India Morning Report: Another election day, more robust earnings

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

 

India Morning Report: Portfolio investment highs let India story dominate

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

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

 

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

 

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

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India Morning Report: Glenmark, Biocon investors start backing out

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

India Morning Report: 6250 again, naturally! O-O O-O

Asian markets do tick down slightly probably because of no Commerce in the financial sector as US markets are closed.

Even without anything much happening locally, The Chinese GDP underperformance at 7.7% was unlikely to be the markets’ concern here our export markets in China safe and the 9.6% production improvement and signs of bullish trades in Copper and other metals. India’s 6% forecast is hopelessly over optimistic and thanks to the networks avoiding the entire China update the fact of FDI non interest is unlikely to bear on market sentiment, and today, and in all 2014, this is a good thing! WPI hit a sharp floor at 6.1% and may breach much lower lewels with core inflation already below 2% Core inflation was basically flat.

In the midst of results season, the positive surprise markets did not expect and despite attempts will continue to be marginalized, is Wipro’s back to back second quarter of gains of 27% on year on profits but F&O markets are trading that and the last weeks IT news pretty feverishly /robustly. However, this interest is mostly maintaining shadows of activity while the Bank stocks get reassessed yet again. The realization that Markets were going to hold 6250 was all too evident in the one way candle of Friday, the 6 hours of sloping down, accelerating wantonly almost after 1430 hrs to achieve 6250 marks

Interestingly, a well-developed hedge fun industry would certainly have seen a short strategy for IT esp on WIPRO from some entrepreneurial trader after this bout of strong results, esp with WIPRO tempting fate and unlikely to beat history ( like Morgan Stanley did, Friday night)

Bajaj Auto and IDFC are my longs this week and will probably score very high as new funds enter the market and get earmarked to the new universe of stocks added in the buy lists ( ET’s Volume breakout series is a helpful ready reckoner, but I doubt you’ll easily find those mix tapes /snips on the ET Now carousel. Go figure)

Actavis may be a strong boost for Aurobindo with almost $8 in earnings in the last four quarters. However Aurobindo is buying its European operations with a EV of $1 Bln apparently ( $320 mln in annual sales) and obviously an easy divestment for ACT and the news has seen a $14 or 8% jump in the week’s trading in the US. After hours trading added $2 on the news . The synergies come from the operations tie -up with the 200 strong pipeline at Actavis

Gold’s busy start in this year’s trades, enthuse Indians but they have traded less of the metal under clampdown driving prices down in 2013 and the story is likely to repeat from a higher watermark below 30,000 this week

Comm stocks lead the indices back after a quick crash mid week on ticker news. Isn’t Debt trading news looming from the Central Bank?  Meanwhile if IRFs had been actively traded the rates started the great slide from 8.8% levels and would probably close  a 100 bp lower in due course whence RBI will return to relaxing the 7.5% Reporate ( excluding the 7.75% last tick forced on by the new Governor) Floating Funds would have a few investors more and any survivors of regulations may have new FMPs to this sector, but will likely be late again. Meanwhile the 10 year can well trade below 8.5% this week.

Energy stocks looked good for this week as well, but it seems there is a new LPG subsidy likely on the ticker for them. Kotak and a host of mid-caps report tomorrow and Dabur and M&M(Fin) follow HDFC with Biocon also reporting on Wednesday.

Midcap indices will probably harness a lot of gains in the week, none of them ready for a harvest of Sell on news tomorrow or Wednesday Avoid the L&T trade tomorrow unless you are fairly clued in to a tepid results expectation in the market

Edelweiss also reports Friday but the crown in the jewel should be Glenmark, that has already up since last week from 500 levels

India Morning Report: 6250 engages, but no higher levels in sight (Tuesday, continues)

The most important addition to the day’s manifestations is the 30-70 split for a 10% divestment in IOC as planned for ONGC and Oil India. That gives OIL India an extra large hole in its cash flow, the INR 35 bln it is required to cough up for IOC inordnately harsh according to them and likely the markets, making cues with the coming anti incumbency vote bearing in corporate and PSU minds ahead of June 2014. The other Khan did a great favor to Modi too, the PR machine working perfectly for BJP’s final attempt at the Crown

