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: 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: Sorry Bears and Cartels, Bulls are still hiding in the Indian woodwork

Yes Bank
Yes Bank (Photo credit: Wikipedia)

 

Network analysts sitting on lower support levels and betting short on most new blue chips having seen the infracos slide, are in for another shocker as the march series looks to inch closer to 5600 on expiry day before closing out comfortably ahead of August 2012 levels. Both Sukhani continue on the second month of watchful short betting SS targetting YES Bank further from today while Bharti and some others responded in kind to the lack of interest to back the market interest to significant lower levels but the buls seem to have won on real strength of fund inflows for the time being. Markets will correct but not by much in April and while the upside was capped to 5850 levels by the weakness that just means the lowside is still as high as 5550 even for safe investors and 5500 puts should be real rich making sells for bullish investors. (We personally are not conflicted by any position here)

 

Five Rupee Coin
Five Rupee Coin (Photo credit: Dinesh Cyanam)

 

BRICS Development Bank aside, which we look to fund the Indian Infrastructure gap in due course, India inc starts off results season in a week and its profitability scores that already improved on identified sectoral leaders in Q3, are the ones that will be identified with the successful India story and not the politicking as enough stability and forward looking governance is guaranteed by incumbent ministers if not the party flags.

 

The Rupee keeps most of its strength in the new series and the may series may give pointers on the new range for the currency as Fixed income yields cross back into the 8+ range having lost the rate cut and pushed the bank to the reverse repo rate on the corrridor

 

Given the strength of equities and currency going in, profitability concerns of consumption and auto plays should be watched closely for bear victories even as IT forecasts and IT results will remain damp and not affect sentiment. Healthcare could lead stocks nose down but not up even if it maintains good profitability and revenue growth and any weakness in bank performance including Q1 FY14 forecasts will be a deal breaker.

 

Infra debt funds have indeed taken off and execution perofrmance of projects still hanging will come intpo play on the bourses also in Q3 FY14, QIP fund raising shifting out from infra and bank fund raising to NBFC or Capital expansion plays across manufacturing and services businesses with CDS holding sub 200 levels , a great performance for an isolated Asian performer.

 

 

Morning Trading Strategies – India September 10-14, 2012 (Day 2 – Tuesday)

 

State Bank of India Logo
State Bank of India Logo (Photo credit: Wikipedia)

 

No do not do that. though smaller targets that Ashwini Gujral has suggested work, you never know which short won’t work and thats a good investment on the long you are switching. Of course I refer to the markets enticing show of what’s left in India anyway and exiting by the back door for the show is over kind of morning with dear networks taking turns on shorts for day traders. Yes Bank could very well come back to 320 and IDFC has already shown enough to stick to 122 levels than go back to 114 both indicating that the supposed over emphasis on both banking and infrastructure financing is unlikely to go away and REC and PFC are already at encouraging levels for an uother upmove.

 

We do not expect markets to go for the South side vacation day traders are so fervently hoping for.

 

We do not expect markets to go for the South side vacation day traders are so fervently hoping for.

 

ITC is a buy again at 253-257,  More IDFC can be accumulated at cirrent prices, ICICI Bank is a good buy but the stock ill run below 900 on some quick performance concerns regarding expectations on NPA portfolios, and restructurings as well as business segment portfolios the firm operates without any regard for the consistent high NIMs  and quality credit pull to the franchise.  SBI stock similarly awaits a big bang news before a new positive target thus making a good upmove unlikely while big news is unlikely in this quarter or next, banks having stabilised a volatile operating scenario

 

 

 

India / Asia Deal News and Prospects

The Anna movement has fizzled out without a viable political color, NaMo and Nimo apparently not good for a national calling and Rahul Gandhi not coming out to take charge, the old generation moving on has also provided pause for those of us born in the 70s as more entry line recrutiting takes salaries , if any , to 20 somethings and no growth industry replaces againg telecom infrastructure stories banks amnaging to gro credit to NBFC, Real estate (Affordable Housing) and other services industries.

FDI collars for old sectors, new banks and growth calls for the pack waiting for work yet still snagging salaries at IPL linked marketing companies, erstwhile growing BPO and It companies or NPA hit PSU banks are yet a year or more away. Not much is expected from IIP data and Manufacturing Output growth data on Wednesday while Friday’s WPI data and that of FX reserves is unlikely to move decisively either, yet not be in the rut, WPI having improved for the last three-four months. European inflation data is likely to be worse today when most nations report than tomorrow when Italy and Sweden are scheduled to report while key South Korean, Russian and Aussie data speeden the recovery by the currencies against the dollar.

AT THE TIME OF THE LAST SUCH STASIS IN THE MID90s WE DID NOT SEE COCACOLA QUIT OR KFC INTRODUCE VEGGIE MENUS BUT MANY LEFT INDIAN SHORES FOR A “PAN ASIAN” PRESENCE and as of now the European Banks are leading the same trend even as their future stays inextricably linked to the Asian movers and shakers.

MEANWHILE Heineken’s Asian Deal has generated interest for real estate reasons as well, with the makers of Tiger Beer and F&N juices also owning the largest property on Singapore’s Orchard Road, worth 50% more than Tiger Beer’s sale proceeds.

Also Kingfisher has moved on from probable and hope ful to near certain death as it keeps the skeletal senior management onboarded at a cost of INR 675 Crs according to a ET weekend report.

InDIA MORNING REPORT SEPTEMBER 07, 2012: Global Liquidity Moves and a crunch in China

English: Bharat Swati (BHEL Swati) is an India...
English: Bharat Swati (BHEL Swati) is an Indian two-seat training monoplane designed by the Technical Centre of Directorate General of Civil Aviation and built by Bharat Heavy Electricals Limited. (Photo credit: Wikipedia)

As GSAM and a few others will willingly admit over the air, there is no return on your investment in China for a few more months. Of course the most important news of this market and it is affecting pre open rates as we speak is the Central bank liquidity thrust which has started in earnest even before the last obstacles toa Spanish bailout have been removed from ESM approvals to Spain’s own assessment and formal request. Bond buying in the 1-3 yr range by the ECB was announced at the monthly ECB meeting yesterday and was good news fo those already picking up 7% and 5.5% bargains in Spanish and Italian bonds. The resulting liquiddity esp as China is crushed under its own policy weight of the last twenty years is more investments in India.

