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

'pharmaleaders.tv'
Thanks Google!

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.

 

India Morning Report: HDFC Bank gives way, KG D6 ‘honestly’ increasing output

Of course the news of the week, last week preceding today’s AGM was the burly new gas find in MJ1. Actually predominantly for Oil, the MJ1 also falls in a gas rich area but details apparently have not filtered from the ongoing AGM and will probably be easier available to ‘non-digitised’ social networks  which remain the most important achievement for Reliance and partake of their retail investor community of yore. Reliance will be forcing a turnaround in KG D6 output levels too after a long wait.

With india’s digitized data communities and even the lack of analysis communities a virtual impossibility, online social networks in India remain dominated by shopping cart brands and facebook and twitter remain ineffective for real business conversations despite teh affectatons as a large global user of social media.

Importantly to those of us who missed Idea to stay on the run to bank nifty, it is the right time to invest in banks es as network analysts and “chhutbhaiyas” in the markets continue to try to scale up the tiredness of the bull move earlier as always falsely seen to be led by HDFC Bank and HDFC for a few.

The FDI panel has made its recommendations and as with all things UPA, hose that have swtched to the bear side are still on the other edge because of such policy pronouncements that are so comprehensive one has to wonder if this government will ever go beyond cabinet Oks and then continue to miss the parliament or ordinance, an uncomfortable fact they seemed to have used home with earlier such comprehensive proposals  already proved to be not worthy, excet for the putting of thought on paper and certainly not an implementation blueprint giving the holey book of India to the dubbas of the opposition  NaMo and namesake Amit and one hears Adani as ‘implementation power’ of rural India.

Update: As Oil tracks evening session vales on the MCX in toay’s morning session it seems to have reach an optimal level for a big optimal short and if one is willing the 5400 contract can be kept rolling to a target of 4500 but in more than three months from here.

However such new eigenvalues and initial states apart, one still does not see any need to push forward recovery or for FIIs to exit India again as the bare minimum in play now is big ticket enough to get international media coverage of the coming big ticket recovery and of course the elections as well. Stay long on private banks like YES and select PSUs like PNB, don’t short the Banknifty and dont expect any pre election rallies either bear or bull for now.

Sell Side brokerage research however is increasingly reaching their ‘trend flatulence’ in the hype cycle esp detailed notes from Macquarie progressing retail credit growth at ICICI bank and their use should get limited too, till more coherent thought can lead the selling of India recovery to foreign players in the next wave aa normal di in the usage cycle of new products, in India’s case still true for research. Rerating at brokerages and new players like Deutsche, despite a good global dbAccess conference (in its most obscure markets, USA). Stanchart had a good media ‘week’ just less than a fortnight back and the HSBC seems to have slipped with lack of HQ and trading room attention on India.

Deutsche and even MS despite a good back handed effort from Riddham Desai for ‘India according to Morgan Stanley’ last week sticking to its 6% FY14 stream of thinking and detailing it rather at the last minute but still making it a comprehensive view. You prbably cn already guess about my opinion of other such commentary by the BNP Paribas wealth, trying to skeet the losers of yesteryears as Defense scrips converting to trend leaders, another “strategy push” which failed to interest the bulls or the new money to INDIA

Things look dustier in fact in Turkey because of the revolution and in Taiwan / Vietnam as China gets ready probably for exporting jobs to Asian locations and importing a lot of foodstuff in more wholesale ranges from American pork(M&A) to wheat rice and more.

Though in a more copious mode under the China series’ we would have covered details but right now i seem to be on shaky ground wrt revenue/study opportunities and writing has to be restricted to these daily / weekly updates i hope readers and followers do not take for another occasion to stop reading and writing. Aussie is going to be the other big ticket investment soon and Korea is not far behind so India still does not get rerated up in global indices, but one can see the noise of rerating up is real except at S&P which is better off completing a going global transaction of CrISIL it is stuck with as its arm in India

India Morning Report: A new bank, not Citi, 8 not 4 and numerous other slips to the mile..

Vikram Pandit’s new efforts in India with Kampani’s JM Financial may get JM a 10% bump in stock quotes but it is unlikely that his 50% buy of the subsidiary and 490 million warrants worth 3% of the listed company with Hari Aiyar and wife in the new bank application at this stage will build on anything like branch infrastructure in at least the next decade, so watch out for questions on the application being followed closely in the media?

