India Morning Report: And it is clear thru to 6250 from here?

Most short strangle/ straddles would be in profit to have exited and is you have been a bit late you should close out here because the markets are going to have a position either way, mostly likely trying to forget the break between 6100 and 6250 as markets have been given the mandate to a new bull run, which might well start around 6250 again. For a change both networks are carrying investor conferences, apparently not the same but more importantly, the post budget rush to 6100 (more like 6150 ) came yesterday and was backed by real flows, the current levels thus likely to have fully bought in leaving a new index level before the argument over the direction for India starts, global equities being decided on the up.

The bet o f going short on the S&P500 is not necessarily linked to the single up move in Emerging markets and while the longs in Emerging markets continue, the shorts on the S&P will either become OTM hedges or extinguished as US markets also resume an uptrend

An INR 12.7 Tln expenditure budget is fair enough but the optimism allowed to him on tax revenues from a recovering India economy is likely to have brokerages just the right busy for traders and speculators to remain ahead on the risk trades  before being called out by their analysts. For example, yesterdays dissection of each such number as a “little too optimistic” finally seems to have gone unheard as it should in a believable bull segment. However, despite our India story being better than China, a sscal e of 10X will likely apply in comparing flows to the two markets alone and India will be able to win that argument for $10 Bln every quarter.

ITC, Bharti are not overvalued in the Consumer space. We cannnot see value in the HUL trade whose markets have matured in India. Other consumption stories never scaled anyway and that therefore is the limitation of investing in Indias FMCG story except the ‘other’ 2010 winners as titan and ttk remain down and the domino’s pizza is no longer the story as expected after the DD ride, showing up the absence of a secular market and pizza hut coming back out in investments despite the Dominos’ 65% share (Jubilant Foods)

Bajaj Auto may not have substantial price cuts that have  shown on the radar for Hero after the budget giveaway

There seem to be big earnings leftovers with DLF and ABB following on , ETNow catching them for a change, but one understands that CNBC mode better, having ignored these latecomers and even penalised them. Its definitely my strategy with such presenters. DLF has a 60% higher sales revenues , with or without their main contribution this quarter from the sale of Aman Resorts as costs remain high for the real estate company

IDFC, YES, PNB and ICICI correct after yesterday’s rush for buying the select list while shorts on Kotak lead the cut in all such Financial stocks. I will look to shorts jumping SBI again, but probably waiting to coalesce th ebull candles into a stronger up force. PNB is coasting at 540 post a week long correction mode after a day’s ibig wins in the post analysis.

LIC Housing is probably as good for the medium term as the Power NBFCs, all the 4-5 stocks at the bottom of their range and Sundaram and the Gold NBFCs unlikely tpo o be competitively buoyant. Axis Bank would support Bank shorts as Kotak and thus Bank remains available as a short hedge too. Cipla and Lupin present a new problem as they continue to activate a bundle of no good stocks they were partnered with in their defensive mode and are not trading bets as they reach the top of their range near 450 and 1200. There is no secular run in metals, none in construction and Tata Steel remains a buy with the auto stocks without Tata Motors or the Unitechs and the HDILs

Modi is looking at some obvious chinks in his own armor as he stands on a half poant English speaking tour, showing up equally worse off in Oratory as Rahul, but looking comfortable with one new round of Desi dose goevrnance for India Inc

From my end, Chidambaram was more than right in showing UPA’s 8.4% and 6.6% 5 year periods ( 4 year periods) against the 6.2% average, but apparently there are not enough Financially literate voters around, despite the preoccupation with growth

 

 

India Morning Report: Markets listless orphaned by a Superbowl

Superbowl sold tickets for cheap in the snow

Asian Markets are closed today and lack of Foreign investor interest on Monday Morning leaves an India open totally listless at 6100 levels and falling again, struggling after a brief respite at 6050 last week. IDFC results were inconsequential along expected lines with no fresh disbursements in this financial year but the stock has only upside left at 93 levels where it closed last week post results as it remains the only empowered player not dependent on infra approvals and a fresh book of loans in the pipe likely. Loans continued to make a better ratio of all NII at the Bank as spreads showed up resilient despite a bad interest rate environment in the nine month period reported.  Retail interest aside, the stock will remain on Institutional buy lists for time to come. It’s large provisions also make it a great equity investment with the Provisions unlikely to be called and can always be reduced prudently. Non interest income remains slave to PE principal and proprietary trading business