However sooner or later more backing will be required for this rally as the BHEL and SAIL disinvestments look ticklishly unlikely despite Chidu’s best face on it. Bank nifty should be an important gainer if not today, tomorrow as 9850 was an important point of support.

Related articles

Fixed Income Report: India back as flavor of the year

Global sentiment has again turned in favor of India as a leader of the trend of survival led growth, thaat is bleeding the best of developed world markets dry with expectations of QE fuelled growth that are increasinglytemporary growth humps on the chart and trending down like a dampening whale’s breath on each injection of liquiidity.

हिन्दी: ताजमहल English: Taj Mahal, Agra, India...
हिन्दी: ताजमहल English: Taj Mahal, Agra, India. Deutsch: Taj Mahal im indischen Agra. Español: Vista del Taj Mahal, Agra, India. Français : Le Taj Mahal, à Âgrâ, en Inde. Русский: Мавзолей Тадж-Махал, Агра, Индия. (Photo credit: Wikipedia)

Put in simpler terms the yields from $100 in first round of QE is probably as much from $230 in the second round and now that most have more than $1000 invested and are getting half the strength expected to continues in housing and treasury markets, the Indian yields are good to be shopped leading a trend down, though RBI was also mopping extra liquidity out from the markets in today’s run

Indian spices
Indian spices (Photo credit: Wikipedia)

Where’s everything headed, then?

We as india writers have pushed out everything with insight in the last three four years, short of  the unworthy Indian infrastructure which could not attract even $100 bln in Gross investments yet with two debt funds of $3 bln each and some older established PEs like Macquarie and 3i and the Govt of India grants of INR 750 bln. Short because Indian Infrastructure sector with all the public enterprises involved is very short on the details and as it works without meaningful graft like the Telecoms, the Roads, Power, Aviation and Ports infrastructure continue to work with construction companies like our FMCG sector works with $500 mln brands from HUL, P&G and ITC and we are the wrong ones because we criticise something as if it was the end of the road for the sectors in each case and nothing else going to happen because it is not.

At least that is also what the Dy Governor of the RBI, Subir Gokarn seems to feel if we read into his new timetable to plan out Capital Convertibility for India. FDI in India has always been able to attract the bigger dollars irrespective of investors’ fascination with issues like the retroactive introduction of taxability of transactions and the impossibility of investing more than tokens of currency in our banking sector with restrictions of M&A or the recent failure of FDI in multi brand retail/ defence, healthcare and aviation.

The true problem comes in India’s cultural intractability compared to China or Signapore or others total rolling out of the Carpet for the bbigger dollar including the State sponsorship of the project, and not an immobilised set of half dozen land reform and Tax reform bills, and the Private state and comsumer acceptance of that way of life that the investment unwittingly imports itself with. Being open to cultural transfusion, this is a real anachronism always heaped on  the middling old politicians who could not run coalitions but it runs deeper as the next few generations will find out.

Probably what we need to bring in each sector is like the perfect storm, at least two representative investor in each such sector, like probably Yum with KFC and Pizza Hut and Tata Global – Starbucks and or Dominos with the Bhartiyas where there are unlikely to be any hiccups with all three biting the bullet and all government departments, consumers and politicians able to sell and compare. I would even aver that the 2g  experiment is still very much a success for the FDI story right now. A similar base exists in Banking where the world’s Top Banks are increasingly looking to Asia and India in particular to roll out bigger base staff or the magic wands that the local and global Harry Potters need to win the magical sorcerers over at state and center.

Whether it is International Quality standards for Highways or structured products in Banking, Indians more than other s are Comparison shoppers who like to think their Point-Of-View is appreciated and part and parcel of the product/standard unlike others who let FDI build a parallel Eco system, much like empty highways and cities outside Bejing while the Eastern corridor esp  around Beijing keeps cars stuck in Traffic queues that take three days to move from end to end, or even more

The simplification stated in that, is to be taken with the usual detailed quid pro quos and the details of a contract like bringing the capabilities to service rural consumers becoming a new reality for banks, auto and credit card and durables/discretionary sector plays from Pizza to That larger personal loan than the $500 on my Kissan Credit Card.

THE INDIA BUDGET 2012: Healthcare, Education and the Rest?

New National Urban Health Mission mooted, NRLM (Rural Literacy ) allocation increased

AAjivika women self help – bank credit -> extended interest subvention ( eff rate 4%)

NRHM allocation INR 208 bln

Addendum: India to get its own Huijin as holding company for Bank Capital 

National Credit Guarantee Fund for Youth, Rural Development Fund!, National Social Assistance increased by 37%, INR 255 bln allocated for Right to Education, INR 200 bln for Rural Infra Devlpt Fund

Kolkata water purification and Kerala Agri separate allocation, Hissar allocation allocation (, Hyderabad ..NCAER INR 1 bln and lesser INR 0.15 bln for NCAER and a Pali language research center ( India is diverse, definition of weaker sections is even more diverse)

Avlblty of residential qtrs for Central Police Forces (8000 units) and separate allocation for Office bldgs ( INR 10-20 bln each)

AAdhaar platform – compulsory Id for all above 18, used for beneficiary accounts…

Black Money Control: 82 DTAA, 17 TIEs signed, 33rd signatory of Mutual Assistance in Tax Matters,

Defence Outlay of INR 1.95 Tln or $39 bln higher significantly

Benami Transaction Prohibition Bill to replace 1988 act

Narcotics control provisions to be also updated

Rest Tax performance after study, review and analysis

Midcap Select: Opto Circuit, Adani Ent

OPTO:

Opto got a first device FDA approval in the USA thrui its Cardiac Science Corp subsidiary. It can now invest in marketing of its retail Wearable Holter Cardiac Monitors

ADANI:

Apart from being close to outbid on the LNG unit in Gujarat Gas (65% stake + 26% open offer = 91.5% of $1

A Meghwal woman in the Hodka village, north of...
Image via Wikipedia

bln+ Valn premium on sale) Adani also commissioned a largest of its kind 40 MW solar plant in Kutch in less than 6 months. Kutch is on the northwest coast of India in Gujarat, also where Adani’s port and Tata’s Mundra power plant are located.