Otherwise of course the Chinese continue to prefer the number of wealth ‘8’ in their phones and registration plates for the cars that are sold and you should avoid gifting them anything with the number ‘4’ thats sound like the word for ‘death’ and Morgan Stanley leads the list of suitors looking for a bear to hold as Indian markets sit pretty on last year’s prudent calculations still not outrunning the underperformance in sensex companies in the quarter gone by. Markets are headed to all time highs probably but the next target is 6350, steady as she goes..

A wonderful FNO pick on Tata motors reversed my earlier opinion of the TV18 guest who chose Tata motors again but as stock vols (option vol in current month series) closed above 40 the bid to range the 280-310 stock trade with a bought put at 305 on a strike of 290 as recommended should gladden many a margin accounts. The strategy is brilliant only if when it opened this Friday, the bids in the normally not so liquid stock family  would not have quoted the ratio spread at a profit. Buy three puts at 290 at today’s open and sell four 280 puts in a minor tweak to the strategy played on the network but you could leave it a t 1:2 as well

Do write to us above and link in with your blog / facebook page in the comments. 2013’s dull exports and consumption story for India in the meantime cannot stop cosmopolitan urban India from turning Jiading(F1 track) and Pudong (Shanghai) and Lavie and “Caprese” luxury bags with Gucci stores springing up here now much after China’s $15 b market accepted them despite our protestations to the contrary .If not the Chinese predilection for lucky numbers, one could still catch a fancy to under-reporting ages , the ilk spied upon by Jug Suraiya on Page 3 in his TOI op-ed of today

ITC results should be eagerly anticipated and with infracos back in demand together ITC and IDFC will garner a lot of new outstanding demand volumes ( open interest) esp as JP Associates has completed a first rush yesterday to 80 on the futures. Sun TV is much better than Satyam though but both are equally risky on corporate fundamentals after the corporate governance in churn in either of the scrips. Sales of $1.6B at ITC in the quarter reflect the last of the big consumer companies making a sustained comeback after the jump in Q3. Europe based consumer goods giants including Nestle, Diageo and Unilever have already been singled out for investor attention in growth deficit hungry Europe for their stronger Asia businesses (ref FT.com, subscription required)

The New Drug policy is out though impacting margins at Pharma MNCs and Cipla & Lupin will also trend down on the repricing of margins across the board.

The main topic on this busy day could still have been the new RBI trend policy established by the WPI falling below 5% and the CPI having come in earlier. Though loath to check the sub indices this morning i see a Core inflation at 2.77% near all time lows and I do not believe we have seen the last of food inflation though April did not get to be a major run on the home makers’ wallets.

10 Y yields on the new bond have already responded vertically to near the 7.25% mark and thus RBI will take the whole term down immediately in the next three-four months before growth actually responds, likely leaving the rates below 7% forcing banks down on deposits despite the flagging demand and without more than a signalling cut in CRR. The news of more cuts was however the most important one behind Thursday’s heart of a rally.

 

India Morning Report: Private Banks paying for PSU heresy

feted by

Bank nifty private bank leaders were again targeted as investors refused to let the index give up its gains. Those locked into long PSU strategies remained headed for negative gains in the 2013 cycle and switching trades also not being available, as a measure of respite seemingly, unwitting profitable counterparts were targeted by those prefering the short side of the target at nifty near 6100 and banks are unable to resist these sharp cuts with most other new longs since April not including banks. To wit, Indian Bank is trading in positive territory being one of the few whose positive uptick in Q4 results fully recovered the profit habit in the eyes of investors. Canara ‘s NPAs for examply stayed above 2.6% headed for a 3% cut in assets and negating any other income of the bank.

New positive offshoots from Infra and results from Karnataka elections that firmed up chances of a stable regime the next five years till 2019 also indicate a firming up of price levels for a success to be feted by equities in Indian markets. All Capital markets look to move unidirectionally in the first few months of confirmation of recovery as fixed income markets celebrate a new 10 year bond and yields move closer to 7.25% levels Strange opinions from Goldman Sachs take over the small screen though as the broker’s opinion tries to spread /believe recovery has spread to stocks like L&T and Apollo Tyres, which both seem to look askance yet and well may lose steam to winners forom metals and minerals first as those look more positively geared up for a recvovery than these GS recommendations

Meanwhile IDFC has hit a late stride on the bull run and DIIs including bulk buyers like LIC look to be stuck with purchases at these or higher levels except for a later correction to 5900 and not more than that

Germany’s IIP data meanwhile only helps our belief that the Euro has taken the proverbial high road, any lack of recovery in the 17 Euro countries unlikely to disturb the currency’s upward trend beyond 1.36 ( hsbc target0 or other higher targets near 1.45 even as any meaningful recovery in the 17 country economic zone or progress on closer union may also well be ruled out after German elections till 2018.