The Rupee starts the weak on such rumors where the deciding NDF market actually feeding on the panic mindset in low trading volumes and the onshore markets trade down but only for the morning after as the Superbowl even that draws a 200 mln audience in the US and around the world has ended minutes ago and investors will be back to a market fairly under priced by the recent pitai (hustle-bustle/buffeting not to be confused with the sage of Omaha’s investing interest)  Bank Rate will remain higher for the majority of 2014 , the prospect of rate cuts being pushed back and there being no prospects of improved transmission of monetary policy with yields pushing for higher dollar depreciation despite the RBI efforts to clamp liquidity which has time and again proved more amenable to intuitive policy than a counter intuitive rate hike move to tackle measures outside Central Bank policy. However corporates borrowing in ECB might actually be able to break the ice in terms of getting older level low rates and break the impasse eventually with increased investments (starting to flow in consumption sectors) and RBI , maintaining a new inflation hawk stance would likely have to hike rats further after the 200 Marginal channel cation and announce a veritable change in stance on rates first.

REC had started up Friday and Powergrid should join in after mi d-day if the sentiment indeed looks up. The Equity rally in the Global Markets hit a big snag in January and that is holding markets back awaiting  a confirmation of investor interest with FDI having exited Emerging markets like Turkey, Mexico, Argentina and Indonesia in a hurry with Turkey coming in midweek last to raise rates by 4% to near 12%. Goldman Sachs is in trouble again having started their own EM investments in losses having chosen MINT’s obfuscated markets and a deep and dead in the water China over India’s liquidity given the cross winds. The Rand(South Africa)  also closed above 11 to the Dollar for the first time in January.

However Emerging markets sentiment is likely to get into it in a couple of quarters from here and India will remain one of the best performing destinations having been unaffected in the post taper trade in January if it maintains 6100 levels or at least stays above 6000 levels

PNB scored great results having come in counter cyclically on raising provisions in a known strategy and NPAs under control in a rapidly deteriorating market sentiment for Banks shoring up investors to its ferry/rafters and trades 10% higher at 550 levels still a strong buy. Banknifty starts the week near a low at 10150 and is good for the trade up but one should be watchful with ugly quotes (in both the 10000 and 10500 series) in the bid auction market still holding an initiating trader to ransom with option writers playing ultra safe.

IT stocks are still overbought and Infy should retrace 3600 levels and even TCS should come down to realistic levels (but already at 2200 levels) as the IT/Outsourcing axis is not coming out as the GDP’s saviour this time either. Volatility levels are hardly material at 16 in the current rally agains 14 in the previous segment in December ’13

Energy stocks should start the climb back as and when markets stabilise, GAIL having  started the year smartly. Glenmark and Cipla/Lupin lead the Pharma rally that continues despite an ugly breakdown in Ranbaxy and Sun Pharma. We still do not believe in a robust Arvind Ltd comeback on USPA and other new limited franchises inroduced by the team since 2011. Tata Global Beverages remains a hold but the magic is still in 100% go it alone investments in India ( which are still a far cry from the carte blanche leading to exchange rate breakdowns in LatAm and SE Asia in recent EM history) Aurobindo Pharma on results and Lupin on announcements today provide good portolio picks along with Glenmark which has only $500 mln in overseas debt and among companies tapping a continuing generic opportunity in 2014 with a new pipeline