India Infrastructure: HSBC, ADB funding to bring up $ 1 bln debt fund

India’s first infrastructure debt fund is well on its way with the $1 bln corpus mooted by IIFCL successfully

Infrastructure improvements
Image by Scottish Government via Flickr

siloed for a launch of the fund in February 2012. the first fund will include IIFCL participation to 26% or $260 mln only as Asian Development Fund and HSBC chip in with $250 mln each for a 25% stake. LIC and IDBI get to participate in the fund with $140 mln and $100 mln each

As a mutual fund the Infrastructure Development Fund, first proposed by the MOFFIN in the 2011 Budget, will invest in debt of the infracos , allowed 90% by its mutual fund charter

The government is infusing the INR 10 bln required by IIFCL the first of India’s public infrastructure funding vehicles set up by the Indian Budget of nearly 6 years back and has failed to tak eoff while Pwer finance companies also set up by the govt and IDFC in the private sector have

500 Rupee note with Gandhi on it
Image by nimboo via Flickr

picked up the funding requirements and turned in a few successful projects each with a good interest margin on each sale.

The debt fund is part of the 12th plan charter to ensure at least INR 1 Tln (Rs One Lakh Crores) in infrastrcture funding primarily via PPP projects if required and ensuring Private participation to close the Infrastructure Financing gap for the country.. India’s overall financing gap coul dbe as large a INR 2.5 Tln or 4% of its GDP

India infrastructure Health & Welfare: European Development funding for India thru the SWF route

India has long relied on welfare funding and low cost development funding from non World Bank and IMF

The World Development Report 2011
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sources like Sweden and UK for its welfare, health and construction / infrastructure spending, relying almost totally on the same during the phase China over sped on infrastructure to create highly leveraged municipals and new ghost towns where no migrants moved from rural areas

The entire DMIC project is highly leveraged on funding by Japan to the extent of more than $ 4 bln, and European counterparts have been fallin gbehind because of auditing concerns and local political maelstroms even before the crisis.

More than 60% of China’s sovereign investments from one of its 3 funds is invested internationally. That means China already has $360 bln in investments including equities like McDonalds and Coke which are doing well in China itself

UK, while cutting back on its development aid commitments to India, has committed for the next 4 years channeling the $2 bln program budgeted at $420 mln a year thru its SWF the Commonwealth Development Corporation fund of dunds for upto $200 mln a year or half its 5 year commitment. CDC being a SWF will be answerable to U staeholders on safeguarding of UK taxpayers’ investment and return parameters and thus will go further to grow UK’s debilitated international franchise as it has all but walked out on the Euro after 20 years. Germany gets 60% of its market for exports of machinery and consumer goods from within the Eurozone , a little ahead of UK and France

The reorientation of the aid as been summarily done in London as Tory MPs do not think a nation disqualified from IMF development aid parameters should qualify for developmental aid

India Infrastructure: Tax Free Bonds from NHAI

Detailed map of Indian national highways.
Image via Wikipedia

NHAI has 70,000 kms of highways to be awarded under the National Highways Authority of India umbrella, targetting progress of 15 kms per day by end March 2013 (FY 2013)

NHAI avers that to reach the target of 20 kms per day, it needs to have 20000 kms or 30% of its inventory awarded. For FY 12 they have awarded 4,300kms projects. The company is raising $1 bln with bonds of which 40% is reserved for Institutions and 30% for HNIs. 15 year, and 10 years bonds yield 12.45 and 12.3%  (8.3% and 8.2% coupons) NHAI puts up the public portion of the funding of the highway and retains a 100% oversubscription ( likely institutional) for its 25% share of any project(tentative)

NHAI already has operational projects of nearly $800mln revenues and has recd $400 mln this year as premium from 19 projects

Healthcare remains free – 100% FDI

India Gate

India’s Pharma market is a paltry INR 565 bln currently, Just cardiovasculars and diabetics constituting less than $ 2 bln each across a universe of global MNCs and Indian diaspora supplying generics globally. In a nation of 120 bln people or 25 bln households, 10 bln households of which are below the poverty line, it is a quandary not many can resolve. The pharma companies already see only one strategy to increase the per capita usage. increase prices so much that even if they bought half the medicine they bought last year they would end up with a higher per capita consumption. The CCI is apparently reviewing this unnecessary price increase in the system, A Food Security Act in place may further improve longevity ( at least for the common man / analyst leaning on logic to make an infererence)
English: GSK Factory Glaxo Smithkline manufact...
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However any larger study will show that by back of envelope calculations if we looked at the 98% uncovered population of the country without medicare as spending a per household 15,000 on medicines for the year for children, OTC, prescription and the stereess related disorders for the husband and wife the 24.5 bln would end up spending INR 367.5 tln or $7 tln on medicines and I dare say hospital care would be an extra amount more than this consumption expense. Of course the 10 bln poor families would depend on state sponsored insurane and low cost care for these requirements.

100% FDI has been persevered with in this sector. Both for greenfield projects thru the automatic route and brownstone projects thru the approval route

However, Lupin and Cipla do not seem to have a buyer after being on the market. The global situation could well be to blame for that and the fact tat sales of $1 bln barely are hardly the scale someone is looking for to enter the market. Like in automobiles, the lack of scale just whets the appetite for global players to explore independednt plays from scratch and market realities stop them from taking the plunge as such a large market does not forgive mistakes easily

On the Hospitals side of the Heathcare sector, players such as Fortis are still trying to take advantage of the amorphous nature of an emergent industry , valuation and transfer pricing issues likely to continue to plague the industry as a whole as for other sectors with Vodafone again taking the fall in one of the first decisions by the Tax man

MNC players have hung back till now in poharma, but they do not have any more reason to do so, India by itself could be a bigger market than Africa as a whole and while GSK and others have moved on to growing NGO initiatives in Africa (GAVI) for the immediate scale possible, the India market is likelier the more profitable market with and without NGO participation and sponsorship.