Disinvestment mandates to achieve promoter compliance with sebi requirements (GSK Consumer, HUL) seems to have rung the cash registers at HSBC as the banks good results earlier this week, also showed its great pipeline in Asia, theonly one including both China and India.

 

India Morning Report: The meandering world’s progress condensed in a fete of ‘immediate payoffs’

The Seal of Salt Lake City depicts the building
The Seal of Salt Lake City depicts the building (Photo credit: Wikipedia)

With Goldman Sachs moving its next meeting of shareholders to its other back office in Salt Lake City, Utah, India’s sloth in an optimistic IIP growth of 2% and FY 14 downgrades to 6% by a couple of foreign brokerages it was all but sure that Monday’s bad openings would be followed by a tirade to the finish line with Network analysts from Ashwini to SS and Udayan Bose (TV18)  pining for the 5500 mark to make the uncertainty go away. Of course that also unleashed the India outsourcing Bull with IT companies a safe bet and TCS the largest Market Cap company ahead of Reliance Industries.

However, sanity has returned to the market since with interest and eyes returning to Indian equities and the Dollar index having recovered its paces since the Yen correction at the start of the series without the Yen losing any of its pressure to cross parity to the Dollar and the Euro denizen of Germany proving that it is unlikely to feed its south neighbours including France (conceptually) anything other than Target liabilities for the growth spend everyone was sure Germany has keeled over for. Germany preponed its budget exercise to reaffirm its primacy of fiscal discipline as the Euro recovered last week’s blues since and the EU summit failed to move on any of the agenda items. The European economy still needs to work out a longer timeline for its recovery.

Trade deficit data however points to a tight cap on US GDP growth for 2013 and similar warning bells toll for Exporting countries like India and China though EU and Japan look at the small recovery in both Capital Goods exports and imports numbers for US in February Capital Goods trade up by a net $1.1 Bln in the ever increasing Trade deficit and a bleak month for the US in terms of the shored up Fiscal surplus breaking down along expected lines in February’s big Fiscal deficit.

India too therefore looks at a larger trade deficit even as Oil prices come down by over $10 in the last 30 days with Exports barely maintaining the newer levels it managed in the last throes of 2008-2010 and February’s deficit of $14 B is likely just an aberration after January’s $20 B hit.

Markets look better in equities from banks climbing despite the fourth estate coup against the top 3 private banks looking to make a mark in wealth as brokerages rang the bell for State Bank and the stock climbed up 3% in Banknifty’s climb back above 12000. The attention on ITC which was almost a giveaway for the lack of short interest in the broader market also encouragingly continues and the picks on Bajaj Auto should also bear long again than continuing south or short as last week. NALCO and RCF Offers for Sale also look lined up to complete successfully with LIC’s participation in the OFS taking its stake to 6% in RCF. The residual stake sale in Vedanta’s BALCO and HZL investments could really brighten up India Inc’s balance sheet in the current fiscal itself but one cannot gauge the impact of continued market confidence to the T given the fourth estate’s penchant for equating accountability for the government with all lack of information and analysis on any story /subject

India Morning Report July 18, 2012: O if only Pranab Da was the Sensex!

 

 

English: Source: http://georgewbush-whitehouse...
English: Source: http://georgewbush-whitehouse.archives.gov/news/releases/2008/03/images/20080324-6_d-0665-2-515h.html President George W. Bush meets with India’s Minister of External Affairs Pranab Kumar Mukherjee. (Photo credit: Wikipedia)

Mr Pranab Mukherjee can possibly land a 73% vote in the Presidential election later in the week as Mamata Bannerjee capitulates for a fellow Bengali. Early monsoon worries caused a big hole in the states of UP, Punjab, Maharashtra and even Rajasthan with more than 50% deficiency but Foodgrain production is already 257.44MT for the year ending June if government estimates are believed with Record production in Rice(104MT) , Wheat (93MT), cotton and sugarcane keeping prices down in the meantime. this last estimate has been revised upward by 5MT from April.

