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

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: 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: 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: 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%

 

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