms is not a strain on YES Bank in our culture and time

Results season accelerates from here as two other important banks report within the week. Biocon and Maruti report this week and may have short expectation rallies today even as YES Bank dials in the latest quarter’s growth in CASA, while ICICI Bank and IDFC report together on Friday and will at least maintain yesterday’s levels at 1250 and 120 respectively. Both M&M Fin and L&T follow YES Bank results today ( may report earlier on the wires)

Get out of IT stocks by end of day today as there are too many stocks to allocate and India weights remain the same. The MNC Pharma growth stories fueled by Global dealmaking may see a little damping of domestic stocks but we maintain the move in Astrazeneca yesterday is not just out of proportion bu tunwarranted as MNC pharma in the country mirrors global frustrations memes strong in the India context even as India and Indonesia markets break out from the EM pack on larger GDP and larger local market participation. Indonesia of course has a long way to go in terms of providing a deeper Capital Market.

India Morning Report: Will 6800 mark a heartbreak for the rally?

The markets are evenly poised again after a quick Monday morning move to 6800. Indices like the Banknifty however went thru a minor break in the week past and recovered only on Friday to 12850. SBI for example is the key to many hidden not so good fundamentals stories the markets wanted to slide past older marks in a no holds barred rally and will likely continue to cede marks even as Bajaj Auto remains positive during earnings month and joins bets like Bharti Airtel and LIC Housing ( upgraded on date by Nomura) to keep the positive momentum of the markets even a san extended wait to counting day keeps investors on edge. China is back in the Investors rangefinders as they look to snipe gains backed by the new stimulus engaged by China. India remains second to Taiwan in FII inflow charts and investors are already on hold with hot money purveyors and lower quality FII relationships proving key as Participatory notes become the order of the day again.

Power NBFCs look like having crossed major hurdles on price charts with REC ahead at 250 and LIC Housing seems to be looking a t good earnings again. The Good earnings stories will slowly crowd out the market favorites again this week and markets will likely use the time to exit bad stories like SBI that are unlikely to make a comeback or IT and Pharma as they top out with the Rupee stabilizing at 60 levels again, without threat. It is good to see the Domestic Institution turn buyers before the FIIs leave and it is also good to see a burst in market volatility that seems to have favored positive moves in the market overall in the last two weeks in what would be a unique advantage for India markets

Reliance seems to have been at the wrong end of the new deal again as Investors hope for a back braking laden quarter from the old bellwether as investors remain hocked and look to make up for interest payouts from the stock move, leaving it actually stranded at 860 levels(result day, 960 on Friday) as it reported moves in its INR 330 Bln Telecom and the INR 150 Bln retail investments. ITC on the other hand could join YES Bank and IDFC again in moving up positively throughout the week even as HDFC’s Foreign status hits HDFC Bank’s move to increase FII Limits and IDFC goes about setting up the NOHFC/New Bank structure and pares FII holding to 49% at 120 levels on the stock.

HDFC Bank is up for rerating of its weight in the MSCI index from 5.78% in May by two thirds based on the Free float calculation for the FIF factor. HDFC remains FII owned to 73%

The Global deals seem to be more than clouding the markets again even as the Diageo offer for INR 120 Bln for United Spirits makes the USL investors good with a 10% rise on open. A similar move in AstraZeneca in the call auction looked a trifle premature unless markets know of any more firm moves by the global parent for the Indian listing. Pfizer bid a $102 Bln for AstraZeneca and that would be a wrong story to back in the markets given the tangential impact on Emerging market and India plans from the deal. A good market practice would be to be a little more circumspect about blue sky deals and announcements in the global markets, like the Hero move to invest in Latam which is likely to be cash negative for time to come and the way we have subjected Bharti Airtel to strict checks and balances thru its buys in Africa four years ago.

Tata Global looks unlikely to score again as it flirts with old 155 levels barely out of the zone at 158 and SBI seems to have recovered investor faith till news of a bad result push them away for a brief time at 2050 levels

India’s Forex Billions (Reserves) hit a new $309 Bln high on Friday.

India Morning Report: The rest of the week is bullish again

indiaGiven Pfizer and US Authorities continuing crackdown on drugs from India ( Pfizers fake drugs lab featured Ranbaxy on Bloomberg yesterday, 100M users (see ET)  did not vote for Ranbaxy and founder Dilip Sangvi definitely has an uphill task trying to convert his $4 B revenue acquisition of Ranbaxy into a paying deal. The price even at Rs 447 was probably a face saver for Indian Phartma as Indian pharma contitnues the quest for bigger stories in the $200 mln – $500 mln molecule categories and even more and the US generics story also relies on academia to cut the costs of innovationand drug delievry with and without Obamacare.

As of now however, prices of Sun Pharma continue their rally as Ranbaxy finally stabilises at 447 (offer price) and markets look to complete their pre poll rally with benefactor Modi piping up some hot Indian curry to Foreign investors around the world. Recovery in consumption is not converting to better Auto sales apparently and poll time spend also seems to be down witht he fortunes of the Congress known well in advance.

In Financial Services and Banks, the IDFC story has multiple positives even as the markets nurse a big bruised ego from RGR’s matter of fact disposition of other applications and the Infra Financing story for India inc seems to be back on track, the Indian welfare state a survivor of other political questions as BJP promises to bring back rural employment and education schemes.

Stories like Bharti and ITC are unlikely to lose because of the changes in Political fortunes while the Pharma and It story probably come under the scanner being at market peaks and the Rupee responding in the NDF market to more than inspired business inflows and remittances from labour abroad.

The movements in JP Power., JSW Power (Nasik and Maha areas arnd Jabalpur?)  and obviously Adani Power ( Amit Shah connection) are interesting and likely to be back int he limelight as news on the business channels remains on target for a big 7000 breakout and is safe for a 6800 score by far, markets continuing to test the levels after each 100 odd points of rise, studying the ramifications and choosing a select dozen every 100 pointswith shorts back in Kotak and Hero Motors. BHEL and SAIL seem to continue to be short favorites and their fortunes and that of IDBI Bank are unlikely to be affected by market direction now.

The best derivatives strategy remains to sell puts at this point for probably 6500 levels on the safe side, markets likely to signall enough if the breach below 6450 levels in 2014. Buying risk may seem tobe in, but new investors are likely to be priced out by the constant rain checks and risk buyers from early 2014 will continue to be rewarded till end 2014 if they stick around.

JP Associates is unlikely to move upop from 56 historically a support for the stock as it continues its tortuous strategy of deleveraging its listed stock

Bank credit growth remains steady at 12-13% and deposit growth continues to outpace, leaving the changing GDP target forlorn at new higher levels and the GDP performance for 2014 and Q1 2015 unlikely to hit above 5%

Market highs around 7000 levels are however already justified by continued double digit earnings growth by top performers.

 

 

India Morning Report: Portfolio investment highs let India story dominate

Investment percent gdp
Investment percent gdp (Photo credit: Wikipedia)

As investment flows confirm net positive investments in India on a regular daily basis, making the total for March closer to $3 Bln or close to $150 mln per day (INR 900 Crores) , India and Indonesia keep hopes alive for Global equities and EEM flows remain negative with exits from China, Japan and Korea closing out on any hope for recovery in North Asia with China remaining dull and Japans deficit imports coming at the cost of lower Exports being kept on deficit mirroring the phase of growth investments without concurrent investing flows.

 

6590 levels obviously proved daunting for India Inc and markets returned the gains out of the morning trades after a buoyant day for equities all around, looking for new levels not belying the sad events of 2012 for Corporate India Markets stay away from Banks as markets had a big open on Monday and new levels in private sector banks seem to wait for PSU banks that continue to be neglected for their larger than life NPA sores and aches.

 

Reasons for cheering the performance of Auto and metals however still seem t o be further ahea d on the road to recovery and have hardly earned their stripes. Bank License hopefuls that still include the Aditya Birla Group and a couple of other corporate houses are probably caught unaware by the extra scrutiny imposed by the Poll panel ahead of a new government in steed at the Center. RBI has enough reason to deny corporate houses a chance to play with the banking system but it may be difficult to deny claims of available NBFC models like Aditya Birla Money ( Diversified Financial Services ) AND M&M Financial Services ( Retail unsecured/Auto Lending ) after satisfying the NOHFC structure requirements, giving the CEntral Bank a tytough decision as it probably wants to hand over no more than 4-5 new opportunities

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India Morning Report: Markets jiggy jiggy with the promise of a new government

Investors are in sync with the BJP pandering interests looking at the ‘younger’ Modi lef new government for lasting game for India Inc. The Pharma index is down and banks have yet added a measly 300 points on the Bank nifty led by ICICIBANK, HDFCBANK and AXISBANK but mostly the nbfc / Financials as muthoot and manappuram lead with Bajaj, IDFC and LIC Housing Finance for the less than half dozen licenses to be issued. F&O bets will likely reward unidirectional risks with sold puts continuing to lock the market sentiment after a week
of rest at 6500.

Today’s morning session would have seen the most spectacular volumes at the best premiums before the 6500 strike wound out to lower risks and continues to interest incoming bulls.

India Morning Report: Markets gain confidence in the rally above 6500

As expected on Monday, irrespective of weaker global cues as the Dow travels back from new highs on weak Chinese follow through, sold puts have moved up midweek to 6400 levels on way to making a bottom support at 6500 itself before the end of the week. Mislaid punts in old Economy stocks like L&T and Maruti provide market shorts ready ‘bakras’ to support bigger longs in the rally segment favorites with PSU banks, tired from all the browbeating are also ready for a short short and BOB is teetering at new 650 levels in March.

BPCL turned out to be the surprise winner as ET Now also highlighted, gaining 20% in 2014 as PMCs and Oilcos caught up with neglected mispricing in the first six months of the rally from the Rupee’s endless bottoming in the last week of August as the Rupee leads the global charge to stay relevant in a post taper world.

Along with the continuing winning stock specific plays in all the new consumer stories of 2010, Just Dial’s F&O inauguration may well be one of the sterling performances that mark a lifetime winner as Titan, Maruti and L&T head for the dumps.

SGX Nifty  continues without a hint following Nifty to its close yesterday unable tpo provide cues to the Indian markets as FIIs continue buying, adding another INR 14-15 Bln on Tuesday. Asian markets opened exceptionally weaker after a Dow falll overnight as they remain sensitive tio the situation in China and need a significant depreciation in the Yen in 2014.

IDFC remains a superb trade and the expected corrections in ICICI Bank and HDFC Bank and thus the Banknifty continue to elude any other buyers waiting as the stocks remain poised for a big upward push from 1100 and 720 levels, FII trades switching the bottom of their range to 6400, writing 6400 puts even as Naked 6800 and 6900 calls continue to get more OI now instead of Call writers who can see the end of the rally before taking a position despite higher PCRs.  A hidden Short Straddle/Strangle ranging the market between 6400-6600 may well win the day ( Bloomberg F&O had a 6300-6800 recommendation on the 12:45) in March though it is still not the recommended trade, Call writers likely though to be not penalised with global volatilities at extreme lows . L&T Finance could likely catch fire from here as goroudns are laid for the trade on new bank licences limiting itself to just key candidates.

Only 35% of Indian Cars are compliant with new mileage efficiency norms applicable from 2016. Exports are down not just in Precious metals and Jewelry but also in Pharmaceuticals. From all visible indicators, Hotels and Airlines are coping well putting the almost recessionary two year spell behind them with double digit rate increases and new fare discounts respectively. EIA yesterday also confirmed that Crude prices will remain low till end 2015 at least while Natural Gas is likely showing an uptick even as Copper leads the metals down as usual at the start of a new Chinese year spooking the browbeaten sector needlessly before the murky waters provide real hints in Chinese take outs two months from here.

Questions on Indian Exports however, seem real as Indian Exports refuse to break the strangle hold /saturation around $27 Bln a month mark and FDA continues to eye Indian export consignments with due suspicion. FIIs may also be done with debt buys in India for this segment. One has a feeling the next month’s elections may not return a unique government mandate but are likely to see the biggest turnout in recent history, with more foreign Observers looking on curiously, Crimea and Turkey, not tomention China and Russia underlining the unique prism of stability offered by India.

IIP and CPI data releases during the day set the ebullient tone for Policy day next Tuesday /Wednesday for Governor Rajan.

India Morning Report: At the top, VIX = 18, NSE Nifty = 6535

DIIs are again trying to correct the market levels hoping for a bigger correction sooner than expected as markets having scripted a recovery trade from all time highs of 6500 level look to executing the same fueled by FII investments. Hopes of a mild correction in Banknifty continue as trades from 12000 levels in Banknifty are also stymied by the lack of positive PSU trades, SBI and BOB still counting as fundamentally short picks. PSU Bank Capital plans are likely to strain Government finances as Insurance companies also reach their sector exposure limit of 25%. It remains inadvisable to increase sector exposure levels from 25% as well and the problem is likely to get complicated as many PSU banks are unlikely to stop NPA accumulation at the 100 bln mark they magically topped up to in December 2013.

Meanwhile the Powercos (Distcos) supplying to Delhi have a long expected bonanza in regulatory assets allowed to be claimed by the State Regulator (DERC) (–see BS lead of date )but apparently the price rise and yield is already been priced into Rel Infra and Tata Power ( Tulsiani)

The VIX trade in the meantime flies off the handle at a tepid 18, the move from 14 to 18 completed in all of two trading sessions on Friday and Monday as Option writers finally got busier and naked calls and shorts covered out at Monday highs and markets continue upward. The PCR also is likely to be stretched at best to 1.30 and till then considerably larger highs could be established for the markets to return toa as indeed foreign buying of INR 16 Bln on Monday is likely to be followed by more such thrugh this week with many shortlisted stocks showing new stamina including Bajaj Auto which is likely to go up to 2050 levels if not 2150, Bharti which is still at  305 levels and can trade up to 335-345

Buying opportunities in ICICI Bank and HDFC bank would be grabbed by the markets though shorts re likely to succeed in Axis Bank as well, with its NPA and management problems unresolved. IDFC is one of the rare scrips that offers liquid trades witha 20% range from current levels on the long side to under 130 levels and YES Bank is also still a big gap from its earleir high valuations of 6000 valued  on the same economic scenarios back in 2011 as India repeats its unique performance twice within th single minded slow plodding recovery after the banks broke in 2008

Reliance however seems saturated at 855 levels and GAIL seems to have been ignored unnecessarily at 355 levels as Pharma is likely to be ignored till the end of the week Cipla headed to below 350 levels, Sun to 580 and probable 1950 marks for DRL while domestic producers with an export portfolio like Glenmark, Cadila and Aurobindo Pharma are likely to get a fresh batch o f long term investors from current levels itself

The Rupee’s trades at below 61 levels , opening at 60.70 in the morning are likely to be followed by better and lower yields in the Bond markets as investors follow the currency buying with some debt investments in India and hopes for an investment cycle upside to India increase with easier availability of “ECB” debt

One should choose pedigree and portfolio when choosing infra stocks and not follow for leveraged small promoters as deal wins in the space almost threaten the existence of such corporates instead of improving their chances given the debt raising limitations

Infy and TCS are already topped up in investor portfolios and current falls are fundamental revaluations and not much institutional trading is likely happening in the two stocks right now

The 2010 consumer flotation offers including Talwalkars, Prestige , Page and LL remain premium stocks with Thomas Cook for FIIS looking at sectoral picks

 

 

 

 

India Morning Report: Banks keep investment cycle hopes “flying”

PSU Banks have mostly reached the highest expected NPA levels at INR 100 Bln each even as SBI discovers the choice to sell off current NPAs in the market, giving it enough tailwinds for the stock to catch up to rally leaders as ICICI Bank and HDFC Bank work to renewed targets after a buoyant Friday when the Banknifty’s 600 points led the index rise to above 6500. Asia opens much lower as China’s first targeted trade deficit makes it on lower exports, confusing markets looking at the same as a weak signal for other Asian and Australian exports to China.

The indices can now apparently score their new peak much before General elections are counted opn May 16, 2013 and a new government sworn in. The market is however not looking to correct anytime soon even as the PCR has ticked back to 1.16 on the Index and call options at 6400 and 6500 unqind with Puts and option hedges switching to writers and volatility for the overall markets still barely above 15, despite the big move up all of last week

Investment stocks getting delivery attention ( CNBC TV18) like Ashok Leyland and JP Associates, still lag behind immediate trading up potential in Eicher and Crompton Greaves, old stalwarts since the reform story of the 90s propeled India into investment portfolios. The weakest link in the market spine still seems to be heady interest in margin devolved Real estate and construction stocks  a little ahead of the real conversion in investment interest in India outside equities. The Pharma sector sees buying interest returning with shorts in DRL, Ranbaxy and Cipla countering excessive defensive runs by delivery buyers earlier in 2014.