However Nifty’s rangebound worries have initiated more correction calls and already stopped out some shorts at 5200 where it lies in wait, as the most undervalued emerging market and also as the fastest growing Coke market where Coke and Sprite both grew by more than 30% The MF reforms are going to come in with commissions restored but the usual halfway house on the bridge of expectations draws a line in the sand for what uptick you will get from further policy pronouncements. The macro Indian story has to celebrate but next year is going to see contraction in agri production with Sowing in crops down from 10-30%. Even in hot commodities like sugar and cotton, the downtick is there though just 2-4%(in sowing)

India is still 15 points ahead of China in the Nielsen consumer confidence. However IMF seems to have given it the thumbs down despite keeping growth estimates north of 6% with India’s Fisc targeting a number the same as Ireland and higher than Spain , vying for the 8.9% mark in 2012 behind Japan’s tsunami restructuring funding and not likely to improve in 2013 either , making mockery of india’s budget estimates brazenly, giving Moody’s and S&P fodder as they are set to evaluate the india rating in the next 8 weeks. Guar seed is the only commodity doing well though the shutting of the Straits of Hormuz mean Oil could march ahead again. India’s trade deficit data for June found Oil buying missing ahead of a probably ban on Gold imports to $10B from $16 B in the month of May

Bajaj Auto reports today and Hero Motocorp follows tomorrow while non discretionary consumer companies ares showing health in Sales and in marketing spends at 12.9% for Marico

Dr Reddys and HT Media report this week with JP Power closing out on the weekend with Q2 numbers. JP Infra is poised to report the Yamuna expy opening as well. Monday opens to expectations of good results from Colgate and HUL. TV18 also reports on Monday followed by the Pizza guys and Dominos franchise holder  Jubilant Foods on Wednesday when the IT saga unwinds with par for the course HCL Tech results

Smaller banks Karnataka Bank and Bank of Maharashtra report this week then ING, Canara, LIC Housing  and SBBJ set the stage for the big Yes BANK reports on Wednesday (24th). Kotak Mahindra Bank reports tomorrow.

 

 

 

The :LATE :LATE MIDCAP REPORT: Where promoters wreak havoc, is there a reason to formalise insider networks?

Securities and Exchange Board of India
Securities and Exchange Board of India (Photo credit: Wikipedia)

Indian promoters as Anil says so often on CNBC India (On Menaka’s The Firm) promoters control so much of Capital that trading in the so called Mid Cap segments here the Daily Volume is in a few thousands is an exercise in futility as the promoters manage in a bid to secure their Rupee funded investment which does not track global investment valuesin Dollars consistently. More than that domestic investors would probably like more investment opportunities but can be stopped out any time by short interests or market makers’ floating stock on whims and fancies market participants are so eager to drive home. One wonders with such a prescient SEBI and a tough act for others in terms odf trading regulation and ground conditions, is not there a way to formalise insider information on those not unlike the Russell 1000 in the US which has a pretty accurate information bag to play to facilitate long only trades in such counters and list specific qualification for opening short trades on a counter esp if it passes muster on a score of negative buzz. Eminently doable if one decides to do it. After all, these are investments and everyone ants investments to grow. Apart from unreliable balance sheet data, fine line items on export and import regulations, and somewhat transparent FCCB/ECB obligation sets which are yet among the most opaque, promoters like Ajay Piramal for example are not balanced by yet unieldy and larger controlling powers of the retail investors in the Indian market than comparable trading only investors in the OECD world

To note: The author dissociates himself from well wishers and ill named friends who use proclivity as a

network to illegallly monitor and destroy relevant and irrelevant information and decision making equally.

To note: The author dissociates himself from well wishers and ill named friends who se proclivity as a netork is to illegallly monitor and destroy relevant and irrelevant information and decision making equally.

Promoters that try are probably equally to blame

JYOTHY LABS (SPIC)

MAX INDIA (33 B inflow inc 9 BLN from unrelated sales not unlike DLF – A split could make businesses worth 50B int o two orth 150 B) and not ready because ‘insiders’ would know but likely promoter stake diluions etc as it did not start abull move at 188 ( CMP 194)

PIRAMAL LIFE

ORBIT

TALWALKARS ( expansion plans are 3 times slower than offer document, always known so yyyet stuck..because of a standoff with operators/institutionals)

PRESTIGE ESTATE

M&M

MAHINDRA RESORTS

GUJRAT GAS

India Morning Report (June 28, 2012) – Expiry Day is here, Nifty on way to 5300

The Big Thursday is here and stocks still have potential of a positive run despite a continuing more tentative move that seems to be taking Nifty the hole 9 yards to each new high especially ith the Dollar linkages still in the equities segment. Dollar should be weaker in CDS trading today as the upmove is confirmed and most tail events behind us with the Presidential battle on. The SGX is enjoying its moment in the sun as a leading indicator of the collective sentiment and Sensex futures are doing fine too in this and the July series. July series positions include good rollovers in Public sector Banks like Bank of Baroda, big moves in the Big Four in Banking and that could mena a big upward correction for Axis in which shorts continue unabated.