A great debate online on CNBC TV18 witnessing Pawan(Piyush) Goyal trying to squirm out of its anti progress stance as Opposition probably with the INR 90 Bln pending transfer fro CST coffers hanging big (Damocles’ sword, something) over the introdction of GST. Similar concerns plagued DTC and ensured the Cong  UPA government was one of the most unpopular regimes in the UPA2 mode.  AAP’s Vishwas is a great orator, with a Samachar plus clip going around very instructional for me to the fabric of a true politician, raised in a lower income/middle class family hitting it off with the masses.

YES Bank reports later in the afternoon, unlikely to have receded on its spotless record on Asset Qualities and with growth in Deposits returning in retail, probably would outperform expectations and we a great trade this afternoon/next week with the full impact of its having survived a crisis of NPA since 2011 and a crisis of Treasuries(and wholesale funding)  very much since August 2013 when the rally kicked in. Axis Bank reports tomorrow. The CNBC expectation set is 16% Topline and 11% PAT y-o-y. Indusind made a geat come to, moving the post earnings forward to today, his morning prognostications well received. (Reactive traders banking on a retaliation are well advised it isn’t mature for such predilections in the market, making India obtuse as it can’t already afford)

Kotak remains a good short even as Banks recover in a big results week promising a concurrent drop in Yields before the WPI report today. Glenmark has finally got the Volume breakout and is surging ahead. India Inc Earnings in Q3 are unlikely to be flat and the sentiment helped by low expectations as shorts ( helped along by Kotak Institutional) tried to break the market rally segments and BJP was again seen unlikely to make it. WPI scores should never have rided so high but the more than 25% fall in veggies will thnkfully also not be followed by other categories like Meat or Milk products and fruits where it started to correct the ‘clawback’ in price expectations

IDFC has returned back to the 100 mark ahead of results and outperformance by LIC Housing in the quarterly (subdued, but still) extravaganza is also certain. Bharti is leading the bull segment today and though it does not mean anything averse for ITC, the ITC scrip is unikely to get too much attention. Biocon seems to have finally come out for a good hit around as the Auto sector remains the Death of Miss Daisy(pucca middleware in sic! ‘uns)

Coal India jumped back 10% as a Dividend is announced after having remained below the IPO price for the public listing. Infy however is unlikely to break the 3650(3675) barrier as 16X is more than well discounted for the stock even if  MoST (CNBC TV18) estimates of 230 in FY15 are reduced to more conservative levels.

I missed the BofA and other foreign brokerage daily notifications today so if you logged in to your workstations, you could check for yourself. Axis Capital is playing for a mix and mash of Rural with the spine of Large Cap winners, to me that means trying to make HUL and ITC in the same lines?

Andhra Bank will definitely kick long for  dividend tomorrow but BOB announcements are due today

Aslso apolgoies to Aptart (Sandeep, F&O show::ETNow), I agree and have agreed with him always and he was bang n that it would be really stupid to short the markets at 6200, the rally from which however is even likely to peak out intra day..and India, where is the data!!

India Morning Report: On your marks, the rally is set to gooooo..

5850 levels would of course cede thru the week as correlation is reestablished and an agreement around the RBI call yesterday seems to have been on target to set the H2 rally in motion. Institutional investors have been selling the index futures hitherto a transparent look ahead hedge initiated for the select longs that have been holding the market above successive water marks since August 2012. Index futures selling aside, the Rupee move should also stop here at 58.50 or above that back at 57.90 whence long buying in scrips thought to be carrying their sectors and the indices are in fact treated to further quality buying

Godrej Nature's Basket
Godrej Nature’s Basket (Photo credit: vm2827)

However in concrete terms shorts on Godrej are a great idea as are longs on ICICI Bank and M&M. The side tag wars of Godrej and M&M in scrip selection if any for both promoters based from ‘amchi mumbai’ are non existent primarily because fo the inconsequential daily volume of 304k in Godrej Industries and thus for your institutional desk it is a single trade scrip, one position ruling its trend and thus will be a short beyond 20 levels too if one wants. M&M and USL similarily lead the remaining value in the market as some smart promoter moves, especially the M&M deal with a foreign promoter scaling up its auto ancilliary units in a single consolidated operation. USL is as good as a iDFC but as the network pick presented (Dimensions?) it is in a strongly invested position. M&M is also important because consumption will also come back in the second half once the recovery is in play.