Interest in the IPL in the meantime continues strong esp evincing interest from global players in the playing XI and a fresh re-auction for all the 8 franchises picking up steam soon after the spectrum auction closes. ING and OBC related good Q3 tales as were also employing covering strategies but have not started lending/stopped losing on NPAs. Yes Bank may not fall back to 280 levels and accumulation is advised at current 300 levels. The BOI /BOB story broke down in January itself as we foretold with both banks still addding NPAs in droves. ICICI Bank’s INR 45 Bln ( including INR 30 Bln pie in restructuring) included the bank can survive the pressures with relative ease having also been proactive on definitions than the PSU penchant for playing it by the ear and losing continuously losing investor confidence and investor money as far as its favorite proprietary traders are concerned who lose another constituency in an unplanned bull attack with construction stocks Dlf and unitech still in a free fall after the ill advised run

Energy Markets react positively Midday

Gas stocks reacted positively as Petronet LNG produce became free to sell to industrial users and IGL and other domestic distributors esp IGL getting commitments to cheaper Domestic LNG in the new pricing regime. This also means domestic CNG in all markets including Mumbai where already 100% domestic gas was supplied prices of CNG and PNG were reduced by 30% and 20% while increasing IGL margins. Petronet imports LNG and will no longer be getting custom from IGL which Delhi used upto 33% imported gas

The move was a n expected one with a new Minister coming back (Moily ) in a sensitive election year . Moily is also expected to facilitate large project clearances with changes at th e Ministry of Environment (EPA Act bottlenecks)

GAIL shares the good news as renewed pressures on its subsidy costs will likely subside as it supplies to city gas companies and others at new revised rates and the policy is deemed stable after LPG quotas to residences have increased to 12 cylinders per year and gas TX likely to increase volumes with good results reported Thursday

India Morning Report: Markets not ready to move from Vol lows Mr/Ms Short

A handicraft shop in Delhi-India
A handicraft shop in Delhi-India (Photo credit: Wikipedia)

Assuming a generic Mr Short in the market has been playing on the increase in volatility from lows of around 17 on Friday before last, he is still fishing for trouble and not getting much though the short strangle is paying the 6200 range(only in a very liquid market, and almost excluded the Nifty series too allowing only the sold puts most of the traction,( see Thursday report) and in fact continuing to burn sold call positions ( Calls written) as the markets move up on filtering out of bad news, post Taper and with the Indian policy and election juggernaut still finding surprising positives including the resignation of a Minister close to the DMK (Jayanthi Natarajan, is from TN) and a government with an unwilling, waylaid partner in the INC in the state of Delhi.

Buyers will likely be encouraged by the Rupee’s boost back from the 62.5 levels as government coffers will go on an eminent shutdown in Q4 holding down the fisc and may even include what markets would consider very surprising if indeed any infra projects and companies celebrate real news moving them on. The recovery is short, helped by the tough interest rate scenario extending well into 2014 and the EMBI entry pending, leading to Bond investors filling up their index linked quotas from elsewhere in Asia. (EMBI == Emerging Markets Bond Index, from both JP Morgan and Morgan Stanley, though HSBC is the biggest debt player in both Europe and Asia right now)

Indian Banks are probably thinking of ramping up the Transaction Banking/Trade Finance motif again and will again be squeezed by experts like HSBC and StanChart with Deutsche in Asia overall and by PSUs catering to (synonymous with: stuck with) Export SMEs domestically, Indian credit growth lag nullifying any growth vectors in the India Inc business and relying on Housing and Auto loan portfolios, which could probably over 2014-2018 also mean a growth trend in securitisation, more amenable to retail credit once available in bulk.

But back to the day’s report, few buyers, fewer large ticket deals ( anything more than 1000 shares) but no sellers and a drought for Call writers as the 6500 Calls remain OTM hedges and 6300 becomes ATM/ITM Finally though the probability of an uptrend is a finite 10% and above and can be assumed till as high as 1 in 3 from here. The remaining 2 in 3 remains a downtrend but is mostly going to be like a slow, very slow and thick cloud of smog floating down on the cities, making bull traders also disappointingly unable to breathe in much profits.

However that slow lazy market is probably still preferable to the One sneeze games, which may get to come back to the market in a last chance in this week’s 5 sessions.   ( Assuming moves of around 100 Nifty points and more in mostly the South direction from 6250 accorded by the mood of the network commentators and encouraged by Prop traders and brokers who have themselves been run out of the Crystal Ball.