Reeforms are not likely to be germaine with  a valid impact on the markets as most would be actions on direction we have seen turn out to be wishy washy temporary cliffs for bears in the wild. india however continues to hold the solitary hope for a global recovery with China yet not buying and the BRICs sentiment challenged globally by fears of hyper inflation which india watchers and India bulls know to be unlikely in this part of Asia

Reeforms are not likely to be germaine with  a valid impact on the markets as most would be actions on direction we have seen turn out to be wishy washy temporary cliffs for bears in the wild. india however continues to hold the solitary hope for a global recovery with China yet not buying and the BRICs sentiment challenged globally by fears of hyper inflation which india watchers and India bulls know to be unlikely in this part of Asia

No QE, no dollar depreciation

The Euro ready to give way from 1.27 levels to 1.26 levels, it is unlikely that the Dollar would get brow beaten and the Dollar Index rising would mean the Rupee continues to settle to new final lows as no fresh probability to assuage the larger revenue deficits in India is seen. However, in a few days our imports will actually start getting cheaper and impacting a lower core inflation. When that will translate into CPI inflation improvements or actual action on the Diesel and Fertiliser subsidy programs is anyone’s guess. The currency is unlikely to benefit from small fills / corrections on the Fertiliser policy. Yields in the fixed income market run north to 8.22% levels too meaning more room for the Dollar to take up

Aviation stocks were back for a fleeting moment when the up trend was in acton Monday, but a Dollar depreciation seems to have put out prospects on them in these uncertain policy times. India specific political reasons like NDA have largely become dried up wallflowers but a hope of Manmohan Singh getting FM portfolio being dashed might still mean more pain for the Rupee. Of course with a majority of the GDP benefitted by the Rupee the stock market might start seeing the Depreciation ride as more fun than pain.

Dollar remains a safe haven and Treasuries continue to surge south on yields.

Rupee Impact: Why the Euro can’t fall enough for the Rupee

The Euro of course is at 1.26 and the Rupee, happy kept its level to the Euro as benchmark for Dollar’s movements against the Rupee has gladly tempered this rise of the Euro to 70.40 in morning trades ( Interbank rates at 70.4, nse can run at a retail premium to 20 basis points – not just points)

The Dollar’s weakness in the week of more QE ahead of Greek elections has been shortlived hopefully because the QE rumor is a shortlived one, however, the Fed would extend its support thru Central Bank swaps ( see advantages.us – It’s for sure another LTRO, but QE? ) Anyway it means the system would be awash with liquidity and Gold, Silver and Oil are back on the (upward) run. That is another week of respite for the Dollar index hardly corrected from its peak in the first 3 days to 82.5 and no falling rapidly, with the Euro 1.26 levels likely to be a strong support in a liquidly able banking system funded from Europe, other G20 or the US

The Rupee is likely to breach 55 on the long side if the trend lasts long enough and the fall for the dollar may not be a one way street in the Indian FX markets as the USD is defacto the only currency traded including cross rates to Euro and JPY good reference for currency moves and the Revenue account

Indian Rupee Symbol
Indian Rupee Symbol (Photo credit: vishuhospet)

having limited avenues for Dollar speculation, Hot money flows still find a way to keep the Rupee excessively week

MidCap IT is ebullient at the improvement in Margins but unfortunately for the lean prospects of IT the Rupee is unlikely to help more than the 26% depreciation at its ‘peak’ of 56.50  to the US Dollar

India Inflation Reports (May 2012) : Last series for WPI data?

World map showing inflation, updated for 2009....
World map showing inflation, updated for 2009. Grey means no data. (Photo credit: Wikipedia)

The use of monthly CPI data for now more than 14-15 months with Y-o-Y inflation comparisons available for 2 months on the trot, it may now be a matter of time before the WPI data becomes secodnary in the Indian scheme. Consumer point inflation though has been refashioned and some may want to verify it further and the WPI trends at sub series level across Core, Primary and Fuel as well are available for estimation quite discreetly and forecasts may not get market confidence for some more time.