Continuing short covering does not preclude higher levels in ICICI Bank and HDFC Bank, with FII investment cycle also updated in Mannapuram Finance and indices now continuing further consolidation and increases in levels on use of index hedges converting to written puts at even 6500 levels by the end of the week despite it being a new high for the Indian markets starting the week with easier 6200 expiries if the markets continue to showcase buying strength as delivery interest in many undervakued index components and blue chips keeps up new bullish levels in the market. BOB almost seems like as good  a short candidate till 550 levels as DRL or Ranbaxy on Monday Morning

If markets ignore the steady stream of buying and keep 6500 levels it would definitely point to a better 2014 overall , however  an improbable choice would be a sharper run right away for quick profit- taking at below 7000 levels followed by a sharp correction ( Ashwini Gujral on ET Now had our ‘improbable’ prediction today morning)

SGX Nifty was unable to lead the trend over the weekend and waits for the Monday open at cash levels of the index. Apparently the Mid Cap index has on cue broken thru 50 DMA levels on Friday as well, broadening the rally as most index components and blue chips also continue to trade far below their final potential given the anemic recovery and continuing threats of a rate hike

SBI may also continue to react downward but the broader markets may not turn the same into an overall red tick recovering by the afternoon’s closing trades keeping 6500 marks to start the week. YES and the Power NBFCs could be still stronger with IDFC as buyers are likely to find their value case appealing for investment accumulation and Kotak likely to ride lower ticks to its 665 levels with Indusind Bank. ITC again looks like its not going anywhere at 335 levels while buying should continue in Barti all week irrespective of market trends

The Rupee remains stuck at 61 levels unable to move beyond that Friday peak and Fixed income markets continue to trade india debt a t 8.8% allowing more buyers to lock in that rate for India buys much before any Bond index entry is firmed up with current FII investment limits in Indian Gilts and other bonds good enough for now.

I agree, private sector banks will again be available at lower levels for buyers to come in the afternoon

India Morning Report: Markets start the day at all-time highs from 6400

Though, it could have been better for the fundamentals, markets have not caught up to earnings increases over the last decade and will probably keep the gains in this weeks rally as the Rupee finally responds to buying and moves back to 61 levels without showing signs of tiring. As it moves further along to the top of its range to the 60 mark, consolidating yesterdays gains over another week, the currency does have a limited headroom as the Dollar Index is trading below 80.

Banknifty and IDFC are keeping their gains and moving north even as the indices savor a moment at the top and a lot of the individual stock memes switch , with Energy and Pharma both offering unique ignored opportunities that may well be taken up, without ruling out the better consumer scrips consolidating to new price levels or for ICICI Bank and HDFC Bank ( including a final decision on its cross holding by HDFC , still pending for renewal of its Foreing investor limit)

In Consumer we continue to back Bharti , ITC and Bajaj Auto. Yes Bank seems to be popping the champagne again, while the real estate pack will lead the way back for a quicker correction if interest in the sector runs up a bigger tab

ITC may again start up from 320 levels , if you are a trader and need to offload the stock currently. Bharti seems to have a new partner in sight for its retail JV( which I will tell you later why is not the ideal reason for backing the stock, like its financial foray earlier) but there are more fundamental reasons for owning the stock

Exiting DRL is a good idea at these levels

A lot of cash stocks have steam trading much below their lifetime highs despite good fundamentals like GAIL while the PCR is also a bland less than 0.9 with PUt OI still being extinguished , probably a precursor to Puts being written as confidence in new levels increases in the Indian markets , as they lead a global equity rally with the Dow a little behind as it is already at record highs. Markets have a long week ahead next week before 6400 Put writing becomes economic and the markets rewrite 2014 forecasts.

India Morning Report: Markets continues the ra-ra-rally to 6350; Business as usual strikes

The Rupee has finally moved into 61.50 marks, investor interest in the tech quartet unruffled by a climbing currency as Dollar indices moved to their lowest levels. The Banknifty is squarely above 11,150 marks on Thursday in an eventful week for bulls, enjoying a cash and positive calls led market supremacy over the cagey watchful investors with BJP backers having decided 200 seats in the National Parliament was worth a celebration too in the face of defating th eBears, an opportunity that does not come by regularly in every market segment and cannot be passed over.

PNB is back near 600 levels and the short trades are gone from even Maruti and others for the moment, likely to come back any time now below 6400 levels itself once the Put Call ration reaches 0.75-0.80. One hopes the shorts come in Index Options and not entirely in Index Futures or worse continuing in individual stock series.

To my mind PSUs like BOB are already looking overpriced again with their asset quality woes not done and BOB likely to be among the PSU strikes leading the way down, with a news driven exit in Adani remaining a probability after a quick rally in the same as this rally segment will unlikely see the one sided euphoria in Jubilant and Titan in 2010. The markets apparentlt kick into gear for welcoming the change in aviation rules allowing International flight without fleet and footprint restriction

Bajaj Auto still has a rally left for brave longs at 2020 levels, using Maruti to torque the trade ( Buy Bajaj Auto Sell Maruti) and starting a similar trade in Hero at 1850 levels ( unlikely to get lower levels int he same) The Trade will likely last thru any index led direction for the market. Index moves are matched tick for tick by the new LIX 15 showing the hold of rare liquid stocks on the market. Markets will correct once pre elections or immediately after results so broader interest can rride on the secular move to 7000 warranted by FY14 earnings and FY15 forecasts even in absence of a recovery

The Cement stock rally indeed seems a little too precocious even this late, as expat commentators would dig their heels in to say in three months time when the GDP recovery led trades start a final swing at old 6400 levels Construction and RE stocks should be avoided.

Your pharma portfolio picks may see a sneaked in ride as markets consolidate, as IDFC finally crosses back into the Century plus marks, both Glenmark and Cadila coming back stronger ona Green only map day for the markets , twice in this week

Time is probably ripe for selling in IT now esp with Infy at 3900 levels. Media scrips have again seen older bullish levels in an almost hidden move on an all green day hiding poor Sun TV(no longer media)  in plain sight with more secular picks like ENIL (Mirchi) and Zee

Bharti is back at 280 levels and the big trade in the stock could take it quickly back to 335 levels , GAIL and ITC is also a long only pick at current levels

India Morning Report: Markets will breathe easier at 6300

Many market commentator see further moves north as highly unlikely and it does seem markets have done a fair bit already including the choppy start to 2014 as buying overwhelmed short trades. However one does not see any of the selected scrips losing much from current price levels. The Ukraine crisis fade had much to do with the afternoon bullishness and fresh buying will be allowed at lower levels in most of yesterday’s increases. Pharma and Infra trades may yet break out again with Pharma yet to take off, Cipla the ‘only’ big positive trade continuing to dominate sectoral picks. IT scrips finally yielded ground with HCL falling a few notches as market spine trades keeping interest in the stock finally seem to have exited the ‘always trying’ bellwether

New affordable housing targets in China as US and China complete their budget exercises point to the realities of the new post crisis economic melee as US Arms spending takes a backseat and China continues to increase its Defence hawkishness and faces increased executive flight risks from the Smog. Australian GDP gave the Asian markets much to cheer pre dating a secular return of investors to Asia even as China is finally deprioritised at some bigger investment houses

At home, one is still foxed by the marginalisation of LK Advani in the BJP as frankly NaMo seems a little banged up for the big job and AAP is well, a one issue pony. ( at best a canard) The fate of General Elections also thus has to be separated from that of the markets as India’s residual growth and any strategic direction will never be delivered by the Legislative arm given the state of our politics. Inspiration may be missing from the Executive or the Bureaucrat/Technocrat nexus but there is still momentum for the populace per se and India remains the best bet in global equities in such confusing times, making do with a much smalller stock of FDI for it knows its limitations. Our advantages in the English language could compare to an additional factor production given the dominance of Services and along with our expertise in more intricate subjects of the business management disciplines , we can well fashion as many competitive advantages any corporation needs to win globally as required Rajnath Singh returning to Public service will be NaMo’s other card but Congress and SP have got no leg to stand on even as the issue of the State’s division holds extreme potential before it also becomes a BJP manifesto dashboard line item.

And Nitish finally replies after 6 days on page 17 (TOI-Blr)

Seeing as NaMo’s other credentials being weak are still the best bet, Nitish finally gatecrashed onto national topics, catching his favorite Paswan in his horns. Meanwhile,  NMDC has corrected more than 17% and apparently has stable lows at 110 levels to allow further accumulation post the new CERC regime in progress with the 2014 guidelines. The Power quartet had a great start yesterday as expected and may strengthen the trend in the Power sector going forward even as cyclicals try to start back for the longer trek to the top uninterrrupted by market momentum taking the index for a roller coaster ride, including the Energy infrastructure stocks and the powerful Consumer staples like Bharti and ITC which arenot going to retreat in the bull scenario while remaining a defensive bulwark

Private Banks remain the most important component of India Bull portfolios with YES Bank leading the charge yesterday and Kotak taking a breather in the secular run. ICICI Bank and HDFC Bank continue to capture market share on and off the bourses from the embattled SBI and BOB pointing to the limits of an upward move in a side like PNB even in this critical move for the bankers, as PNB continues to show good profitability

Nadar is finally offloading HCL stock as his offspring looks to focus on the Education and philanthropy sectors even as both listed and unlisted Tech  and Outsourcing businesses battle the problem of employee commute in a society where broadband connectivity is unlikely to bring any solace or a formalised structure for the telecommuting options. India thus, retains one of the greater habits of managing to jump over bigger social potholes and non lasting technologies. ( in practice i guess with cities = potholes 😉

VIX trades apparently careened over from 15 levels itsel fin Tuesday trading back to mmatching US Vol levels at 14 as the Ukraine issue was wiped off investor tables.

The Great Indian Premier Tennis League Auctions

In other unlisted business, The mega sports franchises era continued untethered with Tennis joining the ranks of other popular sports making a commercial comeback as a four location auction saw  Mumbai grabbing the top three in Nadal, Djokovic and Andy Murray at $2 million each ( less than $2 for Djokovic and Murray)

Ecommerce has enticed Walmart to India too, even as PE players move on to above par valuations after a year of job cuts and enthusiastic middle/senior management recruitment at Management school campuses and Amazon opening its second FC in India in Bangalore

The Dell Foundation makes a return to Indian shores after the Gates Foundation confined itself to outright charity in limited indian programmes. The Dell foundation will be backing a BOP Private equity set up Intellegrow.

ET also headlines India pharmas second attempt to break into higher market shares in US generics in Complex molecules that could well go to the PE companies given the investment required and the uncertainty of time horizons ill suiting listed companies like DRL or Lupin.

Aviation revenue miles are likely picking up in the final month of Fiscal 2014 and Fixed income markets also likely to accelerate demand led price increases bringing down yields as Crude becomes a bear trade and Indian currency moves up on redenomination of the dollar forecasts down for the year in 2014. Policy Day in two weeks is unlikely to be busy for the Reserve Bank of india though the Central Bank may choose to exercise a rate hie whence the yields will come back to 9 levels before investments make a mark in the Indian recovery still flatlined below 5%

 

India Morning Report: 6250 mark to prove daunting again

While Hero Moto has indeed skipped over Bajaj Auto again to try and pull through at the cusp of Auto Sales recovery expected from March, with sales overall remaining dull keeping manufacturers unwilling to pass on excise decreases means Auto Sales along with the overall economic sentiment may not pick up at all in March. The unequivocal thumbs down to Economic data dragging growth in December /January data with IIP reporting core manufacturing and infrastructure growth dragging at 1.6% still shows the hopes of bigger numbers in India’s imminent recovery trade meaning net inflows at 6200 levels itself will likely keep India’s comparative advantage in Global equities in 2014

India’s overall PMI, led by the weakness in manufacturing grew to an anemic 52.5 in February and the GDP growth will beat expectations if Q1 and Q2 growth is revised to compensate for a lower base effect in the dull 2012-13 prognosis of this extended “lowest growth” phase for the Economy. The Oil Bill(not the Act or Law, but the invoice for our profligate spending) pinching has already moved up India’s currency risk levels and the Rupee wearily awaits the news of the wind down of the situation in Ukraine

Use the sells in Private sector banks and Power NBFCs quartet to accumulate more of the stocks, including REC which will not go below 183 and buying will predominantly happen at 185 levels, similarly for PFC. Both enjoy undisputed 5% NIMs on an expanding base unlike Kotak’s saturated advances since 2007.

Banking License trades continue to fox with a focus on the dark horses like Shriram Transport, we favor LIC and IDFC trades which will outlast the license news as the number of new licenses is likely to be limited. A writer of 6200 puts may be steeply heightening his risk exposure but may prove to be a bigger winner in current trading conditions. However, such moves are likely to be the focus of the market after midafternoon open in Europe as markets get updated with the current policy moves on Ukraine, any sanctions on Ukraine likely to tighten the upward spiral lock on Oil and agric commodities, where India continues to hold  a distinct price advantage.

DRL is in focus as a good 15% of its business is in Exports to Ukraine. Nestle seems to be a good pick, starting off the return of Pharma trades to the mainstream even as the new crisis masks underlying positive moves in market flows. Index shorts continue to increase for FIIs and their use as a hedge is  likely to increase even as calls written on the indices get extinguished with the PCR still continuing lower from 0.9 levels on Friday

Meanwhile Switzerland seems to be pushing on India’s request to put an end to its woes fighting other Global Banking regulators unsuccessfully adding to India’s basket of embarrassing foreign policy quirks. Oilcos are likely to mainatin price levels as they are able to pass on increases but are unlikely to capitalsie on the opportunity to increase profitability

FII debt buying was limited to Stock exchange listed(traded) debt , with listed business focussing on buying in the 10 – year 8.83% 2023 Bond. Bank of Baroda continues to stabkly trade at just below 550 levels but its NPA situation has not stabilised neither for other players down the ladder like Union Bank of India

Volatility can move up two notches more, meaning markets can face sharp daily declines to 6150  levels depending on news from Europe in this week and next

India Morning Report: Did investors buy into the Rupee last week, and the Suntory deal

Friday’s  closing rushes on the Rupee trade could be just another chimera as the China miasma refuses to scare foreing investors from China and other shallow EMs renamed MINTs. China also reported an improved Services PMI implying the trade situation could improve for it and its partners including Aussie, USA and India. However, things overall continue to look bleak for global growth as dependent on legs of growth in China and Europe.

Europe has been importing more, however, esp as Germany probably focusees on its own consumption for a small break after a Target imposed halcyon end to 2013. Rates are likely unchanged in Central Bank announcements and Global liquidity reprieve trades, may be ephemeral at best as Yellen returns to post snow recovery prognostications to hopefully continue along the same taper gradient $10 Bln in each policy date.

However, not to be confused by the Global Economy’s internecine interactive brusqueness, the India trade remains a leader for the Global benign trend continuing in Equities and HY debt this year and is likely to turn in better performances on the bourses than any other.

The 4.7% GDP score was not so bad except that it included at its best form, not more than 6% contribution from Services. As expected, Agriculture did not continue an extended rebound from Q2 and thus contributed to an overall disappointment for policy watchers with Governor RGR still on the edge of another couple of rate hikes and CPI close to plateauing out at a high 8% itself

Radico Khaitan is one of the bigger winners as the Equity trade in India opens to new bull scenarios, we choosing to watch after every 100 points as traders fill up the gaps and bears might give up most of their extraordinary gains in the following 6 monthsas they take each plateau of waiting for more investors as an inordinate sign of weakness or overconfidence having nbrought the hcicken count home to roost

Volatility remains at an extended low and the PCR below 1, implies one should batten down the hatches as most price levels on your choice investments would carry very little risk on sold puts . SBI and Maruti also proffer extraordinary choice to traders that need financing and are not selling puts ans positional shorts in both continue to dig for lost Mayan Gold, making it at least a year or 1200 levels before they exit with profittaking trades.