A wierd yet surefire save from Team India on Day 5 of the IND- SA Test may lend to the fogginess of the market participants but was good for both BJP and Cong supporters and the now infamous 1 in 3 a political vote that voted in AAP in Delhi

IDFC is a good pick for the week, Tata Global too, and infracos may be chosen  in advisement with your bankers/brokers. As recommended last week, Bank nifty did not break below and starts the week at near 11400 levels, with HDFC Bank, Axis and ICICI Bank getting bullish picks. Infy may not thus make the biggest stock in the Nifty 50 with markets changing it to a funding trade till it starts moving u in strength again but probably not below 3400 at any time

Aside:Khobragade?

The Khobragade episodes has probably seen the media opinions at their most lacklustre on both sides despite the vain attempt by NY Times to misunderstand everything done on both sides and the continuing desire of the Indian diplomats to make it a case of total amnesty. The pluses however, India takes a strong stand and gets its way to move the US Corps from their longstanding desire to keep India as the one team that plays low and slow to insignificant in all standoffs and Two Preet Bharara overplaying his hand allowing US Civil and Political Executive to root for and get more protectionism. Both are unfortunately basics we should have started with at the turn of the crisis and protectionism should have been sliding now to allow US any chance of exceeding 3% growth along with a weaker dollar, both impossible to assume from here for everyone.  India and China now reap the demographic dividend with US remaining an economic ally regardless, India getting sidelined in the growth story by a China gaining currency #2 for its pegged Yuan more egg on the Indian version of the Silk route

India Morning Report: The gradual Taper encourages a rally, India indescribable yet?

English: Skyline of Mumbai from across Back Bay.
English: Skyline of Mumbai from across Back Bay. (Photo credit: Wikipedia)

India seems to be locking itself into a no man’s land as the nations punters join the global hordes celebrating the slow Taper on Bernanke’s going away announcements yesterday. ET Now in the meantime has continued with finding obscure (GRE: obfuscation..) commentators on key event dates. CNBC 18 wins again. The issue we are raising is at a different dimension(d-axis) than the assumed obstinacy to be different or that of even the fundamentals of a recovery being spelled differently this side of the Himalayas.

Meanwhile what is looking risky even as Asia applauds the thinking behind the taper, that India’s currency markets try the haywire trade still hoping for an aftermath in the Rupee as the Rupee opens to 62.30 levels. Equities will start the day at 6250 levels and while others posit a rannge of 6200-6350 , the day might yet spring a surprise or two before noon trades. Anyway equities are back above 6200 and GMR is back among large bidders even as they exit Istanbul. Also, NSEL promoters in J Shah and Financial Technologies have been duly censured and MCX would soon be owned buy another consortium of Indian Institutions. Taper could have been abslutely a non news in the Indian currency markets too and the open quotes are a sign that shallow trading costs a lot in adverse selection prmiums to the currency’s bid ask spread.

HDFC Bank’s application for  increasing FII limits to 49% pends with Axis Bank’s application for a relaxation in a similar ceiling and both will be leading bullish plays today.  Assuming that currency markets just wanted to explore the possibility of a significant negative impact of global liquidity being withdrawn , India’s preeminence as a investing destination in the new post crisis world stands. The $34 Bln in FCNR deposits aart, because the Infrastructure situation in the country is unlikely to improve from current vies of coalition governments even for the BJP, the risk remains that India investments will remain confined to a NDF market in currency , smalleer Indiab Bull boutiques with no presence otherwise and at best at 50% of the pace China specific and China sympathetic investments in South East Asia. Singapore and Korea too are not looking for more than a flagship investment or two to artner with India in ther growth run. However, none of that impacts the fundamentals of India Inc and the rally we have outlined since August is rel and given US and European Banks and institutions will increasingly be constrained in the coming months given other investment and Capital constraints, or the recalcitrant DIIs recognising any new levels, Real investors have to sustain this rally, neither retail nor from OECD institutions.