Banknifty drift is transcendental and unlikely to impact the prospects of private banks leading the rally.  SS had a great pick in Dena Bank and PNB is also a great long. Air Asia and Jet Airways take off on new India inc rides that are definitely more significant than mere exploration with Ramadorai in the chair at Tony Fernandes’ Air Asia and SEBI following up rigorously on the 51% Naresh Goyal controlled Jet and the “???” Indian controlled FDI by Air Asia in almost an established Malaysian treason habit in India investments

The sudden jump in Gold imports still does not mean good redeeming news for Titan or the slip on the CAD but is probably a last hurrah of the clampdown/controls. Jubilant’s correction looks like could continue another 20% down after the move back from 1300 to 960 in pre-open today one also feels that shorts on REC or Jet are misplaced at these levels of 200 and 460 respectively. Buys on ITC and Bharti Airtel are likely t o hold for longer term though minor corrections from these levels as for YES Bank have to be watched for, including any newsy disruptions to them. FDI increases in Banking and other sectors ( though not Media or Legal sectors) are looking likely but within 2014 H1 after government formation is cleared and not in going away policy presents which would e intemperate for the coalition at this point and more importantly for India Inc.

Rupee impact: The Free fall continues, small snag on equities

A world map of countries by gross domestic pro...
A world map of countries by gross domestic product at purchasing power parity per capita in 2007 from the International Monetary Fund. (Photo credit: Wikipedia)

Unfortunately, with India inc again adding only probably less than 10% of its External Borrowing Capacity in debt, the Rupee and the equity markets have consequently snagged on the  Asian free fall, and now pro bably rupee has a trading target of 4-5% in this move to achieve the new 2014 equilibrium. While the stabiity is currently lacking it is primarily because for the Rupee it is not a daily volatility that is germaine to the currency markets and the trading range is much smaller than the other asian markets while it is still not picked upa s foil to the ultimate managed currency the Yuan which is a precipitating event of greed in the “Currency Wars” mechanism

Having said that, if one were to herewith propose a new rupee exchange with its limited degrees of freedom, the government cannot and should not bother about stepping in till even 65 levels and find meanwhile a longer run solution to the CAD, while the markets will take the Rupee down to 65 and fundamentally destroy the entropy required for recovery to resume in the aftermath and while it may be a jurassic/triassic notion of yore , destory the eigenvalues of Purchasing power parity much before the global market engagement is  increased   to a true equilibrium.

Mumbo jumbo apart 58.50 should hold because of the stability of governance and the defeat of inflation but if it is whirled through the week, it will tip to 60-61 levels and thence may not ever return to anywhere near Friday exchange levels because the fifth of GDP that is exports will straddle the rupee for the remaining term of FY14 for Global trade agreements for the year

Graph of the Gross Domestic Product GDP (at Pu...
Graph of the Gross Domestic Product GDP (at Purchasing Power Parity-PPP), per capita, as a function of per capita Toes. Year 2004. Data available online at http://www.iea.org (Photo credit: Wikipedia)

On the equities front, today’s event of correlation in moves actually mirrors the hidden correlation in capital moving out primarily from debt and in probably a stabilised form of market prediction from JP Morgan asking that the recovery bottom has not happened and will happen till now. While the RBi therefore is discouraged from rate action next Monday, it has put in motion a cascade of rate cuts which it must follow through and avoid running into damage control esp as Fixed income Markets will continue yielding lower on higher demand despite FIIs leaving Indian debt in the first pike exit of QE linked withdrawal from Asia as the lowest volatile investment and thus unlikely to produce ‘abnormal profits equated with Asia’. The PPP map of the world in the meantime as reproduced here from a long left to be updated web provider of images shows the fast losing relevance of this indicator and probaby needs a trading measure to it to harness its gains.

 

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