English: Wordmark of Cipla. Trademarked by Cipla.
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State funds however are unlikely to come this way till Food, infra and defence are paid, both healthcare and education eternally waiting for the state and the planning commission to realise their importance with higher more tangible contributions. India’s state owned low cost health infrastructure is one of the most well spread across the 3 lac odd villages with many still outside the ambit of affordable healthcare comparible only to banks without India’s ‘large unbanked population’ still ominpresent in towns throughout the country, not even accessible for weeks at a time in certain cases

Vodafone Logo
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MID CAP PHARMA Coverage: Orchid Chem

Though we have tried to cover all companies yet on Sales and Potential in the Healthcare segment, we are really short-staffed to push out first in class updates on the same. Suffice it to say that with Orchid Chem FCCB redemption coming up, bonds will be called and the fear has driven the scrip down from 186 levels.

Current TV18 interviews with promoter K Raghavendra Rao confirming that fears are misplaced as a further ECB has been tied up to return the earlier FCCB debt as also domestic arrangements have been made. The company also ‘guides’ lower interest costs in 2012

The company is profitable with a 10% NPM and good Q_O_Q and yearly growth in the September quarter, running to $500mln + run rate. Definitely not worth dropping and something you should buy and keep with Glenmark, Opto circuit (devices) and hold Biocon if you have any

If you do the calculations, from the USD 500 million of our sales, around USD 420-430 million is exports, and against that the import component, it is less than USD 200 million.

The delta of USD 200 million on profit and loss statement (P&L) is in terms of dollar inflow and my dollar outflow including FCCBs is less than USD 200 million. My dollar balance sheet is mildly positive hence rupee volatility is just a paper entry and it doesn�t affect Orchid on six months or one year basis.

Lupin and Cipla are the bigger ones in the area who were actively looking to sell out ahead of changing FDI regulation in the sector where earlier M&A has already scooped out much local infrastructure and biggie Sun Pharma is adding inorganic marketing and research strengths. Dr Reddy is a stable business with sales intact a a $2 bln run rate

In most cases the domestic market is relatively small,  but that is more of a limitation for MNC pharma stocks still listed

Predilections: The exploding turkey

one rupee
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The market sentiment today after the Euro’s integration was exposed to the public as nothing but  a rear guard defense throughout the coming decade, was a perilous wait and watch for any buyers with the indices giving in to another one-sided move after 8 days of unguarded hostility, broken for a brief lull yesterday.  The market also sees everyone else as unwelcome intrusion, just that there are sellers in both equities and currency markets , not to forget bond markets who still like to see the government’s face on the other side before stopping the spree.

Whether in currency markets stemming the Yuan rise or the Rupee breakdown, most would look at the woeful example in Europe and stay away from intervention as nothing good comes out of it eventually. However, the sellers are very clear in their actions and verbal speak that their selling is not based on fundamentals and they do not think that matters. Hence, given our unlimited patience and the propensity of going bankrupt by going shopping for Rupee or Dollar at the wrong time, we would stay away till things settle down. and now, the nifty after breaking 4700 down, may just swing back tomorrow for 5 minutes before staying down till Europe realises how much it is left with after the margin calls and how much it has to print. Unless China gets a new breeds of FIIs. Though, none of the money that enters India typically leaves ( After profit booking, more is inside than it is outside in this entire 2011 spectacle)

Not to say that the markets can’t rise vertically after they do end the fall, but as the exploding turkey in the oven, it is hardly going to be championship fare when this selling gets over. The prognosis therefore is that the markets will stay dull enough and you can wait even more before you do start buying. And, right now shorting any of these would be committing hara-kiri, in equities or in currency As even newly converted India bull JP Morgan mentions, we are still overweight on cash.

Sector wise, no one who is overweight on Comms can be without skeletons to hide and I would not suggest going overweight on Comms or tech. Except that Airtel scrip, which has a lot more going for it too and a sthe only player with muscle,  in its main markets, it will turn out well. I hope my readers have been buying on fundamentals, as there are a few stars out there . Also, apart from the intermittent interest in consumer staples and healthcare, sectorally, the market does not get into a secular upswing till the best sector there is i.e. infrastructure and banking, get up and get going again

Just getting the morning coffee to work..

Predilections: The Organised Mindset of a bear

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Or, What you should be doing when the markets go dropping off that Pirate cliff:

1a. If you are thinking about buying gold, do rethink about that one as Gold has to wait for strong bearish pronouncements to move from here. However did you know that Central banks have bought 150 tonnes of the metal in one week and are still at 10% of the levels they held in the 90s when they sold and everyone else bought gold.

1b. As Central banks count as the most followed buyers right now, Gold’s meteoric rise in the last few weeks may restart Also India becomes a candidate for taking everything down right now as it gets into a tighter inflation high, currency weaker every day and deficit unsent kind of tougher twirls with a higher and higher downside, but then we would still do 7% growth so do not think of a a market below 4500 Nifty, really ( even if it breaks down to 4420 you can beasar with me, right!)

1c. Did you recheck your list of stocks to buy: All time lows everyday present great opportunities for investors out there to verify at leisure. You have at least 2 – 3 weeks to select, drop and re- select winners..

2. Watch that hollywood movie that gets released in India on time during market hours..You could not get a more predictable market direction with no trading bumps mid day since last to last Friday. Also Disney and ESPN are doing much better this decade than their worried little India doobies of a decade back, esp as Pizza and China surge

3. Reorganise India’s infrastructure priorities, find time to review M&M and Unilever (Despite a fundamental change in the fortunes of these two companies from directed strategy, they get good results and attention on a tough down day only, talk about predilections)

4. Teach other knowledgable friends – Who being optimistic on India esp during MSCI re organisation will be full of ‘know all stuff’ you can bear down on with gloating dripping from your eyes and mouth dfor weeks on end..(like the savoures you cooked for Diwali but did not last)

5. Figure out the Economic Indices: Wierd Inflation and IIP volatility, not to mention the staggering deficits not every month but every other month, the winning margins of a UPA government motion in parliament, the no. of public losses Anna is unable to bear and other ..Most of the economic ones we have dissected and detailed over the last three years here

5b. Count and read up the number of laws still required to be passed in Parliament to make reforms work for India, if only just Corporate India..GST, DTC, apart there are two years of laws to make new banks work, countless banking supervision concessions to be worked with to be international bank franchises including voting rights to be passed as clear as day, Capital controls on Forex vis a vis restructuring for a new indian currency instead of pegging to $1=100, are all end of the rainbow ideas that are not at stake either, the laws need a simple fresh Corporate law basis and has to be apart from all the changes to the M&A and competition code, Bilateral and multilateral agreements and treaties, and include Social Welfare, removal of fertilizer and oil subsidies and funding and execution of PPP projects such as the DMIC, (with NMP), new ports and unlimited gaps in education and healthcare not being considered for private participation and foreign participation to the extent required.