The Yen also got a boost from the Taper trade, while India and other trade partners have increased trade with China in the last few months over its traditional partners as both Industry growth charters in China including European imports and Resource exports from Australia and Brazil have been sidelined in the build up to lower trade surpluses and higher retail growth expanding not just Landrover but also our franchises from Cotton and Agri exports and a new market for Management and Consulting Services in China and South East Asia.

The Taper past ( it will last till September 2014) and India starting on a recovery path, markets have to recognise the Depth in India as speculators continue to keep coming back to old favorites that were not more than tangentially aligned to the new Global equations like the frog that sips back everytime he succeeds in taking a new step or two to get out of the well

11 AM Update: (I agree with SS on CNBC 18 again), One should just wait out the falling knives and start buying towards the close of day today after 1400 hrs instead of the rush to sell 6200 calls or especially Axis and ICICI Bank Calls which are well worth buying (ATM) 

Fixed Income markets contrary to expectations of the 8.75% yield on the Ten year bond losing again because of Fiscal impacts in the last quarter of the year, may in fact move back behind 8.5% lines as Spending cuts materialise to balance out the missing $$$ in Rvenues and Disinvestment charges ( which may still come out on top) However equity indices will depend on only inflows into the select basket of scrips including Bharti and ITC in FMCG and IDFC , ICICI Bank, HDFC Bank and YES Bank, or other midcap selections outside earlier.  The Power NBFC trading range for example is a very wonderful opportunity for those willing to wait and watch on India.

Indian Pharma seems to be retaining market interest as $200 mm molecules have more than a dozen opportunities every year in a 2012-2016 period even after the first few Big patents have come and gone as more than 30 $ 5 bln patents expire. Teva’s first few generic applications being rejected upholding current patents in the USA may also not stop them from coming out on the winning side in revenues on the vast US market opportunity, while  Indian domestic business is still less than $10 Bln and probably can grow 5-6 times from here.

Banknifty has a bottom at 11200 so today’s snap southward may not hold after 1400 hours in closing trades before the last session of the week tomorrow. Gold swipes big losses in today’s trade as the Global liquidity shrinkage impacts runaway trades in Precious metals led by Gold and one assumes even Crude and Real Estate markets at least outside the USA. However, even limited trading volumes for importers, ne does not expect India investors allowing anyone here a win with significant short trades in the metal. International prices of Gold may well breach the $1000 per pound mark. They are currently trading at $1200 post taper announcements.

 

India Morning Report: What a 7000 index(Nifty) means for India Inc!

Gold Bar and Investment Jewelry
Gold Bar and Investment Jewelry (Photo credit: epSos.de)

As Neelkanth Misra mentions very credibly on TV18 and CNN IBN, coalitions v. stable governments were never a questions for India Inc and as we have avered since 2007 on these forums, India has been a story run despite politicos in power , as much by the burueaucratic mandate of the time as the populist opinion of what the market economy will and can do.

The latter of course is more uneasy on the shoulders of a government but as a democracy we are habituated to arguing out our investment and business decisions deciding the underlying philosophy for example, the extent of WTO requirements or the Tax regime in the current milieu which are longstanding items awaiting a market verdict even if a fractured government or a single largest party wants to decide. That also means the young ones are communal / secular agnostic probably.

A schematic map of the Indian Railway network
A schematic map of the Indian Railway network (Photo credit: Wikipedia)

The 6800 mark if it comes in this rally may be just a market verdict and a bubble rally to boot without investment spending kicking in, but the same levels would be underpricing Indian markets in 12 months when investments are underway a s corporate earnings have shown. I think that weight is enough for one day’s business. To Neelkanths(Credit Suisse)  credit too, if Powergrid indeed commissions in TN and Andhra, the Indian GDP based on contribution from just that Southern grid will shoot for the skies

Meanwhile another journo got the better of my market specialist verdict,catching that the more leveraged the trade, the better its performance. By the end of the first flush of 5% increases in banks and all other stocks, one was able to catch HDIL and realty not doing well as also Stride Arcolabs hitting the lower circuits, (down 10% at 10 am)

Rupee finally appreciates this morning to 61.50 targets and Gold investors have been satisfied by the BJP’s coming , growing the metal to 32k levels in these few trades.

