India Morning Report: A gentle let down on Policy day

Though of course, we miss going thru our specific brand of analyses, we will not be presenting a more detailed article on why Guv Rajan would not be presenting a rate cut and meanwhile also not able to educate the market sentiment on how the CEA Arvind Subramaniam will be effecting his first seminal recommendations on India’s way forward.

While IDFC and YES remain at investible levels SBI and ICICI Bank have responded to the “put me down gently” sentiment in the markets with the Banknifty watching the way down at 18500 levels higher by 20% from October series level a month ago. The sensex is likely down another couple of 100 points today after the policy release and while the hedged positive move will remain in HDFC Bank, Axis and SBI will not be much affected because of the change in valuation on the two candidates, while Kotak, having speculated much on its strongly speculative bid to buy another dead bank, will likely be the spearhead of a good short strategy to test waters this week, while the Nifty prepares ahead to make a comeback next week in Energy stocks and mid cap Pharma investments moving up on investor accumulation. Bharti and ITC join the cyclicals in correcting back to 350 levels whence another secular rally leg will be in play.

One wonders whether the Winter session has any rumors in store that can be absorbed by the markets today itself, or likely pressure on shorts can be built upon consolidating the judicial and legislative headline output in media, from the IPL and Dhoni’s way out to probably the white elephant that made us miss the taxt treaty with more downstream information on tax offenders

India Morning Report: The Bad GDP report passed on the previous turn

Markets will of course, still look to auto sales throughout the week esp to decide the fate of interest rate sensitives again positively till the RBI Governor brings down the house with another pass on the “rate cut” being nudged by the markets but with the Rupee likely to cross 63 in orbit within this week, bond yields can probably go on improving mid week from Thursday to lower levels just above 8% eventually before any rate cuts happen in response to pressures on inflation in 6 months from now.

The credit pick up cycle lags Foreign investor demand and other macroeconomic improvements markets keep forwarding to the Central Bank in vain hope.  Markets may well take in the news of 5.3% GDP growth and the coming Bank Rate review tomorrow in a move down to 8500 which would be well above the previous week’s starting levels.

Apparently deficit concerns have also been underplayed by the “responsible” and “effective” Government in place and that is a precursor to well timed large divestment programs till the end of the fiscal yet again. However equity markets are unlikely ruffled by such for more than the today and tomorrow sessions till after the Central Bank reports its reasons for expecting an improved policy stance from here, likely rewarding investors in tomorrow’s afternoon session. coming back to Auto sales, markets will likely penalise interest rate sensitives thoroughly in today and tomorrow to allow a fat bullish candle on expected sales data in Wednesday and Thursday

IDFC, ICICI Bank and Yes remain the top of the charts with HDFC and HDFC Bank holding one half of the down move and SBI and Axis showing up with minor corrections in the other till the bull move recovers in the latter half of the week. with consumer discretionary stocks again in the buy baskets esp. ITC and Bharti at 350 levels apiece

Nevertheless markets have moved strongly in the prior weeks to make 8750 a near probability in the new series and Crude keeps heading down to sub US producer costs at $60 levels and Indian exports may not have a good year on the other hand because of the continuing refusal to switch to newer markets to replace traditional strong markets in Europe which continues to suffer from a beat down, despite hopes of a QE later in the week on ECB policy announcements.

 

India Morning Report: News driven volatility for a price?

It looks like, there will be very little pf price discovery in these markets if we keep having these amplified news driven reactions like the one yesterday with ITC back at rally start levels and unlikely to be a short for anything more than 1-2 hours in an earlier edition of the markets from 2004 – 2011, yet ITC continues to be on watch for some period and will likely be nicely and squarely accumulated for the biggest move later.

Also that probably redefines Bajaj Auto and ITC both on defensive stocks for the coming decade and more. Bajaj Auto is hurting on another news driven (nigerian exports hit) bitsy yesterday and will likely rest lower for a similar binge as ITC near 2450 levels not 2250 levels when it last justified its run here.

The market’s search for tradable predilections is noteworthy however, a characteristic of the more refined trader community now on strike and rotating through sectors, trends and even old PSU heavies rather smartly given the headroom for a recovery led big up cycle till 2020.