JP Associates may be out of the index but is a great plus trade ( opnly post redenomination of the Nifty) while Adani Enterpricses catches supplementary caucus support from the Adani Port bull trade. GAIL may still not make it to mainstrem positional trades or transition into a defensive but we reccommend buying the stock with IDFC and YES, while ICICI Bank and HDFC Bank individually will carry the Banknifty, PSU shorts making the Index tradea patchy non performing long

Foreign buyers saw $2.2 Bln in gross trading on the NSE itself on Friday. The return of bank investors and trading rooms including StanChart and HSBC to the bull trade on the Rupee, counld confirm secular up trades in Asia even as China gets ready for a currency depreciation battle. However, first order of business would be to observe if equities can keep up with the smaller selling that remains part of the trade in the first half of the week as markets start the series at fresh new highs of 6277.

The Sun Pharma and Hindalco trades should catch fire by the middle of the week in that scenario as mainline picks remain good for the goo but new buyers may not get them at better levels . Bharti , ITC and Bajaj Auto continue to hold strength in the consumer investments story and Services PMI returnign tot he green likely for 2014 means aviation, trade and tourism could critically support the good guys from here. The LIC and ONGC/OIL buys for BHEL and IOC are confirmed but sectoral trades aer non existent on either side. Pharma’s big week returning to substitute IT is the one certainty and not an immediate bulltrade so more consolidation is likely this wek esp if the Pharma trade does not kick in. The inevitable short trade on Hero as it yields ground to a bad February sales data will only land blows till 1850 levels as the news f the recovery should kick in the sector after new excise reduction and recovery in buying from March

India Morning Report: Markets start the Maruti short 1 month down

As expected, indices are holding and the degradation of Maruti’s role in Suzuki strategy has finally clicked into real trades early morning, that will probably keep the broader indices on an even keel, Maruti no longer a portfolio pick despite a 50% share of market and being the listed representation of quick and easy Indian growth components ( not many left there) as protected cash flows fail to assuage investors

A $2 Trillion GDP really bloated up India’s old economy bottlenecks and one needs to gravy the Indian infrastructure boat, but with hot money and leveraged inconscientous promoters the only steed, it is unlikely markets will try for that 7000 index just today

Cash equities have a lot to catch up with on the Futures that closed at a grainy premium, but I am not sure volumes are still low or if only one player is around, as India with 200% of GDP in equities, has deeper markets than most other Emerging markets including Korea and Singapore who still have a story to tell.

The traders picks continue to show six old timers without a growth strategy and apart from regular stories of restructuring on 1 or 2 of those stocks most others like Tata Elxsi may not be good trade picks either way

If markets are so indiscriminate and all mice come out to play on Friday before the weekend, there may be some reason to looking at short picks when they open dstarted in August and now for two months of 2014

I still worry about the Tech Mahindra story, apart from the possibility that they are playing with another i-banker to get the deal flow into a continuous stream. KPIT is a good pick but then insiders know when and till where 🙂 as PE picks up stake in the fast growth play with legs in embedded/systems programming/chip design and the normal outsourcing meat still available form more than one sector and not having been wasted on product /enterprise investments like at infy or wipro

Those foreign funds still underweight india will not get another chance to come and invest in India and may likely underperform Asia benchmarks at the end of the year, like HSBC Securities

Banks are hot again in this segment, and SBI shorts will strike before the end of next week as interest spreads across Pharma and some Consumer

In unlisted business, IIMA infra naming rights story headlined in ET is a late thing but a good start. One hopes there is also a base endowment fund when the Subsidies are let go from this sector. The Annual ioutgo from the HRD ministry could have well come for each institution from a single/individual endowment

StannCs back in an indiabull avatar but one wonders if there are beaten down sectors left this time for late entrants. Most Foreign investors who stayed invested over 2013 are going to score much higher this time onwards and one hopes this can become a doable tradition for the indian markets finally rid of old time ponies and bad trades in a new era

Unlisted Captives of Global Auto companies have the best chance to make a statement and increase Expoprts traction from India as Ford gets on it.

The Rupee has nowhere to go after hitting 62 from the up and Gold is stuck too even if they try to reverse the bear trend with some late late buying as markets can grab the precious metal at 30k levels itself for a good short and adding to equity trades

Indian residential and enterprise ( Retail Malls and Offices etc)  sector has some potential to add new inventory, last years smaller sales not having added new inventories at all. Chances of Bajaj Auto in the 2-wheelers producing positive surprises in next months data have increased but traders are right in clamping down on Hero, Bajaj and TVS as February data is released into the last months of deteriorating production conditions over most of the manufacturing sector as IIP uptick will include a negligible contribution from manufacturing. A new bite, though, the residential construction intel comes from one of our steel producers. Not the way to go , India so there iwll be another sad story down some months but I guess Jindal (JSPL) was a dead story anyway

India Morning Report: (Closed for Shivaratri) Markets hoping to be tested again at 6250 in the new series

At 6240 levels the market achieved yesterday itself, another round of consolidation is due for the markets and with the second round of investing in November having attracted Passive fund investors while the active foreign interests remain bought in, Indian markets unlike China batting on euphemisms and an opaque economy non responsive to new stimuli, India will retain most of the bull interest as it proved at 6000 levels and then two consecutive bump ups in a testy 2014 start .

The March F&O series may see more active Foreign interest returning, but it remains to be seen if markets can continue from here. In any case, markets will increase the propensity to remain flat and one suspects the new correction that laziness induces next week, may be short lived till a volatility of 18 is reached before deep corrections are completed in individual stocks closest to heavy overvaluation, namely the SBI, BOB and other PSU Bank trades among others

I don’t believe India’s increased short term foreign debt situation is causing any fresh payment problems as Oil has decidedly planned to start a bear trade globally and in India and hot money or NDF mispricing does not seem to have the desired hook on the trend, as markets might indeed get a positive pricing kicker from the NDF markets on the currency as long as Oil trades lower and a commodities bearish cycle licks in across the broader spectrum , esp those in demand in China where domestic production has not only suffered but been officially deprioritised.

Indian Fixed Income Markets seem to agree with Governor Rajan that CPI may not trend lower as the Governor sets his sights on an ambitious training target program for inflation thru required government diktat to support the Urjit Patel report. From all signs, however RGR is a pragmatist and given that India will anyway continue under the spectre of high 9% bank rate scenarios, additional rate hikes may actually hit more targeted spots on the consumer inflation , but banks are unlikely to have increased transmission of the available liquidity to the broader markets in terms of reducing extraordinary deposits and increasing effective velocity of money as the investment cycle awaits other signals. RBI also completed paperwork on CDS issuance in Corporate paper ( IG and HY) while the market continues to look for th esecular India pull to deepen India’s debt and Fixed income markets

Expiry 2 pm trades on Wednesday had not seen a sharper cut, but the markets could easily turn any new 6250 positions of sold puts into short interest could have tanked the market back below 6200 levels to watch for as expiry otherwise is a dull newsless affair, the above discussion being mere undercurrents the markets have faced for more than 2 years now. Markets are closed for Shivaratri today

Energy cos, like the OMCs retain a default rating of BBB- . Sahara promoter, Subrata Ray got a rude shock on the delivered judgement yesterday as the court issued him a non bailable warrant and ADB signed a new road project in the backwaters of Chhattisgarh.

India Morning Report: 6200 on expiry day, not ready to ooze out to 6150

As we said taking ranged positions went out of fashion pre expiry Friday, and markets madea quick climb on 6200 hill which just means Expiry could now choose to be around 6150 or 6250. The sold puts hedges effectively outran the straddles with all players participating in the market mechanism forced out of neutral positions, shorts exited after a battery of trading losses since October, markets down but holding first 6050 then 6100 and 6150.

Some other stock specific plays are more important than others today as markets now bet the flow on small ‘binary’ bets on new license applicants. Plays on IDFC,Bajaj Finance, the other Bajaj and even LIC Housing which is an almost safe play are actually quite risky shrieks ( single point jumps in interest) and investors are welcome to accumulate thus traders on these can be easier branded losers than the Archana Bhargava’s  United Bank hide, ill educated players(or not bothered with education) might think. However, while India’s deep Financial markets may not entertain such arcane history they will be quick to show the door to such plays given the sensitiveness of expiry and vols floating near the bottom at 14 in still waters.

Bharti and IDFC have used up more of the funds headed into the markets as a new series looks at more encouraging inflows based on the stoic handling of the pressure on 2014 by India irrespective of its classifications in EMs , G20 and other such fragile groupings created for an overarching dialogue but India managing to duck each classification as far as the long term buyers are concerned. Again, early snafus by students of the markets would have confused such committed investors enthiued by the performance as residual interest and China the big white hope that continues to hold most international portfolios of US and Europe in sway might still cause additional flows from that.

The class of investors in India may also note that we do not again do not support old ham handed organisations like L&T or BHEL as Investment sector plays or for bank interest in the case of L&T. L&T and Shriram Transport should have been big bets by analysis for their existing asset portfolio and market as LIC Housing and not for applications to the banking regulator. However, be that as it may, Jalan committee has completed the process and submitted its report on all hopefuls, asking clarifications from 23 players excluding India post and IDFC on the NOFHC structure for the banking company and though there was very careful vetting during application by the corporate hopefuls itself, there will be 2 or 3 applications denied for specific judiciary actions pending against them. Only Aditya Birla and Tata seem closest to the post for the limited number of licences this time and one wonders how anyone will distinguish between Muthoot and Mannapuram when only one of the two has to be chosen for issuing the license. Tatas have withdrawn their application, probably trying to finnagle intra group exposures also but struck out at the NOHFC level itself

Expiry trades may finally see rollovers catching up on the robust monthly statistics by 2 pm and markets may allow levels to drift lower in the next 2-3 sessions before public news is again used to build buyer orders into a new level as there is no profit  taking at these levels and no real chance for shorts either. Volumes in equities remain low globally and the Dow did have a mcorrection on Tuesday despite a great presser from JP Morgan on investor day and the first few retail earnings shows. The retail dog and pony show will overtake other market news mid week with a half dozen reportign today in the US and through the end of the week

ETF inflows may not get another chance to dive into big plays in India as it makes a standout bet for Global equities. IDFC, YES, Bharti are today’s superior line, followed by ITC which has remained static for over a week and the infra probables will continue to generate ‘ikka dukka’ buying with Consumer Goods makors priced out for longer term investors looking to add positions. The bear is back in gold and Titan, ttk and jubilant are all big no-nos for us

A small correction in HDFC Bank and ICICI Bank may be due. However,  as most of their gains are sucked out of counterpart PSUs and shorts in Maruti and SBI continue to be an important cog of reality for investors, the Bank nifty is likely stuck again at 10650 levels.

I agree Tata steel is out from 360 levels and a good short if you are not exiting Infy in the changeoevr to bull scrips. CESC is definitely showing signs of having cleared all investor flags and of being a great bull pick and I’d try to follow them to discover the right bulls for them. IDea remains an important new discovery of equity only players, Kotak remains a short on saturated markets for its products and inefficient margins despite a great 5% NIMs, with Power NBFCs showing both revenue traction and extraordinary NIMs not subject to scrutiny or short term market failures. Tata Motors will make a great short, but the pair trade would be Bajaj Auto up and Maruti and Hero could pair up as a poor second, with again under normal likeluihoods of profits both charging extraordinary markets costs for being safe plays, reducing their returns frontier

In divestment jumps, BHEL and IOC projects are out of the door and their inter PSU investment sales given the ‘go’ sign

Apart from the Energy cos catching up on inherent value ignored by the markets, Media cos could also respond to a big year in advertising revenues, even ignoring an IPL exported out of India again with ENIL, TV18 and Zee providing extraordinary value.

India’s recovery in this business cycle will see Consumer investments making a definite impact even as some steps are taken by private investors to catch up on the infra juggernaut gone missing in play from India Inc’s 2030 and 2050 projections. Bharti and ITC remain the biggest non financial sector stories, followed by ICICI Bank , Yes and the Power NBFCs with the new bankers

Start shorting Oil in faster packets till 105 on the Brent or lower and patch in smaller packets of shorts on Gold and Silver till q2 end or August 2014

India Morning Report: Foreign Interest steps up to confirm the boom to 6250

FII buying, now adding debt segment purchases over the last week follows on a 10-12 session consolidation in the current play on Index Option hedges and Stock Futures bidding they have initiated as a class. At this juncture the trend needs further confirmation too and borrowing on the same strategies would make much more sense in a secular trend, strengthening their overall importance in the market as they are indeed the larger players right now, the DIIs having taken a counter-cyclical opinion as always to balance the steed and likely not buying beyond the coming 6250 levels.

Even if the DII opinion does change for all investor classes buying together one needs to remain watchful and the markets will continue to strengthen their skew towards rewarding longer term investors despite the volatility at 14 levels, an extreme low for the Indian markets and all increase in volatility negating any good part of volatility. I.e. The future of the stock markets is now interlinked with all trading margins being defined by shorts and all long gains going to investors if we just look at the definition of volatility and its reward for risk.  A new Liquidity index in the Derivatives segment of the NSE consolidates price trends across the 15  most liquid derivatives underlyings and the index is now 6 months old.

Trading longs again probably negate all their advantages with a backing of almost ready to be shorted posts like L&T and SBI, which is the reason I brought in this more technical discussion for the morning Report readers. Markets open near 6200 levels on the index as markets broke out of the bear hold by breaking 6100 earlier last week.  To fess, I was still hoping for India to prove Good volatility and I would warn others  naive enough that this is not going to be so in this rally.

PNB will likely respond easier after the call auction ended as SBI investors back off and PSUs including larger entities like Bank of Baroda remain short fuses. Banknifty remains mildly positive, lending health to the trend going up and consolidating as India outscores in the Gloom quarter of 2014, down apparently only 2% compared to other Global markets and Dow having a nice return back sustaining a comeback as snow fades away in Neverland, USA, USA continuing the dream recovery.

TCS is due for a rally but Infy’s rerating looking to ride up to 4000 levels seems to signal the coming badging of the sector as a passive defensive again with the Rupee making a comeback

HSBC global results were a great comeback, though analysts following the stock did not expect Q4 to flip globally into lower revenues and while the bank remains the bigger player in India and China, it is focussing on the UK market comeback this year, UK also having ducked the continuing gloom in Euroland.

In other unlisted business, reusing quick reports from Trading Economics, FDI inflows are expected to continue to be a strong $2 Bln a little over 50 times lower than neighbourly flows into China, but in terms of Western FDI , that number is much more equitable and ocoupled with a domestic market and domestic depth in India makes for a more Economic bang in the Indian recovery seeding which now strengthens into consolidation.

Ford is ramping up its small SUV production for Export markets this year in Chennai and Nissan and GM may be forced to follow earlier than usual in 2014 itself if the global markets have indeed completed a overall cauterisation of their expectations of a bullish recovery breakout.  They have earlier over stepped in 2010 in equities and frequent breakdowns of recovery memes since 2012 have indeed made such prognostications more cautious , lending more credence to them for investors hoping to break new ground across Global opportunity.

The G20 Australia 2014 remained a hub of big activity last week. Despite the almost fully ‘denatured’ (pardon the pun) irrelevance of the G20 ( compare with a technical irreverence like applying the law of diminishing marginal utility here, and I am on holy ground) , RGR did force the conference into adopting a aggressive reconciliation towards supporting global monetary policy coordination and the Rupee has responded strongly this week. Rajan said , “International monetary cooperation has now broken…”

I like this definition for India’s new apolitical elite, used for RGR (link): impeccably credentialed , elite.

Meanwhile, polls in Delhi confirmed AAP holds sway in any new election. Modi’s claim to India seems to be weak at the point of Gujarat vs India Inc and if Congress does consolidate around the thoughts of a Jairam Ramesh (IBN Live, Sardesai interview) it could have a real chance of at least getting the right issues to coalesce around in the campaign for the General elections. On separation of Telangana and Hyderabad II into separate states, J Ramesh reminded the editor that State reorganisation is an unqualified mandate. I recommend that the word juxtapositions apart, the only way Telangana becomes a reality and the reform beat maintained is if the issue is indeed followed up quickly with active voicing of the cause of breakup of UP, the monstrous state with 75 districts and 800 blocks. Also, yes Economic development in TN and Kerala have been equally promising if not better than the Gujarat model and this could definitely weaken the economic bloc coalescing around a non sartorial, non erudite Modi who seems to be potently  walking around with a foot in his mouth as much as Rahul himself. I believe Advanu would have been a better choice for BJP too. And Congress , waiting to welcome an even younger lot with Rahul who may not all be able to pull off tags of ‘ able administrators’ make it a  ever extending churn block for India Inc ready to forget any hopes of a consolidated political establishment as the Open democracy treads the path to a Top 3 GDP country by 2050

The US mid terms similarly could still turn out to be a facesaving exercise for the Democrats reeling at their lowest ratings just before the mid terms and the chances are about even to Rahul Gandhi actually coming back to lead He will probably take a back seat from Parliamentary politics if his party does land rights to the Opposition benches.

