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.

India Morning Report: Thats a good jump to 8350 levels, dear!

Markets have taken us to heart and definitely like our analysis though with the inevitable liquidity issues and the affectation of a surprise as traders recover strength and get into a new orbit at 8350 levels

We were definitely wrong about the Banknifty’s capacity to move north in the 2005-2010 period and may have underestimated its power again as the Banknifty powers up the banking sector on good results. As a result the ecxpected rerating of PSU banks down remains undone, after the traders having waited out the entire advance from July 2013 to Modi’s elections and the PSU banks continue back for the last secular run of the rally to probably an overpriced momentume trade beyond 8750 levels but definitely not overheated at any level below 9000

IDFC trades higher again unexpectedly silent before Diwali and waiting out its reorganisation but apparently keeping its constituency apart form our followers also intact. They had bad results to show because of the infra slowdown for these two years

This could however also be only as the markets jettison auto salesbefore the recovery scycle gains strength and that means the markets would have a unique direction indeed in the next two mmonths as the Auto shares have a vertical over pricing gap from their election day levels whence they ran ahead on speculative interest.

India Morning Report: Life is but waiting at another peak

And probably just waiting for the sun to go down, another trek to 8200 completed as the Economy still has no redeeming inflows of great import and results above expectations from ICICI Bank were not really too great esp in linked quarter terms while on year comparisons brought in a 15% growth in net profit and an improvement in net margin

One ‘redeeming’ feature of yesterday’s rally was the coming out of ITC and Bharti from the near term consolidation zone around 350. IDFC in fact is the investment story of the day having operationalised the bank structure and survived an excruciatingly slow year in infrastructure. ICICI Bank in our view did great by finally jumping all Fee based income tby 27% on year to INR 27 Bln

YES Bank is obviously happy it has grown beyond our benchmark 30% increase in net profit in yearly comparisons and increasing NII again by One billion from Q1 to INR 8.5 Bln (INR 7.5 bln) in the quarter, Fee Income has also grown nearly 20% to INR 5 Bln and this is (to reiterate) sequentially from June of this year, a big jump given that most banks have been sufficing increasing the restructured portfolio and selling it in the onward quarter without growing credit portfolios

The increase in Topline has kept pace with increases in Capital during the period keeping the EPS ata reported 11.6 and making it a leading investment in this market up cycle. Understandably the Banknifty scaled the 16700 peak and the 1635- consolidation levels and is holding steady in Friday’s trading. However, the Banknifty should likely, rationally only see a rerating of the components post Results Thursday

India Morning Report: It’s Inadvertent, Indescribably inscrutable and a continuing interregnum yet

That means the benefits of having a Modi government for the next 20 years are already showing on RSS, Gujarat and yet not visible if coincident on the larger economy, leaving me puzzled why the markets jumped like they did on Wednesday. Regardless, we’d much rather wait for another Happy Thursday with ICICI Bank, IDFC and Yes Bank reporting thru the day today for September 2014, a good six months for all 3, for the banks because they come out of a growth rut as industry leaders with credit growth in below double digits in August and September and for IDFC as it drills down to its lower cost of funds becoming a shade better gaining on incoming competition as Infrastructure financing makes a comeback to the top acievement motivations of India Inc. Of course, Arvind Subramaniam int he meantime as our new CEA might have a few comparisons with the vastly superior governance out of China, but that we are indeed in Foreign policy terms now more conversant with the global world view than isolating ourselves, we have a better chance of recovery in the broader economy itself.

Meanwhile, another thing to remember during the day’s and November’s trading would be that ICICI Bank grows both Fee and Interest Income at equal or better pace than just focusing on Interest spreads/Jaws and NIMs whatever be the currency of the day for Loan interest income expected to grow a hefty 15% for the quarter and more for the half year

Bharti Airtel and Maruti also report on date. Markets will likely peak today by end of trading for a correction if the sentiment does not consolidate given the big earnings day for Dalal street.

India Morning Report: A Bond catch up makes yields 8.3% on the 10 year bond

Interest rates keep falling allowing banks to reduce interest rates on deposits with the liquidity situation easing. Any rate cuts in the RBI repo rate can be in contention only after the banking system starts cutting lending rates and the MSF corridor reverts on the lower side between the 7.5% repo rate and the MSF rate of 8%.

However, stock markets buoyed by the value correction witnessed on Monday ( and a partial resolution of the quandary proposed by us in the Monday report) SBM is announcing results this afternoon as we update late today stating a change in focus ( like it was yesterday’s Biryani) to retail even as stressed assets come back from 12% of book to just above 10%. Early days yet to talk of any recovery for the last SBI leg likely to be merged into the behemoth in the next two years. The Bank has only recently changed focus from bulk deposits, treasury deposits being a key risk for PSUs till 2012

LIC Housing Finance is a buy at corrections with YRES Bank still forming the core of high performing portfolios even as the broader sector becomes a pick and HDFC HDFC Bank and ICICI Bank join core picks, SBI having moved up to new levels recently a little out of breath from all the huffing and puffing, still trying to catch up in brand recognition with the new private sector winners. REtail assets may not last beyond this fiscal as winning memes for banks and NBFCs , India not exactly a mirror of other consumer finance led economies.

India Morning Report: Nifty above 8000, Banknifty ready to fall already?

At 16500, any move in the Banknifty after the muhurat weekend in the new year, is likely to be downward adjusting for the market and given that markets have prima facie been using the last two weeks to complain of the overt existence of only banking and financial memes in the coming recovery and thence stock rally, it is unlikely that existing weighings of other index heavyweights will improve any better but yet there is no possibility in financial stocks taking the rally from these index highs and would need a correction in atleast the secular PSU Bank contribution (to the index)

That probably means markets will look very carefully at least in the morning session but still indices will probably find a way and the right stocks to move up to 8100 /8200 level without the Banknifty later during the day

Needless to stay HDFC And HDFC Bank led private bank stocks remain in focus in the recovery and even rough pockets like Kotak and Indusind which are not really catching a break despite trying will also beat the industry growth averages to be in demand with investors.