Cadila and Glenmark are in the mix again but the recent IPO added cyclicals (Prestige, Talwalkars, Page and Just Dial) or banks are likely transparently on down and out lists for the upcoming RBI non announcement, but unlikely to hurt the broader market more than to 8300 levels .

The SBI stock is buoyant after the split listing last Thursday, meaning it is trading for a considerable headroom but institutional traders are in position for the play and longer term holding the stock is ideally an answer. Markets should let the FI yields go below 8% but for the predilection to closely track the FM still leading better economic sentiment and the credit and profitability pick up seen yet, which will eventually let the market lead the yields down below 8%

India Morning Report: 8500 it is and without a break!

Call auction bidding has definitely been good for the markets, the 15 nminute pre-open allowing investors, brokers and analysts considerable space in gauging market direction all day esp in the liquid end of the market, i.e. the large cap stocks.

Banknifty is still riding the wave of good work in the sector with subdued response thru the rally’s initial 2nd rush whence it rested with the markets at 8200 odd, and is been a peach investment for those holding on. However, as you would also notice, it is not really a safe play anymore even after expiry or in the run up to expiry in these last 2 days and there is no reason for it to really move up or down from 18500 levels. Market plays near a more stable expiry again look to adding speculativce plays and that just increases downward risk in the markets. Especially as the FX and bond markets also enjoin under pressure and Rupee eats through some of the last few days gains for FIIs.

One suspects edgy shorts in PSU banks and the non performing Cap goods sector to get tested in the next series again as the slow recovery combines with ultra low volatilities to make opportunistic trades a mine  for intemperate incoherence

IDFC ICICI Bank and Yes remain great buy trades. HDFC Bank is a long term portfolio pick and SBI still has head room left in the immediate rally, pointing as I said to greater dividends for those who wait.

The rally looks to be safe till 8800 levels but for the big dull thud on December 02, which leaves 8300 levels still ont he radar precluding new trades.

India Morning Report: Insurance, GST and the Winter Session

Our morning report was something we wanted to title India is back on the high horse again with the index at 8500, and as you can see that sentiment inside has indeed keeled over, making wary investors challenged at every new level. One wonders ghowever if there will be a correction, and in the normal course without a parliament in session ( hardly gets in the way of governance, that, having democracy already entwined into the processes, Haryana indeed showed there is a simpler way forward without having any of these elected members entrusted with any active discussions at all. However, fun banking aside, the Parliament will meet in the winter session and some key implementation issue may yet not become a thorn in the market’s side given these are simple 5 year old discussions with a likely consensus, even for the hairbrained scheme of not implementing DTC at all, which is in fact not slated to be discussed at all.

It will be difficult for any Congress or non majority to ever make a comeback and the bureaucracy will take over implementation of the business at hand so investors are likely to just ignore the ?Heady heights marker? at 8500 as they should in which case, markets may merrily jog along to that 9200, 9500 or 10000 level prediction which has been placed by sell side brokers. Markets will not correct beyond 8350 levels this week

Banknifty has finally shown at 18,000 levels that it duly deserved the lions share of the $22 Bln in portfolio flows till October (CMIE) Real FDI is also a good $18 Bln in the year from April and is trickling in in good measure because of the confidence engendered by Modi’s pronouncements and as the slow recovery cycle forces RBI’s hand s markets are more likely to time a sizable correction with Raghuram Rajan’s refusal to ‘award’ the markets a rate cut later next week.

As we shortly mentioned in our holiday week pronouncements last week, the Kotak ING deal is abig mover in the markets and will never be a short candidate and yet that is never going to accrue to much in terms of benefits to any shareholders or proponents of the deal a marriage required to defrend the sluggish growth rate for both mature market models and the larger entity will chug along at much the same pace with 1400 branches and a credit book of two minions not likely to add to anything big on the overall. Not an industry shaler, no!