6. Tell everyone to “Take a virtual dive”: Right now is the best time to start on something you have never done before..In the AEs (RBI term for US and Europe – Advanced Economies, the latter have become candidates for REMs now – Re emerging Markets) they have even stopped asking people to start blogging, it’s so passe. You could take a dive into a shopping mall too, a good crowd as always

7. Ask people to figure out the probabilities of a recession in India: No one will put a blame at your door now that India is going to get tougher in the next2 years and who knows your chances of a recession in India may have just improved from 1 in a 1000 to 1 in a 100

8. Review your family’s eating and drinking habits: Especially those zombies and moose heads who are still stuck in your head and inner ear without turning you into a schizophrenic, trying to imagine themselves as a fund manager, not investing with you or paying you for your reports or research bothered with becoming a complete spectacle and proving themselves to be ones.

9. Pay attention to India’s Defence budget we are getting everything we need even if so late and even though China’s spin counts in the media we don’t

India Earnings Season: BIOCON, September 2011

Biocon
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Biocon 

 

Biocon maintained an EBITDA of 29% with yoy growth in the 6 months ended September 30 good in Branded Formulations of 37% with a 46% growth in Diabetology with its INSUpen and revenue from Pfizer’s diabetes related launches. Diabetes remains Biocon’s icket to cash and market positioning with other strong brands in renal Transplants growing at 25%. Onco MAbs are another growth area for the company being pursued currently in NPD/NCE

Reserarch Services grew at 20% and Generics (Biosimilars) at 15%

India’s largest biotech company stayed below a $500 mln run rate for the year with profit growth slowing to $17.2 mln for the quarter and $31.2 mln for the half year

India’s Grand Design? or just a Maha – myth

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There’s a brilliant analysis by  Gayatri Nayak, in the Economic Times today. Brilliant because that is something in plain data and in plain sight what every Corporate indian and even every Indian citizen otherwise or any other species observing India on the World stage wonders. We are the I in BRIC like the I in Team, we are the I in interest rates when the world is reducing them with alacrity to avoid a depression. Our oil still costs a $110 a barrel, 2 of the BRIC nations almost get it virtually free from their own energy resources, the third and the first citizen in every economic miracle now is China.  even if everything in the Local Infrastructure run for China collapses, the 25% LGFV default will just reduce its growth to 0 when it is going through its slowest phase in manufacturing. nary a hope of a recession. And there the similarity with India ends, but with others it has much more in terms of dependence on commodities, energy, and hot money flow magnitudes that just do not compare with the rupee trading at its lowest.

Read the ET article here: http://economictimes.indiatimes.com/money-banking/with-high-inflation-and-weak-currency-india-not-like-other-bric-countries/articleshow/10060355.cms


The foremost problem is the speed at which the prices are rising — from assets to commodities to manufacturing to services. This could deal a long-term blow to businesses, making them unviable. Prices have been gaining more than 8% for more than a year now. The main reason for the fall in profitability at companies is rising input prices and not finance charges as it is made out to be.

“India is less integrated with the global economy” was the argument then. While it may still be true when compared with many Asian emerging economies, this advantage has narrowed down over the years. While the overseas debt has gone up to $306 billion at the end of March 2011 from $221 billion at the end of March 2008, the cushion of foreign exchange reserves went down to $305 billion from $310 billion over the same period.

As far as decoupling is concerned, the bottom is the same for everyone but thence everyone of the global economies from the G7 to the G20 to even Mongolia would have decoupled on the way up . The great contrast in each competitive resource advantage and each strategy in Brazil, China, USA and Europe will determine very different trajectories of growth seen and supported in the Financial markets.

At stake is the order of magnitude of investment and infrastructure which others have harnessed earlier than India. But while the others may be volatile in responding to global stresses, India just becomes a sub standard risk to carry without the heat of a growth running up that order of magnitude. Others have much more command and control mechanisms as witnessed in Turkey and China, to ensure transmission of policy do’s and don’ts. If we do, it stays confined to one single Corporate group or region The regional imbalances are much greater in China and Russia, even Brazil and the smaller economies are exclusively better risks for the global investor because they are entirely dependent on that investment and deliver  a bang for the buck like Coal in indonesia and iron ore in Mongolia, but smehow that focus continues to deliver a faster sustainable growth while our discussion of imbalances makes evryone a victim in the end?

We could very easily be at the same stage as China if we had better transmission of policy cash and of policy mechanism to channel the growth. We may still be doing much more for our poor than China which has apparently been focussed on just the coastal “districts” ( urban conglomerates) that were already trading with Hongkong and the rest orf the world. But what we miss is the global demand or investor interest which cannot be just delivered to those shouting from the rooftops or those taking to the streets by fast and by suicides.

An administered rate of exchange with 10 rupees to the Dollar can bring it though. It will bring into focus our strategic decisions and investment in growth to a direct returns comparision with global investments. It is also the rate at which PPP trades for India to the Dollar. And it is probably the singular reason  why no one bothers to hear us on the table or give us preference or deference in trade.

Probably why we are so happy at rupee depreciation so we can get more value for our immediate quarter from IT exports when export growth in cotton, tea and even coffee and oil could mean so much more to us. In non It exports we will still remain satisfied with 2 – 3 million tonnes of Rice, wheat, Onion and some other crops but we remain the top 4 producers of those and falling behind every year.