Delhi’s 67% turnout is another India investment indicator that has hit the scenes and well, in defence of the incumbent which delivered at the State level, Delhi-ites might still see a AAP – Cong coalition post counts as BJP  is a pariah even for the Anti corruption front that has probably garnered the 20% of the vote that educated Indians had stayed in vacillation , having to vote for politicians ( not just a half joke, probably i would go all the way on this one)

The Nifty rally is strong, Banknifty leading again, and as Banknifty is a well traded index ( or one mis spell may say trading index) it will likely return after a big rise to same 11,000-11500 leves for a new rush of bullish trades as this rally lasts the mile. PNB leads with ICICI Bank on the Private sector side and bulls seem to be cornered in YES Bank for the same election reasons, otherwise I do not see any capped upside in YES Bank either. Axis, ICICI Bank and PNB are all good for a 10% jump from today’s 9.20  levels itself(or 9 am when 6400 was tagged on the index in the pre open)  but if other PSU cranks, muddy the Banknifty at higher levels instead with a sharp irrational step up, they might see lower targets around 1150 for ICICI and still atleast 650 for PNB

Even a vote or BJP might be just a part of India’s reform behemoth, having carried India thru fiscal and industrial reforms more in hope than in action in the first flush of growth from 1998-2007. India is very different from other EMs and even China with an autocratic government despite attempts by even passive investors to blur the differences. Witness the Apple China Mobile deal (rumored) and the comparitive with an Airtel – Apple deal in terms of what volumes mean for Apple.

Investment cycle will also remain weak under the new government for some time but as we mentioned any 7000 level on the Nifty 50 will be a value play within 12 -18 months of these levels signed into this rally by the markets L&T is a slow elephant but the Power sector would showcase a great score, REC may have topped off  and Powergrid ready to carry the rush with PFC, PTC and others and as the requirement of the sector more Financing power and utilitiy pricing power (12% /16% CERC pacts) or mega power signings

On the global front the Euro has started moving up in vain obstinacy as contraction and deflation strikes in tandem in the Euro 17 and the overall 27 nations that encompass the European effort, double signing into the deflation and the Yuan has taken over from Euro in all important trade finance contracts, making the competition between HSBC(volumes), Deutsche Bank(!dealmaking!) and StanChart(price) that make up the Asia carveout

Professional Disclaimers and Opinion/Fact checks: We agree with only 8 of the Goldman Sachs dozen ond one o of five featured Credit Suisse picks in this rally as published in November and December 2013(today on tv18 for Credit Suisse references). 

The Rashtrapati Bhawan which is the residence ...
The Rashtrapati Bhawan which is the residence of the President Of India. (Photo credit: Wikipedia)

 

India Morning Report: The Taper trade that did not matter and a SAP for Sugar

taper-2
taper-2 (Photo credit: Chriszwolle)

Even our best performance this fiscal is going to keep us in deficit and ECB debt is going to be fiancing thaat to a heavy share for some years to come. But we are not close to getting investment back into the Economy. Though one would specifically request those in the audience paying heed to the new Catcalls for Greed&Fear ( the one from Chris Wood, CLSA) to be extra careful even as India’s weightage rises in the same, the concept of greed & Fear including the other global index by CNN i s probably an important turn on for investors who like to measure a positive performance than just revel in the goodness of equities. The CNN index for one is more like a PMI chart to benchmark against esp now that VIX has shown to be absolutely negatively correlated to good sentiment.

Back on the Taper spooking the markets, I think the markets are being taken for a ride, but a s long as that is backed by skin in the game, the resulting corrections and from here the rally to 6300 are as real as ever. The Taper in its entirety has already found India backers pooh-poohing the European idea that India will shuck itself out from that ONE trade whenever it starts, and the traction for that correction was educative for India analysts to realize the negative sentiment India’s sitting on the fence has created for India.