India Morning Report: Markets will be hanging on to 6150

India now holds the key to Equity success in 2014 as Global Equities return to select Emerging markets. Within Emerging Markets, specific stock selection remains key as Mexico joins the global pain story in a low 0.7% reported Q4 GDP ( on year) even as Singapore returns to secular growth after a cramped couple of quarters to a 6.1% QoQ growth.

At this muddling top of 6150 in the markets, most bears eagerly await the early downfall that has been scoring the most points even after emerging market flows turned positive on 6 weeks of battering by outflows. However, negative news has all but gone, the last home sales reports of snow driven year on year contraction.

Bharti is likely trying for 275-280 levels now having scored out on 290 levels and State Bank will remain the most likely start if markets indeed plunge, the short in State Bank juicy even as a positional trade at 1500, more than 220 in profits available to the fag end, as other members in the Banknifty continue to stretch themselves to carry the weight.

Adani Power and Adani ports both seem to be investment driven trades and all the infra stocks would agree to Adani’s leadership on this trend score as others remain leverage beaten in the case of JP, GMR and RelInfra or promoter margin beaten in the case of other midcaps. For whatever reason, Adani’s free float is not under threat and the trade remains good and is a great move to lighten the righteous pressure gaining steam on the aforesaid.

ITC, Bharti and the Private Banks ICICI Bank, HDFC Bank and YES rremains trades on the upside while Kotak and Axis probably remain shorts when the markets start back from 6000 or if after the Call Auction (Pre Open) they remain above 6080-6100-6150 levels.

The Maruti focus seems to be on removing the potential for shorts in the market, showing not many are indulging the bull side either on the H2 win also struggling with falling share in the mostly unlisted Auto – 4 wheelers market

The Rupee however precludes any move long of short as the G20 seemed to fizzle out in distant Australia, Aussies straddling the unfortunate situation of being neither a real G20 force nor EM of DM categories with China continuing a slow plod. The Yen Steamer announced last week is likely to kick into currencies this week as trades look to taking the Yen back from 102 – 108 levels the Euro and Pound standing on near new highs. Corporates have still not started the rush for ECB borrowing, the good ones also holding cash to start off investments, and yields ion the Indian Ten year remain at 8.8% on the 2022 bond and 9% on the 2021 bond.

Bajaj Auto will be leading the bulls with ITC and Cipla retaining both defensives and new longs. One can also see the coming rerating of IT stocks as IT forecasts get rationalised and corrected for over optimism at the turn of the year. I am also keeping longs in Power NBFCs without Powergrid and PNB. Infy and Wipro have now comprehensively been voted out of the Top two in IT as Cognisant resumes representing the entire sector for Global , US centric investors and Outsourcing itself falls down the rungs of the Alltime Top 100 ideas in its second rejuvenation.

Markets have started on another cycle of bash arounds on quickrumors even as Indian markets hit rock bottom at 13-14 levels on volatility, lending the shorting wins nary impossible from here. Markets seem to be again , ilike the NaMo episode, seem to be prescribing and proscribing specific measures to deleverage , options that are likely not even on the table for the listed Bharti, RCom  and Idea as the unlisted premium Vodafone and the newbie Jio create ripples. Aircel deal might be a newsmaker there sooner than one expected.

I am impressed by Aptart’s F&O recommendations that expiry will be around 6150 levels, couting to me and at least some others as a brave call and naked put sales are safer than straddling or strangling anything for this week esp given local market premiums. Of course sold puts have to be near 6050 levels and thats hardly any good profits either but you can skew that position with a larger than normal exposure. to fund your value equity purchases now.

India Morning Report: Markets retain new bullish memes (again to 6100)

Markets will close above 6100 again but later afternoon sessions may see more enthusiasm as good economic data could be followed by expected passive investor moves and new EEM flows to show likely coming trends.

HDFC Bank is up and out of the 600-680 move with new targets to probably near 750 levels. Banks will expectedly support the next upmove too, ICICI Bank having made up new routes to at least 1030 levels, probably 1070 A look at some fund portfolios , interestingly shows Axis is indeed out of favor and Infy in a different block of memory unlikely to provide any traders with gains or hedges as it corrects to 3600 levels. Apollo Tyres, India Cements and JP Associates added open interest yesterday as main trends broke tin the nifty drop from 6150 to below 6100 levels. Sree Renuka stake sale does not seem like a trade at all, being a long known and expected unloading by the promoter. Open offer is apparently at a discount but Wilmar is immediattely extinguishing debt worth INR 12 Bln. Bharti is a great buy again in positional trades from 295 levels. Bajaj Auto will likely continue to 1950 levels for a stab at a quick double (century) The Adani Port move you heard today is so true,its the INR 80 Bln JNPT contract.

Japan is celebrating a bullish candle early in the morning as Chinese manufacturing, along expected lines, brushes near contraction levels. Fed minutes from January showed the Fed agreeable to  changing the unemployment targets and thus somemembers eagerness to discuss increasin gthe short term fed rate will likely be ignored as markets start up after a 5-10% cut since the new year. However on the flip side for India, the risk of an inflated Oil bill has increased. External Commercial Borrowing Markets are open for India Inc to increase disposition from, the CAD averted, but the small packet of Coporate External debt, now unsettling India policy markets. Fixed Income Markets and Currency markets would recover from yesterdays dip as the recovery unfolds into a more tangible item of import than just hope traded by domestic equity and consumption markets. KKR is also providing transformational capital in a new (presser in ET) bid, that could soon be emulated by SBI and ICICI as restructured assets hit a new high in the banking system.

A new endeavour at the Central Bank could see proposals to accept some or all the changes reccommended by the FSLRC. The recommendation, are likely to further aim to bridge the gap between Private sector growth memes and the larger PSU counterparts with capacity building and skills development (HR) guidelines

G20 is up later this week, IMF taking the opportunity to underline that currency concerns remain, obviating any choice of policy leadership for India at another G20 edition, India the easiest dog to put down in the revolt of the EM manger. ( twisted, yet really twisted, paraplegic choice and execution of simile (not stimuli) The Ukraine Hryvnia, the Korean Won  and the turkish lira are likely to be the largest exceptions not part of the mainstream in G20 trades and will be dominating the agenda, not to forget the Singapore Dollar which remains a unique economic substitute for the whole block ( try a whole fat analysis) and mexico a member but likely to stay silent too as Australia lead this round (2014)

Jet Airways’ loss in a sedate Airlines quarter, even as its etihad deal now hangs fire  at the Compat ( like the CCI but just the Appellate Tribunal) Jet has loans of INR 104 Bln as of this quarter, hardly $1.7 Bln but apparently 7X of the other nearest competitor. its market share is now less than 20% as it waits for deal approval. The INR 2.85 Bln loss a INR 3.60 Bln deterioration from its year ago profitable quarter, leaving unlisted IndiGo the winner with Sale and Leaseback economics still leaving maintenance bills manageable and the airline scoring on all the busy metro routes. Air Asia is likely to change that if it is allowed to fly. That would be concomitant with changes in regulation allowing all these Indian fliers to book international routes without a track record’ compulsion(Two dogs in the dogfight, Indigo and Jet, why are others even flying? – significant business case and consulting win with free markets allowing portfolio rationalisation).

And as Facebook found its Twitter-alike acquisition for mobile messaging that paid its promoters $19 Bln, India media look to another expat manager in the pile of 55 employees for the India story and there is as usual one solitary reaper, digging away in that bee hive(ant hill)

Kiran Mazumdar Shaw has taken stewardship at IIM Bangalore as Chairman of the Board . IIM also recently saw a new Director joining back from Boston University ( Sushil Vachani)

In other unlisted business, why wouldn’t a new Pharma business story with unlisted Capital or a PE try to fund a great Pharma business , not from a decade old Pharma attempts in Hyderabad and Ahmedabad but elsewhere. Cost of Equity in India is no longer that cheap as the Pharma market still offers unique advantages to scaled businesses in Export markets and domestically, while current entrants are likely limited by the $500 mln market for each generic molecule,a similar cap for the domestic market too, based on a limit to branded volumes in each drug. The model would definitely be more Chinese if it happened but it could really expand the market opportunity both at home and in the US and Europe

How about new moves in the big retail pie, which despite its propensity for political disaster, is still available in at least 4 states. One reason, hitting continuing entrepreneurship as India stands on a big comeback, holding India back would be the virtual withdrawal of Foreign banks from India, assets now down to 7% of the banking system, esp the unlikelihood of a public markets led such revolution makes it imperative that the easy flow of foreign capital to India be capitalised on.

India Morning Report: Markets drain out the good guys gokum

Markets seem to have initiated a bout of profit taking on ICICI Bank and even PNB as the small shard of storyline of reform and growth reflected by 4 of the 14 odd great showtime picks of India inc celebrated a min rally holding 6050 in the last month and , lending hope to the army of naysayers ill-equipped with research and running out of options in PSU banks that do not merit much research before going up and other such streams in midcaps dead in the water, still looking for predilections like Crompton Greaves in infrastructure and foreign brokerages still waiting for client monies to fuel the new rally, leaving markets without shore leave. Bajaj Auto has indeed switched in , in most reflective portfolios that fully analysed policy impact and Hero or Maruti shucked out. Maruti of course will remain in an uptrend but domestic automakers cannot hope for new sales till the second half

I am hopeful of the banks and the Power NBFCs with IDFC and YES coming back in supporting the winning segments of the rally and portfolio churn must have impeded quite a few changes till here since the halcyon NaMo days of the market post Halloween. The Dabur, the Maricos and the Godrej’ failed to make a story and are not a winning FMCG half dozen, with investors wary of saturated markets and tired memes. ITC for example, is not new but qualifies as a winner expanding into new amrkets effectively at the touch of a button, getting into Icecreams and frozen foods after HUL failed to hold it back in food and beverages. The answer seems to be in Investment Capacity in all such cases and somehow markets refuse to carry that answer home, still reliving penny stocks and midcap turnaround sagas from the eighties.

Pharma markets have missed a significant opportunity in overseas markets with the USFDA oitself exerting a pull to reduce the cost of drugs in the US and over sensitive on Quality  concerns. With innovation pipeline getting critical support from Academia in the US, it is all the more imperative for Indian Pharma to get beyond $500 mln molecules/formulations in this clean bill of health in the US markets even as struggles continue for Indian drug makers. As of now Glenmark, Cadila  and Sun have settled back with only Cipla and probably Lupin continuing long in portfolios

Earnings growth will definitely outperform double digit expectations market advisers like Nomura has given them for par score as growth has the best chance of getting nose up for a takeoff this year. investment in both Consumer and Infrastructure are beyond policy hurdles now, and the silence is deafening. Adani’s return on the bourses today is again like Torrent earlier not part of a secular story ( ; or a communal story as the case may be 😉 but jsuta stop gap switch . Shorts in Kotak as expected lead other corrections in the Banksa nd NBFC space ,a sure sign of a saturated market, trying to like a free market player waiting for a mannah from heaven to further declare businesses that can make a profit.

Here’s hoping the final six or let’s say ten banking license holders at the end of the month have a story to take forward and licenses allowing speecialist banks do come to be on tap, though the regulatory reticence to do so would be so understandable. HDC Bank and ICICI Bank ( in retail business) would definitely do their but to grow the business more than 20% again by the time MArch results are announced despite some contraction in the linked quarter

Energy cos catch up with old levels as the expected did happen on cue in FY2014 for India Inc. IT companies have obviously overshot the mark in possible for even FY15 earnings valuations. The Gold rally is a mirage waiting for the fall at 1300 itself but definitly not beyond $1400 or INR 31500 whence it will come back to 29,000 and retest marks.

India Morning Report: And it is clear thru to 6250 from here?

Most short strangle/ straddles would be in profit to have exited and is you have been a bit late you should close out here because the markets are going to have a position either way, mostly likely trying to forget the break between 6100 and 6250 as markets have been given the mandate to a new bull run, which might well start around 6250 again. For a change both networks are carrying investor conferences, apparently not the same but more importantly, the post budget rush to 6100 (more like 6150 ) came yesterday and was backed by real flows, the current levels thus likely to have fully bought in leaving a new index level before the argument over the direction for India starts, global equities being decided on the up.

The bet o f going short on the S&P500 is not necessarily linked to the single up move in Emerging markets and while the longs in Emerging markets continue, the shorts on the S&P will either become OTM hedges or extinguished as US markets also resume an uptrend

An INR 12.7 Tln expenditure budget is fair enough but the optimism allowed to him on tax revenues from a recovering India economy is likely to have brokerages just the right busy for traders and speculators to remain ahead on the risk trades  before being called out by their analysts. For example, yesterdays dissection of each such number as a “little too optimistic” finally seems to have gone unheard as it should in a believable bull segment. However, despite our India story being better than China, a sscal e of 10X will likely apply in comparing flows to the two markets alone and India will be able to win that argument for $10 Bln every quarter.

ITC, Bharti are not overvalued in the Consumer space. We cannnot see value in the HUL trade whose markets have matured in India. Other consumption stories never scaled anyway and that therefore is the limitation of investing in Indias FMCG story except the ‘other’ 2010 winners as titan and ttk remain down and the domino’s pizza is no longer the story as expected after the DD ride, showing up the absence of a secular market and pizza hut coming back out in investments despite the Dominos’ 65% share (Jubilant Foods)

Bajaj Auto may not have substantial price cuts that have  shown on the radar for Hero after the budget giveaway

There seem to be big earnings leftovers with DLF and ABB following on , ETNow catching them for a change, but one understands that CNBC mode better, having ignored these latecomers and even penalised them. Its definitely my strategy with such presenters. DLF has a 60% higher sales revenues , with or without their main contribution this quarter from the sale of Aman Resorts as costs remain high for the real estate company

IDFC, YES, PNB and ICICI correct after yesterday’s rush for buying the select list while shorts on Kotak lead the cut in all such Financial stocks. I will look to shorts jumping SBI again, but probably waiting to coalesce th ebull candles into a stronger up force. PNB is coasting at 540 post a week long correction mode after a day’s ibig wins in the post analysis.

LIC Housing is probably as good for the medium term as the Power NBFCs, all the 4-5 stocks at the bottom of their range and Sundaram and the Gold NBFCs unlikely tpo o be competitively buoyant. Axis Bank would support Bank shorts as Kotak and thus Bank remains available as a short hedge too. Cipla and Lupin present a new problem as they continue to activate a bundle of no good stocks they were partnered with in their defensive mode and are not trading bets as they reach the top of their range near 450 and 1200. There is no secular run in metals, none in construction and Tata Steel remains a buy with the auto stocks without Tata Motors or the Unitechs and the HDILs

Modi is looking at some obvious chinks in his own armor as he stands on a half poant English speaking tour, showing up equally worse off in Oratory as Rahul, but looking comfortable with one new round of Desi dose goevrnance for India Inc

From my end, Chidambaram was more than right in showing UPA’s 8.4% and 6.6% 5 year periods ( 4 year periods) against the 6.2% average, but apparently there are not enough Financially literate voters around, despite the preoccupation with growth

 

 

It’s Monday Again: Draghi has a position, Oil rally has no legs, US out of consumers (US Economy & Markets, The week ahead Feb 18-21, 2014)

Oil is charging faster than ever before as Brent at $110 looks at being under investigation soon, even as the rate setting London FX Market has snared all material banks. Bonuses at Credit Suisse were rebadged after derivatives issued on their own derivative exposure of $12 Bln as part of the risk awards to employees were disallowed in Capital and the Banks, happy enough with CoCos being allowed. Credit Suisse used the awards to divert $17 Bln of toxic risk from its balance sheet and the regulator objected to the implicit CS guarantee on the securities issued to employees

Either way bonuses are up at more banks with role based allowances seemingly getting past no harm no foul verifications and will allow a new slab in base salaries while from all accounts they will change each quarter as role based allowabnces, allowing banks to get questioned on whether they are masking variable bonuses, but still fair game with UBS and Barclays joined by Foreign Banks in London. Foreign Banks in the US, which as of date still hold 20% of all US Financial assets come under the new Fed umbrella from Today.