Probably our priorities for infrastructure investment also need that push to file up behind the Exports doing the best and easily sustainable as in agri-commodities and gems and Jewelry

but that is the cliched argument no one has acitoned for the last 60 years. never.

Gross domestic product growth in the advanced ...
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Living with high interest rates: How Banks will follow the script for India’s new growth – Part II

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The RBI proposal for making a 100% WOS structure mandatory for existing foreign licensees is likely to get the tax man’s blessings if the diktat comes through form the MoF letting Banks bring in unlimited Capital for the new banking company without any tax implications. It still leaves to the foreign banks to set up such WOS structures that bind them to 25% branches in rural unbanked centers. In the draft for new banks for example I do not believe rural unbanked is the term used and they may be just llooking at setting up next to the HDFC Bank or PSB in the village/town when they do get down to implementation. Also with Foreign banks have partnered themselves in Insurance the FOHC/NOHC structure will be invoked with nary permutations to let HSBC and Citi operate for the projected bancassurance incomes in reputed cross sell revenue burst yet to be seen here.

However Banks will have a significantly larger play than just habituating Indian customers to high rates (mostly on loans), to mobile USSD messaging, UID enrolling for deposit accounts and mobile payments interfaces With RBi close to the curve on inflation there is much more rate hike in India’s future till we can outrun that inflation or pull it back(not happening till midway in 2012) Social programs in the rural hinterland may become more common and apparently more sophisticated than the public sector loan melas of the 80s

Swabhimaan inititive or rural unbanked villages claims 70,000 villages covered in 2011 till now, while NBFCsoperating int he country are being re regulated to level the playing field in terms of prudential and provisioning norms while deposit taking remains the purview of banks and those already having such a license in the NBFC space while allowing NBFC s access to SARFAESI Acto to allow recovery

It is the urban market increase in consumption which is a fertile grounded seeded by the Private and Foreign banks with renewed vigour. With underwriting norms slikely to be ofllowed diligently at least for some more months to come, the higher rates may not make much of an impact on consumer disposition with Cars and Homes hoping to come back to the top of the shopping list sooner than FY12 end in six months

Contraction in bank branches in the US however and in fact everywhere in the developed world where branch interaction has been a much lower component since more than a decade back, the growth in superstructure may be discouraged by the higher rate structures for the banks themselves. This is exemplified by the transaction charge difference of upto 5 times in a bank branch (40p) as compared to an internet only transaction(8p)  An Asian Banking report recently suggested that Internet transactions in Asia are more than 1 in every 5 transactions including large monolithic markets like China

Investments in risk process and Trading systems and platforms will likely take uo larger investments on the banks’ part yet. However, globally some larger operations in FICC and Equities may be looking for less regulated centers than the freshly reregulated markets in US, India, and China and global expasion to SE Asia’s frontier markets and Africa may well shift  the invesment locus from India and China too and thus Indian regulators would have to sweeten the regulatory pie they have to eat at India’s party for some time to come.

The ideal for banks right now is the renewed strength of income from the Wealth segments in Fee and Advisory income, investment income as well as financing the luxury goods consumption channel that seems to have been fairly robust during 2008 and now. Even if retial was to reach an average of 33% to 40% of the banks’ income statements it could mean large jums for the banks’ balance sheets and for India’s consumption pie. Corporate Banking and the likely revitalised IPO market remains the banks’ most dependable source  of income even with a more conservative range of products for the dle funds that have been the banks’ focus for faster profits to the clients and themselves

An HDFC Bank Branch in Hyderabad
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Forecasting the India Bull cycle Part III : Bank rate hikes and value picks

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The conundrum we have all lived thru has surprisingly not that many on corrporate watch predicting both ends and living through it with most India bulls going all out with the first 4800 breach on buy calls for seectors including banks and auto while derating IT and then of course banks in the high rate regime. Still there are a lot of bank watchers who gave in to value in PSU banks rather than wait for the slow creation of new benchmarks of value. On the oter hand the few who did are ubiquitous like Standard Chartered Research team and maybe one other as  both stuck to the falling apart at 5600 and the bottom at 4800. Others on the network include Traders and Technical experts who know when its too early to put a buy call.  Standard Chartered today reiterated the oe obvious fact that the recovery is not here and “it will take time for the investment cycle to bottom out” Ofcourse a lot of the intermediate recovery already seems to be topping out at 5150 and the weekend may not offer anything spectacular.

Interestingly, recruitments at banks have picked up but as IT / ITES slowdown did not impact recruitments that much in August the incipient online emploment index has a lot of analysis for the funny nbone between the lags for job seekers while employers do need to keep a watch on the changing hiring trends usually a sign of the consolidation and a different set of strengthened ssectors may emerge from there as well, Banks will take their time though as rae hikes ar ealso not quite done and instead of the famed one last 25 bps hike going around between economists and wealth management desks, I am going to aver there are going to be 2-3 hikes where I rather agree witht he HSBC Global commetary. Thus with Speptember 16 rate hike almost certain, alikely spike in the market will only vcome frm that hike not being 50 bps, or at least not being resupposed to be 50 bps by the markets. The problem is with Food and Fuel inflation singing the high notes consitently and continuing to stunt the Indian Economy’s on stage performance. DSespite robust sales, September is going to underline a stad corporate performance by India as input prices continure to rise steeply and more than undersline higher prices in the Economy. Home loan tenures are crossing 40-50 years where therey are allowed to but there is no respite from inflation and no way rate hikes can trn down readily at this time

Also where India remains consistent is in growing toplines at Corporates and Expense registers at households increasing by more than 20% plus, thus such a green salad analysis for all you out there reading our research products

Happy Thursdays! Inflation inches down, Europe cracks

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Not much going on for this report thought as the Markets are sstill at 5500-5600 not looking to move much higher. Inflation on Food for the week ended July 16 reported a fairly reasonable 7.33%, and even Primary Articles tclose to breaking lower from double digits at 10.49% but with Fuel inflation stayign on at 12% worries still continue. Bank Policy Tuesday rocked some guns with most Economists sinking their teeth into the policy after the deed, while Banks and Autos spread losses alongwith the newly crowned real estate sector.