We remain positive on YES Bank, IDFC and ICICI Bank, HDFC Bank might start back again after discounting the premium coagulation from the merger revue out last month

The Rupee remains important to watch and with any stasis at even 8500 levels threatening the market from sleeping bears a currency rush to 64 in light of the stronger Dolla r all year and the continuing turn down in the Euro (and no downturn would be incorrect usage here) is likely to deepen the market blues and hurt some unintended parties again on the way down, but the traders are still in favor of the longs than trthe shorts, the correction again just around the corner as we reach another all time low for volatility this week

India Morning Report: I am getting giddy, its so high

As was apparent last week, markets are looking like they cannot handle the new levels again as at 8350, there is not enough results from the recovery in yet to brag about and thus till auto sales actually catch up even Banks could correct just a wee bit though a new range expected 4-6 weeks has finally been established. GAIL has again shocked everyone with a quick move south too giving the rally meme back to Indian Oil and / or ONGC

Cipla and Lupin have a flip side of the pair for a change with DRL setting new highs. In unlisted business away from the direct attraction germaine to Pharma stocks and more in line with the expectations of a stronger dollar all year, FDI inflows have sttrengthened into a consistent $2-3 Bln in new proposals every month. On ground, one is waiting for news of the infra and other capex projects’ take off to become firm gets for every investor to expect.

Update (week of 17-21 nov:) Banknifty has nevertheless moved up expnerating SBI of the baggage and not yet taking to the new hobby of rerating PSU banks as FDI portfolio additions tapoer to 50% from September, and the markets are ready to do the 8450 level ina nopther slow torment in the coming week. Kotak’;s end of the week soiree in announcing a ramp to 1400 branches though combines two stodgy players from the India’s failed credit led expansion decade by and it remains to be seen if Friday will indeed just pass the deal by as HDFC/HDFC Bank peters out to a reduction story and HDFC stands out while FIIs reactivate interest in the exMSCI index component.

India Morning Report: 8350 could be a watermark for the index

It has the distance from the previous highs which at 8200 never lasted for more than day or two on the indices. Given that the market may avoid big moves for now, it could take anytime between today and next Wednesday for a big correction as the futures indices plough forward without move in the underlying.

The PCR however is more than ready to keel over at the other extreme at 1.25 levels after starting up from a extreme value below 0.9. Apparently ( secondary off the shoulders from the TV behind me!) 600 points have run up on the Nifty (Udayan, morning show with LV on CNBC India ) .

The other mitigating factor on the correction however is the Rupee which gets stronger after Europe joins the QE buzz and we definitely trade much more with the Euro countries, and the Rupee Dollar could yet stay at 61 levels because of the stronger Dollar taking away any direct appreciation in the currency.

The bond markets in India are in demand however and the Currency will claw back a few points as investors double down on India debt and Private businesses like Pharma and old hobby horses in Private banks and infrastructure keep adding equity on tap.

The 8350 mark (8338 in closing yesterday would thus hold if corrections were indeed swift enough ( within November futures , 27 November being series expiry) I guess institutions would now seriously consider adding next and two month ahead series for bullish Put sells to lock in the future upmove and exit this trading range at maximum profit to a net short on the indices.

In line with comments from other hopefuls, I’d love it if the market draws all the way down to 8000 levels, after all its tiring to have to keep telling others they are not so good after all, which seems to be explicitly required in every leg of this rally segment

India Morning Report: All those who running with Auto now, we did warn you!

And of course we are going to miss this run if Hero and the M&M and other tractor makers really become that sustained bubble which saw a sudden interest in Excorts. The Oil trade is well and truly dead and so is apparently the Pharma export story,  giving in to some heady profit taking in Cipla, Lupin and I guess DRL getting a little bit in trading pairs showing a cycling thru of disinterested rally participants who’d rather get some real punch in the Economy before moving that big wheel. I guess these show if the Bank nifty would weaken in the new steed with 20 days still left and a festival shortened week not really part of any moves beyond 17200 on that index. I would stay with Yes, ICICI and IDFC and wait out the next ride to 8100 before getting on the traders’ strategies Glenmark and Cadilla remain buys with Cadilla reporting today.

Again what indeed would bring volatility back to these markets indeed.

Auto trade is a weak proxy for the falling Oil prices but not at these prices for 4 wheeler or two wheeler or the other stories with CV deamnd yet only negative and the first few plusesin the sector would barely cover the big tear in the wall.

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