Earlier, the capital regulations for Foreign Banks have already been postponed, and are likely to be postponed further as the Fed comes under pressure of US based banks who would be facing regulatory uncertainty overseas. Under current regulations, banks with assets in the US would allocate separate Capital in the US to hold their US assets and if that is indeed allowed to exist , it would be ideal national regulation to imitate across many other national jurisdictions also applicable to US banks. Within US, All Global assets of the US based banks and all capital qualifies for the Fed, while for the Foreign Banks all Foreign assets ( i.e. all assets in the US)( have to be shored up by risk Capital held in a US structure. The Fed had earlier mandated a limit of Banks with more than $10 Bln in assets which has been further eased to $15 Bln

Retailers report full quarter results in a week from now except for Llowes’ that reported expected dismal quarter sales and profits last week.

British PPI was reported today when the US markets opened after the Presidents Day weekend and the healthy inflation, supported German solitary rushes in European reports yesterday as the BOJ liquidity of worth $650 Bln did nothing to break the Euros rush back up to year end 2013 levels, Draghi out of a similar move to infuse economic capital into European Banks which continue to report negative credit growth. HSBC and StanC also get ready to report year end balance sheet and more detailed Financials are due from Deutsche Bank The Euro will also be alone as the Aussie has started back from 86 cent lows against the US Dollar and the Pound looks ugly at highs of 1.65 ( this week at 1.62) and needs to correct but probably not t o my choice levels near 1.5 before it starts a new run . The European surplus is a great show at 33.2 Bln higher by 60% over the last month, and unless someone is serious about a banking union and some more political union, there is unlikely to be more liquidity

The week’s Treasury data reports large outflows auided by $18 Bln of buying in Foreign Bonds by US investors. Foreign investors also sold out US bonds leading to a total outflow of $51 Bln this month’s report

Existing Home Sales report Friday after the Housing Starts data on Wednesday and all signs point to more contraction in Mortgage business this year but with the fall having lasted more than six months and the overall gap to 2007 peaks or even any efficient recovery in housing still back a few million homes, most would expect the housing starts and home sales data to start perking up and the reports are critical as they show how much of yearly growth can still continue to show up Housing starts will stay near the 1 M mark and Existing sales near a 5 M run rate it reached last month

The NAHB Index showed up unexpectedly lower by 10 points this morning. E-Commerce too, may be hot in India and Asia ( up 100% in both India and China) but back home remains near a secular bottom at 3.5% growth

Equities have completed the correction after 2013 ended on highs with all short interest obliterated, and  Soros’ and Allianz may also be exited from all his reported 13 F Shorts on the SPY , and you and me should definitely be long on US equities now as the economic sentiment also sank easy down to lows ahead of the snow lifting in April

The Dow’s in its first trades of the week is already trading at 16100 levels and today’s FOMC minutes release showing details of whats doing well in the recovery and how more taper may not be the answer will both more than likely add to the euphoric sentiment

Good news out of Korea in January data was again followed by great improvenents in China with the Year of the Horse FDI scoring a 16% growth on year with China looking buoyant despite the PBOC cutting up $7.9 Bln in liquidity as the credit rush focused on real estate continues. The retail sales buoyancy in China on yearly data is mostly because of the small base of branded retail, which continues to enthuse all Global MNCs including some from Europe US trade dat will thus remain buoyant and with the Treasury Budget also on the up and up , some of the Executive Action in the SOTU might not transpire after all

Coke was down 1% and Pepsi 4% after US volumes dipped but (FastFT) Chevron’s down 9% on the year already. Einhorn seems to be jst playing safe in Anadarko and as of now it does not look like one of those Greenlight Capital attacks where he has been forced to exit from GMCR , not wholly unlike Bill ackman and the retailers. Apart from Caterpillar, we showed you the best squeeze for Portfolios not looking for ,emons this year, namely Starbucks, Amazon and the others from non tech as Hedge Funsds probably try to corner more tech before Apple comes back in vogue in the second half of the year. Liberty Global is indeed a great pick for Mr Buffett

India Morning Report: Les deux ex machina, et vous? Les fou de cirque n’est pa!

In singular, it would be the Ghost of the machine or the fool in the circus. A market of course has more than one of everything. Apart from that there is cricket too, where India turn a win opportunity into a clarion call to stay awake

Markets ‘jumped’ overnight to 6080 levels at the close, with US markets closed on Monday. The VIX trade is back again, 2 weeks from expiry, ( though the last week in Indian monthly expiry is usually the busiest in contrast to more deeper US and European markets that trade weekly expiries and expire by the Friday for Third Saturday in monthlies staying untraded the last week as most of the busy series are in the “next” month or new weeklies.

The banks are back with a bang but the Bank nifty trade is a good strangle range pick , even a sold straddle will give you a decent range (as Ashwini reccommended yesterday) as PSUs and SBI get exchanged out for new buys in ICICI Bank, HDFC Bank and Yes. While one is not sure of Kotak, PNB definitely has enough detractors yet despite the great performance with controlled NPAs and fully provisioned balance sheets at begin of year allowing improving provisions while releasing profits. That means PNB might again be a buy after the big run to 550 levels is cut on profit-taking.

I”d try a short in Kotak and let you know what happens. IDFC, Bharti  and ITC are great picks and starting from the bottom of the trading range while the Power NBFCs are ready for a move as well.

Bajaj Auto gets first mention on the Excise giveaways from PC’s last presentation, which was technically just a Vote on Account.

Excise Cuts on SUVs and Medium and Large Cars to 20% and 24% mean the gains in market will start for all automakers including the listed Maruti. The markets preferred Hero management coming out after the excise cut, but with Hero also biting a lost mandate for a grip back, Bajaj is still better off with Egypt exports hit by the import ban meaning less than 100K units to be recovered from the drop in excise duties.

The Indian Macro is easily the best poised for most fiscal adjustments to be burdened at this time and the VOA optimism could well prove to be PC’s gift to the parent Congress party in its new roles after the Elections as a fiscal deficit target of INR 5.3 T is not a shakedown or bleeding optimism in the projected Indian Balance Sheet. The nominal rates of growth at $1.10 T base in FY13 we assume may yield $1.26T and $1.44T targets for FY14 and FY15, that may very well be any other number at the realistic 11% nominal ( achieved in FY14, LV-CNBC) and 13% in FY15. However the 4.1% target look daunting esp as Food subsidies have been duly increased to INR 110,000 Crores (1.1T) and Energy subsidies understated at even INR 650 Bln (65000 crores) with INR 850 Bln scored in FY14 after the deferral.

A great Fisc performance thus at 4.6% will be greatly rewarded by the markets esp that includes INR 2.46 T and INR 1.8T only from Tax revenues but shows 100% achievement of Divestment (INR 400 Bln ) and Spectrum sale targets (INR 600 bln) and the new government make the usual drop down ravines for itsel fin beating the other government’s VoA, before trying to dump comparisons in the new Budget post general elections, All inall, not a great day in parliament for the new government as it would never sound better than boring humdrum in the whirring engines of growth that have to take over this year. A last note on India Macro stems from the continuing dissociation of Investment levels in the GDP at 34% from the true investment which has barely just hit 5% growth and mostly in the Consumer areas. Unconstrained Bank lending continues to remain available in India and interest rates are likely to continue down from here at a fair rate, allowing Fixed Income portfolios a bigger boost

There however is no comparison of the difference between any remaining expectations on Infrastructure investment in India and real participation to any other subject to kickstart India’s new millenium story, yet to begin after in stalled in 2009 and infra funds have to prove versatility in financing the new projects still blamed on bureaucrats or the Congress. None of the private cos as the markets have shown they realise, are in any position to take new project debt into these balance sheets at GMR, Relinfra or JP Associates and conventional bank lending is not the answer for them

Kejriwal and AAP brought the AAM AAdmi back but failed in their mandate by leaving from the aisles before the start of Act I.

Energy cos are getting the best possible deal with INR 1.1 T in payments despite the deferrals with more than INR 800 Bln already paid out , so they should have already been discounting much better levels, at least 250 for IOC for example as the fiscal did see a consistent unburdening of the energy infrastructure and a more rewarding marketplace, even as the Power regime gets more competitive

India Morning Report: Vote on Account does not offer anything by definition

Not to be dismissive of other efforts to research quantised discernible notes in the market, we have beaten others hands down with the preciseness of each sentence seemingly in a complicated human language. And we are not artificial intelligence, just something more  populations can understand. However, that is all a predilection of becoming  part of a deluge unless we can remember the basics. Like 6100 yesterday, 6050 today and stuck at 6250 again. Or for the currency it is an even simpler, 62.50 and broken till 63.00 now returning to break 62 on the upside, waiting to break till 61 to start a trading move in that dead market Foreign investors pass by with just a tenth of the allocation to the China which would be enough impetus for investment I guess.  That is adding the currency noted going out of circulation bringing in additional thicker statistics streams of returning investments instead of churned velocity without disposition, which remains the only unexplained flow for many developed and EMs. Meanwhile India posted a latest velocity of another 12.5% and growth of 4.9% kept WPI ticking under at 5.5% , inflation at 8.8% (and still high to merit 8% rates for the RBI policy (India’s Central Bank)

Now to get thru the market open again, HCL Tech is done, L&T is not coming back so soon, having clarified there si no better financials in the old heavy pipeline they keep carrying in New Orders. However, the note of caution from Kotak does not translate into a correction in the markets, as it is a known flaw, using subsidy deferral on the way to an improved performance and as we have always maintained to PC’s weaker arm, its not anything to forget to talk of.

Banknifty is at 10,250 but their seems to be a dearth of substitution for older SBI folios, because SBI has to go down to 1250 levels ( broader guess) bottoming out near 1280 ( our estimate – not to be confused with the statistical mark of MLE). HDFC Bank is up and out of 640 levels but no 645 it is..Pharma should not have been a defensive trade, esp as Bharti and ITC remain powered on apart from the IT scrips which can keep current levels once HCLT returns to 1400 levels. I have faith in ICICI Bank surprising in the post speech trade if India’s Financials are surmised as feasible, though it is just necessary expenditure for the six month period going forward and the Macro economic review has already been celebrated. A smaller gross borrowing figure for instance , may not be possible as that may be the only accommodating flag for the noise of governance to come. Also it would be a shame in my mostly moderate opinion otherwise, ( cooked to become the mainstream o-pin-onion like other examples of better business leaders than the half cooked Modis and Rahuls of today) if PSU banks join in the rally just for their survival has been noted by additional Capital for FY15 in this month again confirmed in any allocations. YES Bank and IDFC remain mainline (first leads) not for this bull segment but for the secular bull cycle that remains.

Nifty i s actually having a hard time at 6080 and will not drift down but 6100 is the new bear dominance levels, mostly because the media presence as Citi explains ( in that elusive to understand bid for retail investors here) requires reusing old hat ( from this trend) and the market tone is still as 6250 the normal would have been but that is a likely illusion in the distance, with markets using the distance again and again to tone down , letting shorts bound them up and show the futility of expectiung an overnight renaissance in the Indian Fixed income Markets. StanChart in the meantime has sell side macro posting the VoA precursor on ET Now since AM, looking at Government freeze to show the numbers.

I’ll leave that unedited para  in, just because I have things to do before I come back to edit it. It is just a Morning report. I may not be writing in the vote on Account speech or the dictum,

The markets may not break down, mercifully, for lack of reason to celebrate, a not new feature of beating down equities at their own, esp cognisant to those who bank promoters accounts and promoters’ who play their equity to death in a monetary degrowth, which now runs an extended life with a defined taper even with a reduced nozzle draining out the dumped in steroids, in the recognizance that US was critical and that most of excess liquidity remains excess. I wonder if one coming from my free markets background can make enough morbid adjustments, but one knows one must to explain how taking care of the trifecta is not done by just that phase of liquidity and now by the withdrawal of the same. One does note also the 16 mln unemployed uncounted in US estimates when declaring a successful 6.5% unemployment statistic from the same.

I like Crompton Greaves for the capex trade, old Mid Cap plays will be sideline for the 2010 IPO brigade in most cases. The fisc will score the most points when it reports a positive surprise. The FM should not aim for FY 2015 without thinking up options and should look to a fat target as we have probably over reached in the current fiscal itself. I would even let him off at a 4.5% target and that will not get BJP any further advantage.

Post Vote On Account satisfaction, Congress is going to be a quick disappearing loser in the elections, BJP winning it however would be disturbing not to India’s soul, cause there was not any in the conventional modern world definition of it, but it is can only be a rude awakening to India in a few years, however growth will churn in any government, because of the strong basis on which we stand up and shout for more, and the bureaucracy , the technocrats ( non outsourcing) and Private investors / Business will remain the agents of  this growth. Bank lending will never be a constraint and there is no wishing away corruption. One can even learn the vast cycles of it in local, regional and International Sales processes, and is not a equivocal nodding to suffering , nor a socialistic bite of suffrage that will make it the topic at the corporate dinner buffet.

explains: in the middle above is used as colloq/sms for explanations

India Bank Earnings: SBI Q3 turns out the ugly parade

The bank created 39 bln in restructuring as INR 114 Bln added to Non performing loans in a single quarter, adding pressure even as the bank decreased provisioning in the last two quarters of the fiscal, to 58% in Q3 . However a 4.5% increase in Advances ensured another double digit increase in Net Interest Income to INR 115 Bln and Assets of INR 11Trillion with Deposits running INR13 Trillion at a 16.7% clip . Gross NPAs at 5.7% are likely just more than three quarters there yet and a Net 3.24% NPA looks ugly.

We stand by a 1300 price target to be broken on the downside in the short term now, 1280 levels heuristically offering the bank new consolidation. SBI PAT is down one in three to INR 22 Bln and aims to improve Cost and other income as the Chair announces post earnings NPA control committee restructuring. Administrative staff(quasi due diligence at best) has been deputed to front offices in measures listed. Technology may definitely provide a viable solution but Credit scoring of SME and Export credit provide unique challenges.

Employee interests may indeed warrant a look at buyback programs at this stage but the bank continues to need annual capital infusions from Government coffers as the largest bank in India. 15,297 branches with 40,344 correspondent banks, totaling a 100k outlets is definitely a great business opportunity for someone scoring the India puzzle.

As unlikely comparison and bank memes go, Barclays has turned out into a India phobe in the open, it’s Head EM Economist  using the required dissing of China to add the bumbling India quatrains to complete the report. Needless to say any such composition, follows the new meme to instead look for new EMsllike Mexico where one finds the bad mix of resource dependent Dollar imperilled markets like Turkey and Argentina.

Kotak seems to be a market favorite on this bet, if prices this afternoon are a suitable explanation ( with no other important news or rumors on the wires) HDFC Bank has finally taken off even as HDFC investment approvals are awaited. The mid afternoon score of 10250 is barely a tick as the street forgets SBI results.

WPI did make 5% in the December data release a 33% downtick from November’s spike but Core Inflation is at 2.76% . Bajaj Auto faces a revolution at Chakanypt (8%) and a ban on Exports in Eg and Sun Pharma has eased defensive buying , while the Banknifty rests at new 10400 levels with SBI’s degradation no longer a surprise, but the occasion serving a reminder to those indiscriminately picking weaker banks in the index

India Morning Report: Pacified by US liquidity, markets gets on (to 6100)

The Nifty is up 25 points in morning trades, taking a 6090 clip to test the 6100 levels though new buyer interest is looking iffy. Selling and profit taking orders have topped out however, and Banknifty has resumed a positive bias though a trend is yet to form with the PSU block moved aside, the index being a traders” delight esp. with shorts on Kotak pressuring in house support

ICICI Bank is up 2%, HDFC Bank is in the middle of the 600-680 range strong as ever. Tata Steel continues down, renewing its correlation charts again with Ranbaxy even as the Steel sector’s fortunes have brightened. China’s remaining the question mark has likely provided long term investors with exceptional opportunities to accumulate at a stable price band.

ITC is looking like evaluating 325 marks anew for a new rush as it is safe in being a bull scrip but there is no current trade in the scrip. Bharti as expected likes 300 levels pretty much for keeps except a small downside risk to 290, and informational marking of the stock is likely to show up more often from here.