The Debt deal drama in US is still on and  the weak dollar putting paid to most results in Europe while US earnings look bright and sunny, even the banks reporting an ok result for each

European Banks may have cleared stress tests but all hell has broken loose otherwise, most reporting half the earnings from last year and Credit Suisse, and HSBC announcing fresh job cuts today ( 2000 and 10000 respectively) In fact except for Shell the European Earnings today from the big companies also pointed to a very mosrose economic situation for the continent and the British banks reporting on Friday already a lost case.  Bellwether Siemens and the largest Chemicals maker BASF reported subdued earnings while unlikely European Pharma Giants Sanofi and Astra Zeneca reporting better than previous results. All these would vbe reviewed in dsue course at advantages.us but the Indian pharma midca story looked like it was getting better with Glenmark and Lupin reporting good results as molecule approvals for $1-2 bln drugs keep coming through and each adds poential sales of $100 mln to each company

Returning to India, with bank rates in a new orbit in a week after day before yesterday’s policy announcement, prospects for growth have dimmed up and its time to be cautious though India remains insulated from most of the global currency troubles outside establishing a steady rate for the Rupee and a healthy exports target.

India Midcap Healthcare: Lupin continues the growth chip

With Sales growing in India, Japan and South Africa and progress on three dfifferent molecules Lupin ended June 30 with $1.5 bln run rate for the year scoring Rs1.5 bln in Sales.

The Indian Consumer statistics | The Business of Capital

Manmohan Singh, current prime minister of India.
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There are stats for everything, from the days when it was The flexible indian Consumer, to The times in the nineties and oughts when he was the Durable Indian Consumer and now when he is simply the Tired Tired Consumer. With Rural spending growing 65% year on year in the Household Consumer Expenditure survey, we finally have a welcome report that actually validates why and where all the Durable goods companies and the FMCG ? Food majors have been peddling wares anew in the last 2-3 years.

Most consumer surveys are either pie in the cloud hopes translated into numbers like the TAM ratings much maligned yet curiously always ont he right mind maps..or on the other hand they are like the census making us rely on 2005 vintage statistics of durable sownership, even the wealth ones have no idea on month to month or even quarterly movements before turning in an annual update

The fact is the National Sample Survey led by both ET and MINT does show athe numbers for the economy, but as ET and mint chose, it could yet mean different things for different people. Mint argues we are still poor and growing on a small base in the hinterland, while ET argues we are in the middle of the revolution. Given distribution costs all discussions on moving to the hinterland are likely to be miore media hype for even the next 2-3 years as we have seen for the only viable distribtuion systems like e-Choupal and that women networked example from HUL/MFIs which really cracked up since 2008

ET

Urban India did better with the MPCE rising 68% to Rs 1,856.01 and prices, according to CPI-IW, rising 49.92%. The National Sample Survey, done every five years, was carried out between July 2009 and June 2010, covered 7,524 villages and 5,284 blocks. The data suggests there have been gains in real terms, as the rise in incomes has offset the rapid rise in prices during this period.

Mint

Despite the much-hyped rural consumption boom and all the social sector programmes of the government, the income inequality between the rural and urban consumer widened to 91% in the first five years of the United Progressive Alliance coming to power in 2004.

According to the 66th round of the household consumption expenditure survey released by the National Sample Survey Office (NSSO) on Friday, the per capita expenditure level of the urban consumer is now 91% higher than his rural counterpart, compared with 80% in the earlier 61st round of the survey conducted in 2004-05.

Mint rings truer to the heart in the first whiff, also with newspapers showing me the survey and having to wait 5 years for the next one, I pass on much more original commentary and analysis for the issue. A much in depth commentary from both, alas my advertising and marketing friends in the agencies do not get much from this even for media planning

Happy Thursdays! The rate hiked, will we go back to business? (Late Report)

fruit market in Obaköy, part of Alanya, Turkey
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Here you go, the beer will go down in happier times on Friday, as markets take an opportunity to reflect on slowness of growth in the worst performing Asian / Emerging market and the expected 25 bps hike a marker for keeping low interest and maybe even testing a new bottom as India failed in its 2009 bid to go over 10% and now avers 8% is enough/ FDI flows for April will be out next week as low interest and slow growth replace low interest rates and high growth. From a cursory browse through of ET(economictimes.com) it seems Cash volumes are now INR 90 bln a day in Cash turnover, last seen in mid 2003 and a third of that seen in 2009 in the same month

Some shorts are now paying full cent for the dollar in th Indian markets as keeping the markets up for monthly pronouncements stays in fashion and gives bulls the time to use filler time on the networks for the same 30-90 stocks championing consumer spending. At least Titan and Jubilant are more than extended and make easy pickings

The infrastructure / construction development sector still does not allow LLPs , but allows 100% FDI for performance, each new PE signing Infracos has signed a new road project ( $500mln each for a not too large project bid). The third sector still keeping me on a fine perch is aviation as loss making KFA and Spice jet also pick up 15-10% more traffic. Autos should become more expensive, Coal companies passed over in the next quarter even as RBI’s Financial Stability reort to the MoF still shows 18% credit growth in the banking system, a near equal deposit growth and a tenuous and uncertain link to the global financial system persists and noted players withdraw from the Indian market in terms of their cash on the prowl and planned to be in stake.

In a way, we still have the perfect insulation to stay alive in the global winter and the global winter runs prolonged but in the long run, i looks like we and the world are talking two different things and maintaining a sotto voce constance in the two paradigms a task akin to your English school teacher trying to teach you all the nances of letter writing and presentation, leading to another fractured new generation with their own lingua franca

Happy Thursdays! Foodies dismayed..Primary Articles shooting big pool

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In the vein of serious statistics collected and regrouped by the nations Economists, here is the latest symptom of the double digit interest rate infection..With global commodities holding,raw material inputs keep moving up higher as Primary Articles for WPI inflation crossed 12.5%.

Food group ran up 100 points from 8.06% to 9.02% while fuel is holding at 11.46% Scary figures but soon the lull in global crude and commodiies should make is way into thisese numbers as second half of the year might perform well for the Economy as per RBI Governor Duvvoori Rao’s expectations

As mentioned in the other posts of the day and in May, India and China would continue raising rates for some months to come thought he reasons are fundamentally different. Also, much like QE2 went mostly into a equity boom preceding good results, the FIIs are here and ready to take the indices north in line with India’s overall outperformance even as profitability will remain hurt by these hot numbers from the WPI baskets and transfer to manufactured goods is likely unavoidable.