A correction in Pharma which set into select stocks even as Lupin and Glenmark come back on the up and up is probably interesting more for the perceived contributions of players within the sector, with old favorites again being identified more with DLF and the failed real estate speculators with Gold and Oil also remaining under a cloud affecting a certain class of high net worth investors even more than the cut in leverage on existing securities/promoters’ shares in hock with banks

The Foreign investor contribution to the market rise from here will likely be balanced by an equal participation from Domestic institutions and MFs however and the Economic data for October and November may well prove to be the turning point for markets as CPI follows WPI down and is expected to turn up again before the end of the fiscal but with real growth reappearing in infrastructure and manufacturing sectors.

This week’s kitsch headlines: refueling of investments in Power after the denouement of the Coal gate investments which failed to provide the apparently available support ecosystem in the sector. In other unlisted business, the Airbus JV with SIA and a 45% FDI proposal in India could be key

India Morning Report: Playfully yours, India Inc.

Happy Deepavali and a happy new year. It’s 2071 AD as most of you must have seen on a flash by on your TV screens.

Heromoto has come out ahead, that is definitely newer this Deepavali with heavy duty bikes making a return with Bajaj Auto but the market much bigger for the smaller bikes and split vertically between Hero and Honda.

But back to playing favorites and markets are way ahead just waiting and watching for growth pick up signs to come head first in the Banks and non Banking companies, HDFC Bank proving it as simple as pie and Kotak following in its steps today when it announces results in the late afternoon albeit at less than one third the rate at HDFC Bank in Net Interest income and even in Brokerage and Insurance, it not making an impact outside its exclusive Wealth club clients

Havell’s is still doing well, Jubilant Foods is not making a comeback despite both Jubilant And Talwalkars also managing a 20% clip of growth, while Page industries and the new local directory company Just Dial holding some aces in Mid Caps. Arvind Mills and Adani seem to be aces in the hole if you disregard any Small Cap/Large Cap/  preferences with some key investments making a difference for both Gujarat based groups.

Markets are going to run a bullish candle till 8200 levels and come back again in the next 5-7 sessions of trading including the short and sweet muhurat session. There is no reason for “Energy and Pharma to take a breather” (ET NOW) per se and they are likely to start a catch up with the bank sector for their own results with Glenmark not posting results next week but eagerly awaited while Lupin and DRL report on Tuesday and Wednesday and create some good trading mojo having bid their time,-

Follow our earlier posts to figure out what s wrong at PNB, and stay away again for another couple of quarters , engaging the other PSU alternative to SBI that is slowly and surley making a return to good profit. For those willling to duck out this rally again, Oil India and GAIL seem nice bets with the gas controversy seemingly behind us at a new $5.60 price

Futures markets are again seeing good traction after the jump day in volatility last week, however we expect Options only strategies to continue to outperform with PCRs starting up from 0.85 this time and 0.89 currently on way to 1.2 levels ( against 1.1 mostly at the top) so a lot of options at 8000 today and 8200 next week to sell and close. :p

Bank Earnings Season 2Q-FY2015: NII ramps up 23% to INR 5.5 Bln

Fee income growth as we have often remarked here remains at a standstill for the bank even as that creates a pressure on the topline as market sensitivities ensure the bank approaches a lending income based operating model, ramping up Interest income (NII) on lending spreads to INR 5.5 Bln for a $1.25 Bln quarter. With growth in deposits tamping down growth in Interest Expenses, NII has been boosted by increasing spreads on an already large base, with gross spreads for the Bank/HDFC at 226 basis points (not this quarter’s data) on any incremental borrowing over low cost deposits

The bank’s reported NIMs have moved up to 4.5% while Fee Income has crawled to 27% of Income at INR 20 Bln incl almost INR 2 Bln from recoveries on substandard loans declared in default, also a steady stream of income now , that we question but was a hefty INR 1.6 Bln in the year ago quarter as well, implying the Fee income was even lower including normal fees and commission of INR 15 Bln and Derivative and Revaluation/sale of investments of another INR 3 Bln

The bank thus is ably rewarded for investing in additional Provisions on time growing Provisions of INR 4.55 Bln from under 4 bln in September 2013. CASA deposits have grown to INR 1.68 trillion with tha Bank growing Current accounts custom a bit faster again int he current quarter

The Topline has grown only 15% over the 6 months of FY2014 because of the Q1 slowness keeping them out of the reckoning despite a substantially higher than industry average and a go slow on credit by the bank after the KFA account last year in view of credit conditions. REstructured Loans have reduced after growing to 0.2% of advances in the previous quarter.

It has increased 200 branches(197) and 260 ATMs(259) so far since April 2014







India Morning Report: A flurry of results line the way for future assessment

Markets at an inflection  point, the new to-be investors are unlikely to be impressed easily with double digit topline growth even as Net Profit contionues to grow at 20% for the best of the best in the set of winning companies , including HDFC Bank which actually beat topline and bottomline benchmarks continuoiusly and is completing a technical merger uncapping a lot of value in the stock. Kotak Mahindra reports tomorrow with no real growth while HDFC also completes the reportage for HDFC -HDFC Bank tomorrow

PNB results will also move the markets but it is going to be very flat today, and news flow driven jumps though at the inflection point will not lock into any big moves this season as IIP and GDP show up the investment deficit

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