Bond investors should be interested in this Bond market but again, a short term spiking of yields is likely even after docile 10 month trade data. Gold and Silver imports have caught up to almost 2013 levels at $1.72 B and noise demanding removal of curbs has likely increased on the Central Bank. Trade deficit for January kept the $10 bln average, but the good story is that Exports at a healthy $27 Bln (26.75) are a significant improvement after being tied to a non growth $25 Bln mark and Oil imports are under $14 Bln again. Going forward the natural impetus to India growth is likely again multiplied by a continuing dullness in Oil prices and Dollar inflows may well continue headed home in the 9% yield scenario beating a few HY options a s well

Investments promoting Indian GDP growth do not look like having grown past the 5% mark. IT is buoyant on 2014 prospects but headroom is limited except TCS, well corrected for a move back to 2300 levels. I would have thought FY16 Estimates would show the gap being overestimated currently by the market at 14 multiples or thereabout (FY15 multiples are near 17)

Other Emerging markets are likely to cede to India again in 2014 as Janet Yellen looks to fine tune the taper design with a smaller cut in inflows going forward and Stanley Fischer is confirmed as Vice Chair.

Indian Media sector is probably looking a little tired at the bottom of the cycle, with IPL advertising revenues likely to exceed expectations in an overseas edition. However, in unlisted business, more gains are accruing for digital movers as E Commerce is currently buoyant with PE funding.

“Winners Curse” by Goldman Sachs analysts gets a popular break in the media for the coming price wars but the auctions process over the last 2-3 years more importantly showed businesses do not overpay for such commodities. Auctions lasted 6 days as of yesterday’s reports for INR 600 B inflows. Investors may take hope from Sustainable pricing at Bharti having lasted 2-3 quarters surviving on minutes and ARPU metrics. Both Idea and Bharti will be formidable to beat in Data for newcomer Reliance JIO which apparently has bid nearly INR 30bln adding reports in the ET on total investments. Vodafone , as a 100% business make the foolishly high premium move again to start off The Hunger Games

Maruti may be ripe for fresh shorts again in the Auto sector as exports volumes increase at Ford, GM, Nissan and VW. The markets would be increasingly straitjacketed on any up and down moves till the Vote on Account announcement and are thus more likely to be a volatile move on announcement, esp when the expected :no action: status from the FM is construed as a big disappointment.

 

 

 

 

 

 

India Morning Report: Tata Motors rebound, Markets still headed for 6100

The rally  in Tata Motors has been on and yes we would still be advocating fresh shorts on the stock. A bonanza in Tata Motors on JLR gaining strength remains the story of the day, with no news on bank licenses. Anand Sinha apparently is staying on till April just to ensure things are not done in a tearing hurry and news from yesterday’s session is awaited.

JP Associates apparently been in a two stock portfolio with Tata Motors, dropping precipitously even as Bank Nifty starts the day at 10250. Results from Dhanlakshmi Bank were not good. ENIL(Radio Mirchi) encouraging and TV18/Raghav Bahl also encouraging

JP Associates apparently could not manage earnings expectations well, leaving doubts if there is more to come inn pressure on the bottomline

Bajaj Auto is up and PNB is holding 550. Crude prices seem to have been exceptionally buoyant on the sly and a good bit of short is coming in Oil futures. The markets are still headed north as broader Bear strategies continue to create space for buying in the selected folios. Sun Pharma seems to be good for being on the buy list even at 624 levels. MCX and CFTC in the meantime cannot do enough to bring confidence back in the largest asset trades

IDFC and YES are as  good as Cipla, Lupin with Glenmark and Cadila  making a complete portfolio. Longs in SBI need to continue to be careful. Shorts in Kotak remain exclusive in the banking sector holes. Jyothy’s EXO round seems to be on a dho daala spree.

NMDC raised sales (37%) and profits, 20% on iron ore comeback

Sells on Bharti Airtel are going to be sad fails at  303 levels with the stock likely making new support at the worst at 295-98 levels Buys on IGL are not exuberance based alone and shorts are ill advised

ET Now’s suspect list for the Daily show remains ‘Pakau’ and uninspiring relying on Mitesh and Ashwini ( Bear Mama?) . CNBC 18’s Top 10 feature at 8 am is a great show.

HDFC Bank is in the middle of its 600-680 range and ICICI Bank well priced around 970 levels before index action takes up one or both the stocks. Pfaff on the winner’s curse is not going to make the real price degradation in the retail Telecom market go away. Telecom and Aviation have historically proved unprofitable with volume players shutting out sustainable pricing windows and Reliance JIO is again going to score the walls with ugly graffiti for the search for BOP without profits

India Morning Report: Markets inch up in time ( to discount better earnings)

Markets are able to easily move up to 6100 levels as earnings baselines have increased in doubledigit CAGRs since 2007 and 6400 has been conquered. Rupee markets thus remain buoyant with EM outfolows reversing after $16 Bln in outflows including debt markets from India in December and January apparently

Bharti and HDFC/HDFC Bank have seen FII selling (LV) and are correcting with the spectrum celebration priced out in the immediate after as debt concerns remain.

Optional addins: However telcos will consolidate on their combined effort in making a real time market respond to overpricing bids by the governments if you count each arm of this diversified bureaucracy with an apparently non working polity (BJP) and a misfiring chaiwallah (Modi increasingly sounding like his stock is due for a big correction, anyday now, no fundamental value showing esp on the home state Topic)

Tata Motors may not be able to celebrate JLR sales again this quarter, still the easiest short in the market and Ashwini Gujral may end up with more buy picks than sell after spending the morning on the down trade to ensue, I agree with his buy on Cadila Healthcare with 61% rise in USFDA business (31 new generics licensed to them) , its annual revenue rate rising to $2 Bln and likely to be a straight line up till a $1 Bln per quarter is achieved.

Glenmark and Aurobindo continue as buys. DLF has a big day today after the sale of Aman Resorts worked out. Contrary to a section of the market hoping for India to be counted with China, India has to now compete with China after the bank regulator there assured markets of liquidity with FIIs continuing to favor China investments by a factor of 10X or more and Global 500 companies continue to shore up higher volumes and profits in those luxe and westernized aspiration markets.Look for our Monday morning round up ont he global markets in a few hours at advantages.us

We’ll need to be back after the Governor Jalan chaired meeting on Bank Licences.  Janet Yellen’s testimony on the Feds plans is due Tuesday and Thursday and RGR would be among those watching. As we said last week, things look better for Indian corporates looking to tune up domestic and international growth plans and India’s short term debt pile is not that high especially with a 4.9% GDP performance for the fiscal. The Japanese Yen has finally started down from 102.3 levels this week growing the CAD deficit with weaker exports even as the US deficit turned out higher than expected with a $38 B trade deficit.  Japanese Yen hopes to reach 110 levels over the course of 2014 to boost domestic exports and further boost the growth seeded last year by a turnaround in policy. January is past in US payrolls making further prediction easier. Asian markets saw the reurn of Cit to top of the honor roll in debt markets this week

The Sterling TCIL deal has been signed with an open offer from Thomas Cook in the markets. IDFC is up on license news, but levels are good to continue accumulating. Bets on License additions are still sprained by the fact that only 6 of the 25 applicants may be successful before the licensing regime moves to licenses on tap at a future time(being considered). YES Bank is up for some good bull spreads as the Bharti and ITC trade takes a breather and Pharma stocks also interrupt a 4 week long bull trade. Banknifty will deliver huge gains as new constituents to the index universe get an in and PSU banks deselection (im)probabilities rise.

Securitisation and Fixed Income markets in India continue under the regulatory glare in a bid to expand the player pool(correction tick in dull late morning trades) and HDFC Bank is stoic in the middle of the 600-680 range. The hopes ofor a rally improveas correction in IT stocks deepens and indices stay on target for 6100

One would have expected the energy companies to be getting more attention after the changes in gas pricing worked out well for the State’s Welfare Economics keeping India’s fiscal concerns well at bay. The stocks are still worried on counts of subsidy expense deferment hitting upstream companies ONGC, OIL and GAIL. The outgoing Finance Minister has promised a debate worthy 20 pager for the Vote on Account due on 17th February and GDP estimates for FY2015 will again be in the 6% ballpark. According to Tanvee Jain of Macquarie as shared on Profit, the Gross Borrowing for FY15 is expected to be INR 6.7 Tln and that remains athe single biggest reason for Fixed Income yields in India to continue northward.

 

 

 

 

 

 

 

 

India Morning Report: IT’s missing pizzazz, Auro Pharma strikes Cymbalta gold

Courtesy: BioSpectrum Asia

While the markets renew interest on Friday to get ready for the battle of wits at 6100-6150 levels, Banknifty has moved into gear with good boy PNB ceding its additional upside from 550 levels and SBI continuing down near cracking below 1500. Private Banks see Kotak going down too with Marico and Godrej losing the barely viable Western(Maha/Goa) branding attempts , consumers rejecting being shortchanged as a way of life. That leaves both ICICI Bank andHDFC Bank with YES and probably Axis but for its NPA woes. Aurobindo Pharma’s wins were mostly likely for the gains in Cymbalta and that’s a big molecule to crack.

The Foreign investors however bite into its market pie despite a 10% indicated gain at the open. Jubilant Life is also returning 3% at the open. In Banks, as desired by the broader markets BOB and BOI have also been shucked out, though the turn of events has apparently got Ashwini and proprietary traders’ older generations into a tizzy in the markets proactively readying themselves for a blood bath monday

Bullish picks in YES Bank, ITC  and Bharti continue to plough open interest as short interest is extinguished in droves before a new bite. Shorts were down 10% in REC even as PFC stole the limelight with great scores , unfortunately pushing the Powergrid story to the back. The Power and other infrastructure stories thus remain orphaned by the impracticality of raising larger equity or single entity debt for the mega project financing requirements of India Inc and specialist Finance like IDFC instead gets more important not less.

PNB remains a buy, Axis will probably continue down with BOI, BOB and grandpa SBI. The correction in Power Finance is probably understandable after the big gains overnight. Ambit Capital again agrees with us on the rate cuts remaining in RGR’s coat pockets to conjure due braking for the inflation express.

Bajaj Auto is back again but pairs would require new designs probably mixing Tata Motors into the trade as Hero exits a long term bear view on the stock. The Bajaj Auto story as pioneer however, much awaited by shortchanged Western region industry, is definitely back with a bang along with banks, with performers in banks waiting to be rewarding after marginalising of the Foreign banks in the Business and Consumer sectors

MNC Pharma will probably get into this rally for more than spectator gallery participation. The Infotech trade is unlikely to be back though opportunity for shorts in the sector or on the flip side for cadgy immature ET reporting in print is probably extinguished (opportunity)

Spectrum auctions, unlike reported yesterday have indeed turned out to be an exercise in budget restraint , bidding well for the Indian Telecom sector as Vodafone returns as a 100% owned business. Total Bids have still brought in the desired INR 500 Bln per budget targets and it was a big ask to have completed successfully with the prudence now reflecting in Telco strategies necessitating the delays in the process where Government was on the verge of bankrupting telcos with its greed.

The Gas companies will be on the good side whatever happens on Monday and some bad boys like Jet Airways have probably bottomed out while midcaps like Talwalkars, Prestige, LL and Page continue without breaking even as Pizzas break speed with Pizza Hut taking back 30% growth on completion of capex spends in new restaurants.

Thomas Cook and Sterling remain a bad story post merger with lots of work to do including printing restated financials, probably still required once the combined operations on board. The IT clawback is a temporary mirage and the sector should be avoirobably hiring plans will be postponed again as the Visa sanctions come back owith immigration reforms on tap in the US

If indeed Bear on Monday , one should retreat into Auto and stay invested in quality stocks identified here over the last year

In other unlisted business, Twitter results serve as warning to those assuming bigger volume pies from the SMAC crowd, the social space inherently low value except for big advertisers and Corporate Business with Facebook and Linkedin

Look ahead to a grand theater attraction as Disney’s Frozen takes the world by storm and ESPN after global success proceeds with better redefinition in India as well. Time for someone to get another update from Aubon pain and the QSR ilk?

The rupee is trading consecutively improved levels at 62.30 and yields are still hoping to cross 9% apparently though if we start angling for ECB debt we could score tighter spreads and renewed growth could indeed be aan easy story again for India Inc

India Morning Report: India Nifty again manages to cross back over 6000

Short interest is flagging and except for proactive shorts who got good prices (unlikely) in the February series during December and January, no one else would have survived the market and shorts have been extinguishing even as Volatility increases and time decay sustains call premiums lower having been written at hefty levels .

Till Cipla reports next Wednesday, the earnings calendar is sparse yet still interesting showin the need to reorganise the calendar again as Jet and Reliance Infra group companies report today and tomorrow but more should have already reported before them including MMTC (today) and NMDC (Monday) Media enterprises like ENIL (Monday) and HT Media (W’day) also remain interesting to those ploughing value in the India’s Consumption story with mainline CNBC (TV18-Monday) and zee reports.  J&K Bank joins Dena Bank and CESC, Stride Arcolabs, Cadila and SunTV(Spicejet) over the Friday leading to weekend – a good breach for value pickers after a consolidation on the index.

The Rupee is up to 62.40 levels after BHEL results on expected lines wiped out the green in the India Capex story. Cuts in Powergrid are likely to be great picks for value building portfolios again, though one can wait for the events foretold in the price cut in the pre open ITC similarily is a great pick, though the trading correction may well be supporting a business volume update post gargantuan price hikes in the tobacco business. As expected YES Bank stayed up and Kotak stayed sold (assuming prop marketmaking holding up levels on zero to negative float) with HDFC Bank also in the middle of its 600-680 range, keeping the Banknifty locked in at 10200 but with much more interest at the upside, volatility increases in the broader market allowing Banknifty to breathe more comfortably without the PSU/performing bank dichotomy

REC is a great pick, PFC and PTC likely even better. IGL and Petronet hopefully getting into value buying sustained uptrends after a week of trading up and down on news. Apparently Cognizant guidance follows Jubilant into another sunset trade for old faithfuls, the IT story never expected by us to get into another stratospheric orbit. After expected quarterly contraction in Singapore and Indonesia at th end of a Chinese fueled investment minicycle, Korean GDP ahs scored a good 4% on annual growth and a sequential pick up in GP as well as Emerging market flows turn positive again in the next few weeks with India firmly in the saddle and excluded from most benchmark portfolios except the salutory 5% odd weight

Indian markets are expected to reach 6100 and most India backers would be willing to go with that till inflows allow for further market aligning in specific sectors outside Consumption and IT bandwagons. RelInfra trades would likely turn south after results with no more than rudimentary backing by marketmakers already aligned to the stock

Morgan Stanley and BofA feeling bullish about India is not necessarily good news, bth having lasted the entire rally since July and probably tired stockicking likely to lead to market accidents or at least easier targeting by the dime a dozen shorts

Jet Airways is definitely a value pick at 220 levels but bad news continues to dog the stock. Aban Offshore seems to be the only LPG stock consolidating gains from the large market changes in the sector. I am still bearish on Gol from here so I do not see liquidity conditions in Banking changing anything on the interest rate scenarios including th interbank markets, but overseas market spreads for India deb have probably tighted perceptibly given the anti cadence in more sensitive markets

India Morning Report: Markets responded to opportunity on Tuesday

Wednesday Morning however, despite Asia a day late as usual responding to Dow wins overnight is up 1% and 0.5% across the board. Indonesia’s Fragile Resource busy GDP story breaks ground in a few and the Asian story remains different from the India story despite sharing some older European origin investment Banks and India bulls in the  offshore markets.

At least two Indian companies in BHEL and Ranbaxy report single digit OPMs, markets still in love with them for their size and representation of sectoral wins but mostly sentimental and disproved by Corporate governance foibles though BHEL still shares a stronger order pipeline and key barter investments in Africa.

Exchange markets settle down at 62.5 levels after the run ofn the Dow and the exposed sensitivities in the current breakdown make bulls not just stock specific but watchful of still more south moves

Banknifty resilience was on display yesterday as it returns to favorites to lead the rally when it hapens and will likely hold 10300 levels, notably as expected YES Bank making an early recovery at just under 300 and ICICI Bank following from 950-970 levels itself

Tech Mahindra results may not be able to hide their BT attrition from markets and are at best a sell on results as key profit taking in IT continues

DEspite the cut in SGX Nifty to 6000, Nifty has barely moved in the pre open yet is positive with many investors still holding cash and some able to switch to Longs as TRaders end the short trade. Shorts in Emerging Markets ETFs have been extinguishing this week and inflows may well be back at least in India specific interests as the South AFrica-Indonesia-Turkey inadequacies play out to the new lows for the currencies

Bharti a great trade in longs, seems to have recovered the renewal bids in Spectrum and competition from RElianc eJio is still not looking at Winner’s curse level bids after a long drama played out over two years for the cost of Spectrum. Government, despite 68% higher prices in Mumbai and 50% in Delhi for Bids closing in on the INR 1 T mark at the end of the 2 day auction, still probably south of the Centre’s initial target and the value of the spectrum, paying for being not counted in a fragmented aand fractious mandate, likely to bite any new incumbent again

PFC reported great results, NIMs for Power NBFCs continuing  near 5% and spreads of 3.5% after all costs with Revenues of INR55 Bln and Net Profits 11 Bln for the December quarter (Q3 FY14)

What about the iPhone at 20k?