Though, anyone maintaining shorts right now can roll on for a couple of months without being pushed out, the markets remain dull waiting for the inevitable northward move after just 4-5 sessions of uncertainty in which we have all recovered our growth expectations not to miss the opportunity to invest in the India dream.

India Earnings Season: Dr Reddy’s redeems the sector’s performance

Dr Reddy addressing at Patent Symposium
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You know Healthcare is beating other sectors this year..

But here in India, Ranbaxy and Sree Aurobindo have led results based depths for the entire market while MNCs continue to showcase $200 million  odd sales wshether it be Merck of MSD, Glaxo of GSK, Pfizer even after sign up s with Biocon and then Sun Pharma itself which like Abobott find Piramal Healthcare is trying hard to diversify into bigger segments

Despite impending regulations making its imported APIs expensive to use in domestic best sellers and its production snafus of Q4, DRL reported great 23% and 101% yoy growth in Sales and Profits  on a consolidated basis to ready itself for a better FY12 with $500mln in sales bringing a marging of 16%+ to $84 mln profits keeping it the Top 3 heal. Lupin’s results continue to show a plateau but the management is greatly appreciated by investors and analysts, Stride Arcolabs a sure winner and Cadila consistently shining in results. Orchid Chem has had some volatile performance swings but along with Glenmark seem to be good scrips to stay with and push esp with FDI and M&A control regulations changing for the lucrative sector soon

Biocon
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Logo of Pfizer Incorporated.
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A Whimper for the results season! Ewww So Awkward!

NSE building at BKC, Mumbai
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How my daughter would have reacted to them market story being played out..

The trading stories really lack maturity here in the NSE minefields of INR 1 Trillion — two trillion on a good day — with most value plays (Mid Caps) strapped on to 4 investors and 1 broker playing an amusement park ride and nothing so intelligent or scary as a roller coaster.

The results season just showcased how easy it is for Indian companies to grow double digits quarter to quarter but it is just not getting the bang for the buck as we look on to someone to start rolling fresh cash into the markets.

DIIs buying of course to reduce the impact cost stick on to this purchase cycle and are ending up with value picks where most of the leads coined by india bulls have gone kaput led by “rate sensitives” > Where SBI’s deposit rates and cost of funding was as low as 6% in 2009, its raising deposits by 75 bps to 225 bps along with lending rates as thankfully however been noted a s a great positive, but why they are waiting on ICICI Bank despite the big results or HDFC and HDFC Bank.

The erstwhile Mid Cap, Axis Bank has of course pegged on to a new size as the Big 4 locally and plans to grow slowly, an example of a stock market darling that got her ambition and served the investors well. But many more are waiting none fof them likely unresearched . The drawbacks are there nonetheless but not the ones recognised in the marketplace.

For example, without due liberalisation, most sectors now have leading stocks with larger sales and growth numbers, not listed on the Indian markets, we have the Emerging market ETFs supplying regular funds to India keeping India at a lowly7-8% weightage and the India ETFs getting into pretty laconic and clubby investment cycles some where probably because of the small number controlling larger sums. None of the drawbacks is so contrary than our predilection for the worst grade of investors/traders., like Morgan Stanley leading press and networks into a decided trend.

MS has a long history of catching the BIG LOSER pretty quick and in lthat it is almost a 99.3% consistent leading indicator on picking the wrong trend or a trend dying out. I am so tired and confused.

Morgan Stanley's office on Times Square
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India Earnings Season: Institutionalising housing infrastructure (HDFC results)

HDFC again underlines India’s NBFC structure / Institutional structures for finance & Credit companies across Infrastructure and Housing.

Additionally it emphasises that India’s disappointment riddled 2011 still means a more than 20% in sales year on year and 12 % profit QOQ. HDFC manages a 30% increase in Sales and 23% increase in profits for the quarter. Sales are up to $947 million for the quarter and Profits are an important 25% margin at $285.5mln (Net Profits after tax) with Net NPAs at NIL

Provisions have been maintained as mandated by NHB

Defaults are more likely if interest rate hikes continue into 2012 howwever fresh lending maybe under pressure immediately after the 50 bps hike

HDFC maintained spreads at 2.3% and including tail income from securitised/sold assets it upped NIMs to 4.57%

Construction companies had a great FY11, Sobha Developers for example intends to build an inventory of 11 million sft up ahead and is currently carrying only 130k inventory in fully built units and of the 2.7 mln sft under construction, less than 30% inventory is unsold.

Sobha was one of the unleveraged players having reduced debt to $350 mln at March 2010 Profits were more even than last time going to $11 mln for the Quarter at an ave realisation of INR4500 psft or $112.0 while for the year profits rose to $45mln at an average realisation of $100 psft (INR4000)

Meanwhile, Healthcare – Pharma major Ranbaxy PAT dropped from 20% or $240 mln last March to less than 15% to $75 million this quarter while sales were also lower at an expected $535mln clip

A wow Healthcare surprise | Advantage Results season

Ranbaxy Laboratories
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Cadila beat a lot of MNC competition with reports stamping their approval on PAT growth 50% yoy for the quarter boosted by on time forex profits of $45million and a revenue tick of $275 million almost twice the size of a GSK Pharma quarter of $150 million revenues, Cadilla scoring $30 million in profits at 10% NPAT and GSK Pharma at almost 10% with a $1.5 mln NPAT. The Pharma lot look surefooted and steady even as the Phase I winners wave by with pressures on Volumes, FDA disapprovals and new Excise regulations esp at Ranbaxy and Dr Reddy. The sector and its allied winners in Biotechnology are increasingly getting good vibes for taking revenues to the next level of $10 bln each from the current park of $1 – $ 4billion for the year just a tad ahead of the auto ancilliary specialists with $200 mln revenues etc. Emerging Markets should now steam roll some bigger numbers from this sector and we’re hoping!

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