The Core inflation is expected to be the biggest encouraging figure in the May data at 4.7% almost half of the data till no in the past one year, which encourage bonds to move down to below 8% in anticipation of a positive RBI Monday. Fuel inflation though likely to go back to near 13% is s till belo the 2011 benchmark of 14.5% and the Primary Articles data of 12% is actually understandable and does not require more policy action as commodities trend down steeply in many cases despite China’s buying having begun in earnest in May

The rate cuts may be 50 bp as pointed out by current 20Y yield movement but then RBI will be not expected to do more than 150 basis points in the whole year and a 50 bp cut removes the flexibiliity from its hands having committed then 100 bp before JAS and OND quarters even begin and that likely means the markets will prepare for a slow(25bp) of fast ( 0 bp) descent on Monday

The inflation data is a little late but safely bullish for the RBI Policy day at 7.55% Primary inflation at 10.88% was still less than 11% and fuel inflation did not get most of the fuel rise in the last week at 11.53%. The Core inflation was below 5% at 4.99% primary and Fuel inflation ere at 9.71% and11% in April 2012

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.

A time for infosys, past

Image representing Infosys Technologies as dep...
Image via CrunchBase

A time for Infosys, past The cut of growth estimates to 16% and a last clarion call from Infosys( before going down) for high quality revenues led by consulting as CTS shines up on the horizon wihtth low cost high volumes and TCS maintains the domestic lead Esp suspect would be macro strategy pronouncmements in the wait and watch mode , having plateaued or lost relevance in managing high relevance for clients and or creating and non linear growth in products and platforms. Europe’s outsourcing experience is patchy at best and they are busy at home this year, growth in Asia not spilling over to spread of outsourcing for another decade? Infy wants growth from Europe (touche) and 5 large deals were signed in thwe quarter for $500 mln value, one in Europe. Margins are good for Infy and hedging for less than half the revenues at $877 mln. Sales were $1.8 bln , forecast for Q4 flat at the same

Image representing Cognizant Technology Soluti...
Image via CrunchBase

$1.80 bln and expecting yoy growth to end at $7.05 bln revenues in March 2013 Also funnily, the management team just about managed to not sppeak about growth in banking and financial services but then the sector remains key, we believe also nearshoring is more key than you would believe in such a key Outsourcing insdustry thus Accenture outscoring Infy by 5:1 in coming bids and wins despite the “potential” for this industry,. Between CTS and Accenture’s growth (outside India) Indian IT is up for recalibration or individually for Infy and HCL Tech

Q3 Sales INR 9298 Crs ( INR 92.98 bln) up 12% QOQ from 8090 CRs (INR 80.98 bln)

Q3 Op Margins 4.4 % currency advantage 3% from rupee

Q3 OP Margin 31.4%, pricing up 5% yoy

Added 49 clients, 5 large deals, 2 above $500 bln, increasing share of outsourcing of clients with higher quality business key target ( biggst weakness in strategy)

Europe and life Sciences and healthcare grew over double digits in size from last quarter

Future Outlook

Pricing stable

FY2012growth down from 17-19% to 16.4%

Moneycontrol Interview – Boardroom

Accenture
Image via Wikipedia

The RE60 basis for new Renault Nissan Car

Currently an offering from the 40,000 units a month three wheeler stable of Bajaj Auto, the $3000 vehicle may be presented for public governments to replace three wheeler populations, Production is scalable to 500k units a year from existing 3 wheeler facilities and its Carbon footprint is the ultimate selling option for the company and buying governments/auto drivers at 60g

English: Bajaj auto rickshaws in Adama, Ethiopia.
Image via Wikipedia

The new on again, off again

Ambani House July 2010
Image by Jay Hariani via Flickr

Happy New Year everyone. As head of the largest falling business empire in market capitalisation has come back from the East and Tata Airlines to my father’s group of companies, I have organised one little reunion with ( no, not my little brother) the one that matters the most tome and I knew of.

Mukesh Ambani has taken up the $250 mln debt ( We are transferring a lot of idiopathic drivel to sanity courses with 1$ =  Rs 60 USDINR=X at 60 will likely overshoot the final average rate for the rupee this year we hope and it also gives us time to think and strategise, to plan the year and get readers more reason to ccontribute to us.

The $250 mln investment will alow Reliance media efforts to come out of the gray zone to some extent with new brands pretty usurius to build even  in Big bad Mumbai. India can do with a strong industrial group coming together and if Mukesh Ambani is able to put his act together after whatever component of the $8.8 bln development costs are paid back to him by DGH/ MOFPET

Mukesh Ambani at the India Economic Summit 2007
Image via Wikipedia

Earlier Ambani in his true bludgeoning self had kicked himself repeatedly with shadow investments in his telcos apart from the misadventures of younger bro’s RCOM expansions and RMEDIA expansions in at best shady ventrues without admissions or taints of corp governance and administration, easily run from the BErmudas if so willed. Mr Mumbai Indian in the meantime has been singularly helpin gthe banking sector avoid too much correction in India during the bear run, absorbing more Bear points than a Canadian grizzly bear on each rough day at the markets.