In unlisted business, Apple India joins the host of halfway attemts to infiltraate Indian markets and remains shucked out with its half baked plan to catch a mass market at 20k. With smart phones , including latest Adroid offerings from Samsung available at 12-13k, they have definitely missed the bus with a 20k non-option . Yes, I am talking about premium phones. The 20k price point is way north of the premiu market price points in India esp for Gen Y and Gen Z now than Gen X is firmly in the mid 30s and we have alredy crossed into 40s, not wanting a sunk cost instead of a premium phone making the decision easy for most of us.

Another India unlisted key card losing focus on what it can do is Economic Times, again losing ground in print with shallow almost incomprehensible half analysis in each post, disappearing like a TZP excerpt for the Oscar run and which will end up as a barely half quality unusable piece of paper/indian chip with the latest Y design in journalism woefully missing the mark

India Morning Report: Markets listless orphaned by a Superbowl

Superbowl sold tickets for cheap in the snow

Asian Markets are closed today and lack of Foreign investor interest on Monday Morning leaves an India open totally listless at 6100 levels and falling again, struggling after a brief respite at 6050 last week. IDFC results were inconsequential along expected lines with no fresh disbursements in this financial year but the stock has only upside left at 93 levels where it closed last week post results as it remains the only empowered player not dependent on infra approvals and a fresh book of loans in the pipe likely. Loans continued to make a better ratio of all NII at the Bank as spreads showed up resilient despite a bad interest rate environment in the nine month period reported.  Retail interest aside, the stock will remain on Institutional buy lists for time to come. It’s large provisions also make it a great equity investment with the Provisions unlikely to be called and can always be reduced prudently. Non interest income remains slave to PE principal and proprietary trading business

The Rupee starts the weak on such rumors where the deciding NDF market actually feeding on the panic mindset in low trading volumes and the onshore markets trade down but only for the morning after as the Superbowl even that draws a 200 mln audience in the US and around the world has ended minutes ago and investors will be back to a market fairly under priced by the recent pitai (hustle-bustle/buffeting not to be confused with the sage of Omaha’s investing interest)  Bank Rate will remain higher for the majority of 2014 , the prospect of rate cuts being pushed back and there being no prospects of improved transmission of monetary policy with yields pushing for higher dollar depreciation despite the RBI efforts to clamp liquidity which has time and again proved more amenable to intuitive policy than a counter intuitive rate hike move to tackle measures outside Central Bank policy. However corporates borrowing in ECB might actually be able to break the ice in terms of getting older level low rates and break the impasse eventually with increased investments (starting to flow in consumption sectors) and RBI , maintaining a new inflation hawk stance would likely have to hike rats further after the 200 Marginal channel cation and announce a veritable change in stance on rates first.

REC had started up Friday and Powergrid should join in after mi d-day if the sentiment indeed looks up. The Equity rally in the Global Markets hit a big snag in January and that is holding markets back awaiting  a confirmation of investor interest with FDI having exited Emerging markets like Turkey, Mexico, Argentina and Indonesia in a hurry with Turkey coming in midweek last to raise rates by 4% to near 12%. Goldman Sachs is in trouble again having started their own EM investments in losses having chosen MINT’s obfuscated markets and a deep and dead in the water China over India’s liquidity given the cross winds. The Rand(South Africa)  also closed above 11 to the Dollar for the first time in January.

However Emerging markets sentiment is likely to get into it in a couple of quarters from here and India will remain one of the best performing destinations having been unaffected in the post taper trade in January if it maintains 6100 levels or at least stays above 6000 levels

PNB scored great results having come in counter cyclically on raising provisions in a known strategy and NPAs under control in a rapidly deteriorating market sentiment for Banks shoring up investors to its ferry/rafters and trades 10% higher at 550 levels still a strong buy. Banknifty starts the week near a low at 10150 and is good for the trade up but one should be watchful with ugly quotes (in both the 10000 and 10500 series) in the bid auction market still holding an initiating trader to ransom with option writers playing ultra safe.

IT stocks are still overbought and Infy should retrace 3600 levels and even TCS should come down to realistic levels (but already at 2200 levels) as the IT/Outsourcing axis is not coming out as the GDP’s saviour this time either. Volatility levels are hardly material at 16 in the current rally agains 14 in the previous segment in December ’13

Energy stocks should start the climb back as and when markets stabilise, GAIL having  started the year smartly. Glenmark and Cipla/Lupin lead the Pharma rally that continues despite an ugly breakdown in Ranbaxy and Sun Pharma. We still do not believe in a robust Arvind Ltd comeback on USPA and other new limited franchises inroduced by the team since 2011. Tata Global Beverages remains a hold but the magic is still in 100% go it alone investments in India ( which are still a far cry from the carte blanche leading to exchange rate breakdowns in LatAm and SE Asia in recent EM history) Aurobindo Pharma on results and Lupin on announcements today provide good portolio picks along with Glenmark which has only $500 mln in overseas debt and among companies tapping a continuing generic opportunity in 2014 with a new pipeline

Interest in the IPL in the meantime continues strong esp evincing interest from global players in the playing XI and a fresh re-auction for all the 8 franchises picking up steam soon after the spectrum auction closes. ING and OBC related good Q3 tales as were also employing covering strategies but have not started lending/stopped losing on NPAs. Yes Bank may not fall back to 280 levels and accumulation is advised at current 300 levels. The BOI /BOB story broke down in January itself as we foretold with both banks still addding NPAs in droves. ICICI Bank’s INR 45 Bln ( including INR 30 Bln pie in restructuring) included the bank can survive the pressures with relative ease having also been proactive on definitions than the PSU penchant for playing it by the ear and losing continuously losing investor confidence and investor money as far as its favorite proprietary traders are concerned who lose another constituency in an unplanned bull attack with construction stocks Dlf and unitech still in a free fall after the ill advised run

Energy Markets react positively Midday

Gas stocks reacted positively as Petronet LNG produce became free to sell to industrial users and IGL and other domestic distributors esp IGL getting commitments to cheaper Domestic LNG in the new pricing regime. This also means domestic CNG in all markets including Mumbai where already 100% domestic gas was supplied prices of CNG and PNG were reduced by 30% and 20% while increasing IGL margins. Petronet imports LNG and will no longer be getting custom from IGL which Delhi used upto 33% imported gas

The move was a n expected one with a new Minister coming back (Moily ) in a sensitive election year . Moily is also expected to facilitate large project clearances with changes at th e Ministry of Environment (EPA Act bottlenecks)

GAIL shares the good news as renewed pressures on its subsidy costs will likely subside as it supplies to city gas companies and others at new revised rates and the policy is deemed stable after LPG quotas to residences have increased to 12 cylinders per year and gas TX likely to increase volumes with good results reported Thursday

India Morning Report: Is SBI adequately capitalised after the $1.2 B QIP

Of course on paper 12.8% Tier I is nothing to scoff at, however the bank’s larger book of advances makes its likely that it would need additional funding soon and now would wait for the government to fill up the tank on Capital. PNB on the other hand is a value play at 520 and Bank of India at 140-50 levels could be offering value for incoming investors ‘cept for the NPA monologues, not in play at PNB in this FY(FY14) where SBI and BOI would lose further stock with analysts

Meanwhile, the weekly closing will be positive, and the new series will see a build u of positive trades. Apparently Nifty and the Blue chis all fell 10-15% in the January series. The currency saga is also over with the post taper trade turning out a whimper and US equities smartly rallying in Thursday trades. While Asian markets may enjoy a bigger uptick on that rebound in Morning trades, Indian markets will decide as they go along with all stock specific trades holding

Havell’s has been a great story this year and will see 2014 exceptionally favorably. Powergrid and REC anyone? The trade wis ripe alongwith IDFC as Mumbai’s Monorail comes online in a late reprieve for the Mukesh Ambani group. Yesterday’s trades saw a sharp recovery at close to 6080 levels again because there were no trades at the lower levels, markets just waiting out the post taper reprise and increasing transaction costs for those creating shorts or withdrawing from their overweight Indian  portfolios, which saw no takers.

ING and OBC both report today consolidating the story of improving NIMs and a lrage profitable Asian market still delivering growth to incoming banks. A couple of measures deepening our presence in the Global Fixed income markets would do the Trick, if I were governor. Currency markets are back at under 62.50 levels for the Dollar.

Dr Reddy’s looks overpriced at these levels . HEro may also be ready to complete the black candle and get a big red score to end the week. Bajaj Auto will hold levels. Buy and Accumulate IDFC, Yes Bank, ICICI Bank and HDFC Bank at current levels. Stay away fro m construction cos. back on a dead cat bounce. Bharti, already up 2% yesterday can move up to 330-340 levels before next week closes. The Maruti short is about ready but will probably wait till Monday. Going in first precludes market operators from creating that position as hey are anyway prop. holders of the stok and are not using it for short collateral

BOI NII growth was stolid and the PAT hit should not hurt the stock sentiment desite the almost immediate post earnings reaction as the stock has been discounting its NPA woes a good six months of the rally that ensued in July 2013. IDFC results should se a muted reaction as its diversified businesses hold up and get ready for an aggressive 2014 ( The last three years have been bigger growth in the loan portfolios already) the stock offering great value at 90-91/-

Ashwini and Angel Broking are again fishing in troubled waters and most shorts should be avoided esp at 320 level son YES Bank

India Morning Report: ICICI Bank, Bharti surprises on bottom overriding expiry sentiment

Or rather the headline should probably not read having overridden and markets continue weaker as a Strong Earnings calendar for Wednesday in the US drowns out brokerages and analysts still following the Indian open. Asia is weak on Thursday as US Treasury yields have continued south despite the additional $10 Bln in Taper added to the Global tab by the US Fed overnight. With only $65 B in asset purchases, it is a measure of the importance of sentiment in fund counts as Global markets respond in weakness after a weaker China spectre makes EMs already in a bout of outflows a queasy place. Leaving apart those who believe India is apart of the Fragile Five, this could be a huge buying opportunity as predominantly unlisted markets like Ukraine and Turkey bear the brunt of asset volatilities. Indian Rupee has opened close to 63 and pressures have receded quickly again. 6050 levels on the Nifty make it almost not tradeable in any direction this session despite expiry

Bharti’s results were an eyeopener, and the stock should be an overpowering Buy in morning trades at 304 levels. ICICI Bank also reported positively and is duly being punished to 975 levels for its rising NPA score and a gross total of INR 120 Bln or 12000 crores in restructuring assets including the 100% pipeline ( which is a 100% count on probability) but is a great pick at 930 levels probably and adding the risk it would never fall to that place, I would have been accumulating before he spurt and now after I should continue to buy. IDFC is surprisingly again substituted out for making space in portfolios and is dull ahead of tomorrow’s results, another Overpowering BUY call.

Bharti did well to double profits to INR 6 Bln esp in catching up on Data with a INR 75 ARPU and improving call realisations to parity with Idea at 37 paisa. Quarterly losses in Africa will likely continue around the $100 mln mark (qualitative expectation) Analysts apparently expected much more from Airtel coming in and that is why the Earnings business remain highly qualitative in India and expectations score less than Economic surveys and GDP inflation estimates on accuracy.

Nifty would probably not drop out of 6000 levels, but there would still be a square chance ( in double digits) of the index not coming back over 6100 at expiry and starting North in the mainline trend, with stock specific calls in closing trades today itself for the new series. We still expect a  short trade in Maruti in the new series. Biocon and Auro Pharma have definitely made a mark with investors and Glenmark /Cadila continue to be great picks. Markets at score additions t any blue chip portfolio. NTPC announces a 20% jump in sales as Coal supplies make for better ower generation ahead of new incentive structures

Overall though the correction remains a proactive wait and watch on news from the US and China, it has taken a sharp toll in four short days. IT exits will continue es as Hiring season news is no longer neutral for the biggies and Genpact reduces its dependence on assured GE business in BPO sector

Markets are also looking at thick fund switching as Proprietary books try to fuel the Hero boom and defensives get churned from earlier in the week though Pharma has not seen many exits except in Sun Pharma. Adrian Mowat had a great story to tell in the pre open and we all wait as the market along with Hero also plays out a 10% fall in Titan’s quarterly revenues reacting to proprietary favorites in a shallow market

The Banknifty, after a single trade whisaw from 10600 to 10300 is likely to be a positive trade in the new series after the bashing on the rate cut refuses to yield anything in now undervalued plays except the NPA/PSU stock. ITC remains on the upswing, likely bottomed out in Baja Auto before Hero earnings as well ( less than 50% probability)

India Bank Earnings: Is time standing still for ICICI Bank ( Q3 2014)

FY 2014 saw another quarter of rising NPAs profits standing still ( up 1 %  )sequentially at INR 25 Bln even as Net NPAs closed in on the 1% mark at 0.94% and new restructuring pipeline still another INR30 Bln though the bank does not expect any restructured loans to come back into Bad Loans. NIMs on the international portfolio remain poor 1.7% with 3.67% Domestic NIMs a 2 basis point move up on 2013 December scores. Domestic Retail portfolios jumped at 28% were dampened by the expected shutdown in Corporate Loans at 7% (calibrated approach) Reducing Provision cover also contributed to better profit. Even with similar NIMs, profit growth should have come in sequentially and even on year comparisons show continued 10-15% grow in Profits only.

NII is up to INR 42.55 Bln but apparently fee income is still potentially up for larger gains at INR 28.55 Bln and NIMs represent a larger share of the total loan yield. Insurance profit of INR 4,380 mln from Life and INR 770 mln from general. Retail Portfolio for the bank is 22% higher with 35% growth in Auto loans. Unfortunately Financial statements releases in India continue to be delayed with only ADR investor conferences transcripts and detailed analysis will wait at least a fortnight from today

Gross NPAs have come down as percent of advances but fresh slippages to Net NPAs counted another INR 12.3 Bln. Branches are 3588 (highest) and 150 new ATMs were also added. The bank has adopted a new one line objective of bringing up Efficiency with Cost below 40%. CASA deposits have also grown 17% keeping it ahead of industry

Bank Policy Tuesday: RGR raises rates to 8% on Repo and 7% on Rev Repo

Maintaining the Channel at 1% and the CRR at 4% , the third quarter policy will go down well if markets in credit ( inter bank markets) continue to gravitate to reverse repo rates for borrowing in lieu of improved liquidity. Most hawkish analysts would improve their forecasts of rate hikes basis the new policy implemented in the third quarter. Our day’s review of Urjit Patel recos shows it is unlikely to be in an implementable form for some time and cannot be proposed into active roster during FY15 and probably FY16, but then it is a function of Central politics in 6 months from now

The Macro review admits to a loss of grow momentum. CPI declined as food groups obliged WPI at a four month low and the report notes the mall uptick in Cre inflation which is still very much below a healthy 2%

Hardening prices of services and key intermediates seen in conjunction with rising bank credit, increase in order books, pick-up in capacity utilisation and the decline in inventories of raw materials and finished goods in relation to sales suggests that aggregate demand pressures are still imparting an upside to overall inflation.

Policy stance incorporates the glide path to CPI envisaged in the UPA report in six months

Term repos were conducted in the later weeks of January despite Advance Tax payments to improve liq after Government Balances rose. Trade deficit is down by 25% in nine months. CAD has been forecast below 2.5% in March and CPI(Combined) expected to be ranging 7.5-8.5% at the end of the fiscal and FY15 before the next target of 6% kicks in.