Are India’s Derivatives Norms sufficient and battle ready?

Bank of America Plaza
Image by Frank Kehren via Flickr

While india’s central bank has been rolling out reforms at a slow pace even without significant market acceptance as desired, from Fixed ?income Derivatives to the current CDS approvals, it has also been concurrently cajoling foreign banks to stop overextending non funded lines and off balance sheet exposure among other actions that are a sure sign of a shallow market on ransom for each Golden Dollar that continues to hold us enthralled because of the asymmetrical flows.

The last in this series of a dissatisfied regulator was a series of penalties imposed on SBI, ICICI Bank and others  for not having any norms for their derivatives desks in place. Shortcomings include a non-existent risk management system, and inability / no desire to conduct due diligence on suitability of these products. 19 banks were penalised and have been served show cause notice.

Thus on top of already scarce demand and skin thin trading in derivatives, we have also had our top line banks being accused of not understanding their products and we do not even see any speculative profits or

English: Kundapur Vaman Kamath (born December ...
Image via Wikipedia

even losses from the alleged transactions as no disclosures were required for the products, probably engaged on an OTC basis and contract documentation never completed in tradition of the big desks at London and New York 10 years ago.

Really, we need to invest in the human resources and the infrastructure to make these thriving businesses for banks before we go looking for retail participation and this depth will not come from one off trades like India’s Olympics medal haul by the Kamaths and the Kochchars.

India Bond Impact (Fixed Income Report) : Inverted yield Curve accentuates mismatch

The classic inverted yield curve is caused by a liquidity / solvency crisis and one could very easily be caused in India if attention is not paid right now. As we worried last two weeks, short term liquidity drying up despite auctions has taken the short yields to 9.3% a new premium for these two reform decades for India since (1997) while the first Fixed /income yield deflation has hit the shores like a Tsunami fromt he west to 8.3% from 8.75% last month

Ideally the mid term yields (3, 5, 7 yr terms) responding to inflation however can harness the inverted yield curve we have done on multiple occasions though never when Oil was rising along with the Dollar and it remains to be see if India can cross the rubicon and beat inflation with this stick than get grungy deflated like Europe.

India should probably avoid the 20 year or 30 year terms for bonds as they seem to have supported deflation in the Wild West, bu tcan get matching terms for Infra projects with 15 year concessions matching 15 year financing to at least make sense to investors and raise some cheap money to outgrow the deflationary impact on the long end.

Foreign Banks in India: European Banks deleveraging in Asia Part II

English: Skyline of Mumbai from across Back Bay.
Image via Wikipedia

According to the news flow, borrowing costs across Asia have risen upto 50%, that’ is a sizable loss on balance sheets too

where Asian swaps would have been incomplete rings and with this situation of freeze in financing however expected, those betting on Asia’s growth despite the picture of the slowdown ( not when you considered Asia in subdued growth but when you – and many did – bet on contrarian growth or that the globe did not matter )

There is no denying however that Asia will still grow at 4% and Central Asia & Africa as a region would grow albeit at its speculative trade/underdeveloped paradigm rate which was Europe’s version of an Emerging market European banks have to exit faster though if they want to be not caught in the flurry of exits. TThey will not get a penny’s worth in 3 months if deleveraging continues. Expecting banking assets to be illiquid is a readjustment that will cause such reactions in the market esp with Asian banks already suffering at the hands of repo financed Europe for a decade in Swaps and derivative contracts.

I remember AIG spent two years trying to get anyone interested in its business last time  despite profits in Asia. Credit Suisse needing to deleverage its market book is not a good sign for its advisory business. nor UBS focus on private banking / wealth as its future. Credit Agricole is shutting shop in 21 countries after losing EUR 637 mln in the latest quarter and quitting 1000 jobs in Investment Banking businesses after 850 jobs in France and 650 jobs in Consumer Finance and Factoring

In India, the costs have risen on par despite the strong ECB performance till October by the sheer drop in the rupee not the whole 20% but the one from 50 – 55 ( 54.50 today) a further 10% even as only 3-4 FCCB borrowers are out of the race. Opacity in news flows continues to trouble those with exits firmly completed though, and that is the raison d-etre of having a TV channel to shout from as the index takes the wrong ones to 45 despite R Power, Welspun , Orchid and a couple of others having exited the Dollar debt that was to be a pain and / or matched with their Export inflows

Bharti has a $12 bln of External debt in Dollars on its balance sheet which it has not swapped or hedged. Suzuki gets an import bill of almost $1.6 bln dollars. Indian Oil companies’ entire Oil imports are a huge loss to the exchequer as they have the purchases of $5-10bln every other month again unhedged and miscommunication and bank managements will have to share the blame for these treasuries’ inefficiencies
It is not clear if the INR 80 bln announced by REC as external debt is converted at current rates another $200 mln is to be issued this year maximum from dollar markets apart from a current $250 mln issue. REC Ltd has otherwise worked with very low rates and is repaying $200 mln worth Its book is Rs 1 Tln (930 bln) and new $1 billion at 8.25% may be at least a percent higher

ICICI Bank under pressure, market likes a turnaround

firstpost.com leads with a weird ‘post’ today showing amchi mumbaikara’s frame (unhinged) of mind. the headline screams, why ICICI Bank blah, photo pic is one of the anti corruption celebration as the government signs 3 anti corruption measures to meet the mountain and I did not read the rest.

Though India has rejected the three (four ) critical sector FDI updates incl Retail, Banking and Insurance (Aviation in a new soup too!) and ICICI Bank is struggling to find its bottom , it is by no means representative of the Indian economy per se esp with such “Blitzy” slash as an opinion befuddling young minds and inviting perennial dissing from market commentators.

What is likely however , and that is why the $4 bln FII flow till now is safely locked up ( after 20 years, another first ) as anyone exiting now for a lower bottom would miss instead an instantaneous splurge which could bring the market back to 5300. Though many would have advised to start accumulating, not many would be brave enough to purchase block trades or fundamentally take a larger position at today’s touchy levels. The 54 we talk about now is that of the rupee on its way down to more stable depths ( we think!) where our IT exports ( merchandise exports having died already in textiles, tea et al) would be saved by the profits from the sold rupee. Unfortunately that also gives fodder to the bears as a Rs 100 exchange rate of the rupee would make your litre of Petrol / Diesel worth Rs 200 per liter / Rs 150 per liter even with a Rs 5 Tln locked in subsidies.

Banks: Indian CDS trading at ‘default’

English: Kundapur Vaman Kamath (born December ...
Image via Wikipedia

ICICI Bank CDS suffered the most in the first few hours of India having approved CDS trading . Though only one insurer wrte CDS on ICICI Bank at a high but manageable 180 basis points a couple of weeks ago, the first few trades have pushed bank CDS’ to a high 471 points for ICICI Bank across the default watermark of 450 basis points. Even SBI trades at finite default probabilities of 361 basis points above that of  France in November trading when it rose from a spread of 200 bp to more than 350 bp.

That means cost of insuring $10 mln of ICICI debt is a $471,000. However in India’s case a CDS rate of below 200 bps would never be possible given its low ratings at BBB- for the sovereign and most of its banks can trade higher than the sovereign benchmark easily. even the soevreign should trade at nearer A rating levels in times of normal liquidity inthe Financial markets

Rupee Impact: The ECB/FCCB addendum (Part III) and remittances India/China

Welspun India logo
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ILFS Transportation Networks Ltd

ITNL gets into Chongquing in South East China this year as it signed up for a 49% stake in a district tollway for $160 mln or more than 5 bln Yuan. The concession period is 20 years and the debt used to finance the deal on flat repayment ( thus lower interest outgo every year) for 10 years. Immediate impact (TV18) is a 5% bump in the first year in PAT

ECB/FCCB deals

Welspun’s existing bonds converting in 2014 and Gati’s balance $15 mln in FCCB bonds with an additional $7 bln interest component were bought back and or redeemed via a fresh offer for $22 mln in the case of Gati. Welspun’s outstanding amount was higher being covered by a buyback for the last one week to $150 mln at a still attractive 4.5% coupon.

Both are well run midcap companies in underserved markets in India. Gati, in the surface logistics space could well position itself for a larger infrastructure play as a 4PL player but probably did not get enough interest because of the size ( India’s vast untapped market stopped by Dollar’as running away? )

China Remittances 

Standard Bank
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China’s banks have started building on the foreign remittances having been party to a $3 tln domestic payments system that excludes Master/Visa in China. ICBC signed an arrangement with Moneygram while Africa’s Standard Bank got a line of $275  mln for facilitating Trade finance in Taiwan from a syndicate of International Banks. the Standard Bank arrangement will allow for nmore outgoing trade flows from Africa to China/Taiwan/Hongkong

China is behind India in remittance for the year ended October 2011 at $57 bln versus India’s $58 bln as the Rupee falls through the last decades 47 levels to a 15% lower 53-54 range currently seemingly in the middle of a down move that could cover all of 2012

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