The GDP fan shows a 4-7% range by Q4 FY 15 with expectations of growth from agri included in the RBI prognosis, forgoing their choice of a sticky move in Repo rates north to 8%. However the new Governor does admit this was an on the edge decision leaving further moves to the south probably open if his version of noise in the inflation is rested appropriately further, and improving chances of holding at 8% on the Repo rate and 9% on the MSF. On the whole, post policy action is still likely to raise interest rates in the Indian Economy now prior to the returning of the miracle grow / prodigal (not RGR reference obviously) though banks may not raise lending or deposit rates and Transmission issues remain with Banks using excess liquidity in borrowing from LAF for investments(govt borrowings/adjustment auctions)

Import controls, mostly on Gold brought CAD 1.2% in Q2 and the liquidity measures on Sept 5 , rejuvenating post impact from the currency crisis resulted in inflows of $9.1 Bn in equities and $14.1 Bln outflows in the Debt segment till Mid November (since May) were balanced apparently by $3.8 Bln in inflows in Debt since

MSF rate was only brought down by 150 bp since with elevated inflation expectations resulting in a repo hike of 50 p till now, which is likely achieved objective but still leaves the threat of increasing repo rates out, we would say another 50 b p is ready in the bag assuming yields travel to 8.5% , which would have been stable conditions this policy but are likely to be six months out from here given normal growth henc as yields likely move back to the 9 benchmark in the intervening period

Markets dipped on worries of UPA report making it and the unexpected rate hike before biting the bullet at 6130 levels during the presser.

India Morning Report: Expiry, Policy jump, Vettel at Airtel and a difference between Ukraine, Turkey and India

sinbadThe overnight return of the Emerging Markets this morning in ASia was none helped along by continuing waiting for news on the Taper Wednesday but India’s own policy will be stable, stoic and yet enough to motivate the markets ith the Banknifty at 10,500 laying the grounds for a bull trap that might finally work after ages.

Bears got the markets at 6200 again, the fall below 6170 precipitated mostly by Rollover computations in jeopardy. Maruti’s lookahead to today’s earnings may have helped but we think that performance remains sub par and there is more yen volatility on the horizon, trades continuing from 100 or stronger levels on the Yen back to the original 110 target for the year. The GDP forecast in today’s published review has barely any chance to score to 4% in April let alone any number RBI may still hope for in the policy. Banks should continue expanding NIMs despite the HFS effect loaded in Q4/H2 with easy liquidity and yields stuck in almost non-existent liquidity cuts which continue to be required for the same reason.

Indian Exports have inched close to the $325 Bln target and definitely do not need additional level punched in by hot money or market sponsoring of IT non-performance as the new India peak. The markets will thus expire at higher levels after running to close to 6300 again if not higher, the momentum on the positive side jumped by crossing over 6200 and 6250 levels. Volatility barely hit 19 yesterday and ‘proprietary’  longs in the eternal ghouls of  shucked out old fabric like DLF, JP Power, HDIL and Ranbaxy and Apollo Tyre showed up with more than 10% cuts in OI in each easy pickings for daily bears when a brief surge in panic put paid to a lot of outstanding long trades on Monday

Idea’s ARPU score improved to 169 again ( been a little volatile since 2009 including the last 5 recovering quarters) and es I do believe the full margined Indiabulls is close to being the scum that plays the hurt wheat in a festival of crushing chaff just in 6 hours and some few of trading.

Thankfully, including HSBC there are still a few advisors and boutique investors left out there that already under stand a difference between India and the Turkeys, Ukraines and even the Rand trades of South Africa.  Mexico’s recovery again is being clubbed with a fully private island (economically) of Thailand and that probably means the depth there is much weaker as most EM investors stay fully stunk in China, Russia and even Brazil. A glaring difference in most is the ease with which investors engender volatility in the Economy, Japan and India resilient to the charm

Tata Motors’ tailspin could continue as there are barely any reasons including Ralf X’s designer JLR bets for buying and investing in the stock. Tata Steel seems to have run out again waiting for the jump back in metals for further gains in Steel, which could steel ( silly, naive me) if construction in infrastructure picks up or being confused with a residential construction and auto slump  that is also extending the slump in Cement and other manufaturing bets, closer to a deflation in the core than one might think ( seriously just preppy talk)

Glenmark is up 10% from its recent all-time lows at 500 and GAIL shows a lot of promise. Today’s trades have finally rewarded IDFC and not beat it down with the Jhabla trades in chicanery beat down in a half day yesterday morning in Unitech and DLF

I respect both above for example but only when thy are near creating performance  and they definitely are not quasi- bets in private infrastructure holding on to an inelastic line created by their pricing power and always illiquid markets despite a surfeit of available built up real estate. Aswini as usual back in the morning with a straight face after recomending bear trades n BTST at closing yesterday but 6135 was certainly out of whack yesterday itself and markets did refuse to move north at closing despite every reason.

Gopal Vittal gets anointed as CEO and MD at Bharti Airtel and Formula 1 season is not so far away. Students and Analysts at work should not follow the woefully fashy and flashy titling on the report.

India Morning Report: Predictably rational in the face of regional panic

Coulda’ Woulda’ Arvind Mayaram FDI, Note extinguishing before 2005 (25%) and others

While Goldman Sachs may have repeatedly missed good calls for the search for a political establishment in India, India per se knows better, discounting global EM troubles with considerable ease even as the Rupee inched up to 63. India should also probably try and make a bottom for the markets around 6200 itself, correcting SGX Nifty in those regular moves every year as EM withdrawals again translate into a wonderful opportunity for the second half of the year and India leading the hopefuls in market performance with fund investors probably again going to China and other markets just for rueing the missed opportunity? However that may eventually turn out, the Rupee faces considerable pressure and the RBI policy , a non event as expected, would not definitely reduce the pressure on the Currency. The worst culprit would be the deficit ridden Yen, apparently stimulus itself having lost momentum after month 1 last year having never come back. The second month of a huge trading deficit would imply that BOJ’s encouraging monthly perusal of the Economy just encouraged bond investors into JGBs and they are going strong for now.

There are not really ready funds/positions that can be withdrawn in this rally in India that apparently not just broke stride but flattened all kinks in the new year. Seriously for those feeding the panic though, Ranbaxy? buy trades? honesty now..Similarily failing countries facing high risk of default only count Turkey, Ukraine and Argentina, Venezuela and before that Brazil and Russia having recently faded from trading memories , dataless on India without trading in its bonds counting to CDS data yet, Korea similarily trading a very liquid 70 bp

Sensex is safe at 20800 levels and the Nifty safer at 6100 levels but that is almost totally out of the ball park if and only if markets are actually waiting for Foreign investors to reward India immediately for behaving stoically, which hoefully will not be the case when we close the week on Friday. Global market commentary should see those countin gHousehold debt abd Card spending in sovereign leverage counts receding again in 2014 but Student Loa mounds remain avalable high peak panic buttons back in the US.

Meanwhile Indian cash equities should continue to see accumulation, we still continuing in IDFC, Yes, ICICI Bank and ITC, Bajaj Auto and Bharti. GMR and infracos continue to deleverage and the rising valuations may not be able to bail them out before they complete that deleveraging extending the government’s troubles in looking at Public Private options for financing infrastructure, ever falling behind. The fiscal is already expected to come at 5.4% and is likely to improve from there, that unfed hope being snuffed out in this move on the Rupee( as expected , Turkey and some other currencies have already followed double digit losses after the yen refused to go back below 105 ( to 110)

Tickker updates before 9:30 am include Glenmark not revising guidance (debt at $500mln) and launching Crofelemer and all of Goldman’s merrymen could muster in their five years of India sponsored India bashing was to shuck out one Opto circuits from te ile, having bought 26% stake in the same.

We regret Karl Slym’s death as reported in the Morning headlines. Stay away from F&O baniding of the index and the 6000/6100 puts are no where being fully priced to write/sell safely

Bank Policy Tuesday would likely show india flows an economic condition stabilising with a health Liquidity position and no threats to the CAD with WI likely to fall again post policy on ag gained from the Vegetable price drop in November

Glenmark’s up 4% on 10 am trades (featured EarningsTalk/cxotalk on ET Now)

India Morning Report: Glenmark, Biocon investors start backing out

Planned portfolio additions in Pharma would suffer even as Ranbaxy’s troubles hit another Big Screen release in Toansa, US plants getting fogged by USFDA. Ranbaxy expects to lose momentum on launches of Diovan and Nexium putting aid to revenues recovering to potential in the US and along expected lines with portfolios already shunning the stock. Toansa plants account for Atorvastatin production among others.

However, Biocon and Glenmark pace corrections have not been suitably pledged into expectations with Institutional investors waiting for a secular India recovery and retail investors, barely out on the hunt probably cannot be blamed as they decide to wait longer. Glenmark rally may be sold on results so one should wait post results and try for 500 levels. Ashwini had a big fail day again recommending a volatile Adani at 6350 levels ( for apparently rush hour investing at the top)

Markets were peaking at 6350 and will retreat to 6250 at leisure leaving F&O PCR fully divested to 0.9 and even at 1.0 levels new Interest avoids the markets after the unsuccessful attempt to club IT and Pharma earlier. Bharti stays up and there is probably room for HUL and ITC both , but as the same is untenable in the medium term positional traders likely continue to prefer ITC.

Results Season draws to a virtual close except for IDFC, ICICI Bank and SBI that report along expected lines and are positive, positive and negative for markets.

I would not lose this chance to accumulate on all good Banknifty stocks including PNB and ICICI Bank and shun BOB and others after the Dividend run ( SELL on ex Dividend valuation targets)

Midcap index breakdowns could be ugly but runs have been stock specific and individual reccommendations hold ( as always for the best stocks only)

Currency weakness seems to have mirrored in Fixed Income markets as soon as breathing space was abvailable in the yield and Bonds are a great buy if available at quoted rices over the weekend to probably 8.4 levels on and after Policy Tuesday. Short yields on newly minted IRFs. The extinguishing f currency notes should be a small quiet affair with only INR 3 Tln ( 12% of 2013 Balance sheet Assets)

Higher Education sector’s fortunes are diametrically opposite to that of Online ed and I would aver Online Ed stocks and vocationally listed concerns should be avoided.

Spectrum auctions are due Feb 03, 2014 as bidders get verified over the weekend

In unlisted business, Air Asia’s launch is getting nearer and IndiGo from the new Bhatias is finally moving on expanding is footprint with the government closer to removing restrictions on International routes in the new phase for Aviation with etihad and Air Asia. Indian listed concerns continue to rely on getting out of the rut with a mix of budget and high end investments in metros and investment in the sector is active. Prism and Destimoney bring in some new unlisted business in the Financial service s area if their proposal is accepted at the FIPB review

The last FIPB meeting had seen approvals for KKR Floorline (Gland Pharma and others) , GSK and Hospira (Singapore).

GSK is spending INR 64 Bln on buying its Indian stake as already completed.

Hospira is injecting $300 mln in the India operations ( around buy from Orchid Chem) with Cadila

The February meeting is unlikely to have any important proposals though Lupin was hanging in balance after the January meeting. Abbvie apparently plans to come back too.

The February hopefuls include a half dozen Infra projects from L&T, Mordril and Welspun to Brightstar and Westbridge PE also applying in mid 2013.

India Morning Report: Out; KPIT, Biocon, M&M Finl, L&T? In; Sun Pharma, HDFC

Of course the trade that earns is a good Bharti as ITC catches a breath at 322-326 levels and HUL tries to crowd the space after good results across the seas at its headquarters. However, positional trades on ITC are advised, we still like IDFC and Yes, ICICI Bank’s journey is a bit in the clear after HDFC’s straightforward increase in spreads to 220 points on the yield curve turning south across all points. A lot of “Sell on Results” shucked out in the pre open indicators (Call Auctions and if they are trustworthy? right now we are pretty stabilised on the morning indicators on bid and offer prices you”ll get in the market hours)

We would advise, that viewers and ET Now still learn to ignore Volume breakouts between 9:15 and 9:30 as the price uptick in that first flush is usually recovered with a correction easily assigned in markets in the midst of a positive rally. Thus we do not believe in the Larsen technicals either and they should rest this one esp with the bad prognosis. L&T’s dismal domestic scores preference in the Indian markets is a lagging Indicator for the Indian Economy and its being a Capex churn probably a function of the pipeline at best and payment collection habits not a pointer of the Economy returned to Normal that the markets are forcing on it.

Biocon is  agreat pick after the “Sell on Results ” shock,. At least it is apparent that new investors did not join the Biocon rush after results which are due today. Those Mid Cap IT stocks still in the ring, better have a story to tell with the PCR still not crossing into overbought signals but the market still tired at old highs and the 8% after fatigue for the Indian charts M&M results are 0% higher on NII in rural catchments. HDFC profit was up 12%.

Barclays, CLSA and GS are already tepid on L&T but these levels are definitely not the stock’s ultintisurfeitmate bottom. No sign of bulls there or the turnaroo. Similarily for Kotak, who cannot perform as a company but shorting it remains uncharted territory. Is it right, BEES ETFs are back in play? check the volume ludes. and check the bottomline as always. Chill pill for qualuudes?..an extra u to coin my own word

Indian Pharma remains the great big bet for this rally as its market characteristics have truly changed and the Indian players have ramped up on the business of generics at least with cheap strategies for the $200 mln molecules and more in case of First movers post patent removal.

SBI is still uncomfortable at 1650 and looks ripe for Sell on rallies at these levels again.  I’d pick up Bajaj Auto again in pair trades as the trading range bottoms out again, not so unlikely at 1900 levels itself. I for one am ready to add Glenmark and ICICI Bank to big trades right away but waiting for a confirmaiton and the 6320 cap likely remains

The AAP charts can probably prove pre-cognitive abilities as donations that peaked in the new year damped out a week before the (Somnath) Bharti chapters made a big event splash India bulls Home loans are back with INR 6.95 B and PAT at INR 3.95 B, Loan books of INR 390 B are hopefully in process of reaching a better denominator in a large unbanked market like India. Axis Bank could pick up where it left off but investors do not expect any NPA debacles in that neck of the woods, sufficiently loudly demarcated as out of PSU

In Policy matters, the CPI linked benchmark idea, we will assume , was another committee suggestion ( someone converted us, right?). Affordable accommodation units and Prop rights(garden variety TDRs) in Mumbai RE did take off but have not grown as a class.

In unlisted business, opening as a secular class in the Morning Report, AS in including both Global Corps and Unlisted PE business or the unincorporated merchants and Franchisee business we prefer Mike Fries in the Global Charts (Charter Comm – Liberty Global)than the local entry of frozen processed fries(McCain), and that is a definite final No from India for McCain as it follows in Gujarat after McDonalds’ merchant production for its restaurants . The price points will be out of reach and the consumption uneconomical for Vikas Mittal’s new effort. Walmart’s independent beginning on the other hand is another new victor of he Indian sweepstakes and should ramp up faster in the next 3-4 years. Amazon FCs are in Bangalore

Tata Global rush trade classifieds are back again but no corrections this month, unless someone starts up a maruti while its running!

Oh ya,  I have finally come around. India’s problem is/was feting Jim o Neil. It’s a wonder he came back despite betting bigger on China and biting a big fat Turkey. (I have to watch how much to put in the Morning ReporT)

zee entertainment below 2odma is a false and stock is a great investment. do not pair trade in US cash equities if and when you head there to advise or trade. stay invested in cash and speculate in f&o. rice exports at 2.3 MT in rice couldn’t possibly have peaked already did they? are the quota clamps back in place or no surplus production? krbl trades may follow real-time exports/orders in the next 2 quarters

Did you see Biocon’s brush with the NHAI in the Bangalore Mirror today? Taking medians out on NHAI highways is definitely a surefire way to asininely jugaad India’s hind out of global competition. Biocon sales (updating at 10 AM post Keki Mistry of HDFC) are a 7 B for the quarter and R&D spends seem still subdued because of other limitations at INR 1.02 B but none of that should count against the investment. Principal Global may end up showing us how corp governance and voice on the board are still a flexible parameter for India portfolios as we move towards harnessing and integrating the NDF currency markets into the mainstream And hey that Thomas Bata protege is still walking, so there’s no (h)urry!

O Gao, Jan Jan (ko Chhua) Janjivan(badla)

Ashwini contributing to his own sells by recommending 6300 put sells, that’s backslapping yourself twice over as Puts have anyway likely over priced themselves out of investors by today’s close and that does not make investing on te bull side defensible today. so the shorts are likely having a needless hope surplus till Friday in the pouring rain.

PSU Bank Dividends are more than justified, if the Banking Secy needs any props and tempting fate by linking to February Capital re-infusions and Banks’ demand for reduction of free ATM transactions per month should be denied aand the number of free transactions should be increased.

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