Again, thankfully it is easy to see the negative sentiment as a European thing because those are really fragile banks and though they will continue to press enough of their capital into Asia in the coming decade too, their role after this taper might well be non existent after two currency crises in Asia and a little of the curry for the home run. Sorry, UBS. Sorry , CLSA. Pension investors and Infra shows like Citi, Macquarie and that HDFC investor(Scottish widows) still remain, but those sharper on the Short trade including HSBC and StanC at times, must suffer for it. That aphorism about Glass houses is meant for them to read into their history of shutdowns accelerated in the last few years

Taper trades are a hoo-haa if 6000 survived. The date for the Taper moving to June 2014 ( We mentioned sometime in October)  and a lower CAD, also star  as the most important factors in the next stage, when the Taper quantity becomes limited and gets filibustered by a non US QE from another OECD Central bank as 2% becomes their growth ceiling and the scare runs back to Bull trades, like they shut out shorts today

Of course markets closed yesterday without any shorts exiting and no one has been caught this morning because they exited the trades or are in the process of exiting the same. Yesterday’s negative FII flow would be a rare moment in the history of this exclusive bastion of Bulls that is India nd e are again ready to move beyond 2007 levels here, especially if the Dow moves out into the 16000’s as it showed last week.

There is no argument 280 per tonne,is electorally stimulating for farmers and ever untenable for Sugar Mills suffering from days they could get it for INR 130 just before the SAP arrangements began. However, it is unlikely that farmers will go back to lower realisations and it is still that SAP’s positive effects continue to out weigh its negative impact on Agri inflation. I’d say till Core inflation starts getting impacted, it is another “sleepy hollow’ strategy that India Inc is more willing to bear than it lets on and will be critical in India’s continuing move to reap the demographic dividend, not just in consumption but in investment in urbanization and modernisation residual to the New World

Those bullish on IT and Pharma for the wrong reasons may be the next in for a rude shock as markets refuse to stay on a particular 6200 or other level in search for the elusive big trade. Especially in IT, those like Tech M may not be able to hide their being disapproved by current and potential customers despite the Dollar Rupee. One suspects HCL’s half hearted transformation may also have found the cliff it was hiding for all the time.

The Taper? It does not loom..Sorry Mr. Doom

Banknifty had a hard call for market soothsayers even as higher than 9% yields tempt everyone to the current Fixed Income market as well .Kotak’s projections for H2FY14 could probably look for sympathisers extending the sam eto the Full year where it a little short sightedly holds the bullishness in earnings to a mere 6%., that probably landing it again in the wrong side of caution tales.  Also one expects Bank earnings to tank the H2 report card for the index as a whole but the double digit earnings score should still be a n easy challenge for Indian companies showing an immunity to global volatility esp with FMCG, Domestic Pharma and Automobiles. The Sun Pharma trade is on the short end right now, more to do with Sun Pharma being clubbed in the passive folios with  Hero Moto and thus probably caching good stock for short trade to use a s collateral. They could thus off and on make the negaive end of scrip pairs within their sector but overall they will still be an increasing part of bull portfolios their index scores likely to go up esp with those not formally keeping to the index components in index tracing funds that will walk away with more inflows

 

India Morning Report: It’s Conferencing time again, do India advisors need the Brain Buzz

View of Hilton Towers Mumbai
View of Hilton Towers Mumbai (Photo credit: Swami Stream)

The Kent RO India Economic Conclave(ET//ETNOW), probably reminds other Indiaphiles of the Autoclaves and Indian barbecues as the Delhi Winters approach. Indian (Mughlai) Barbies of course last all year and the take off on that name is rather steeply silly, but not as silly as those Modi’fying Indian polity or still relying on Bankrupt European franchises not just in India but even in US where European Banks try to claim the upcycle again just for having reached the bottom of the valuation pile in investor opinion.

It signals that people are listening to more than the seldom heard refrain earlier that US Bonds are headed for the 4% mark on the 10-year Treasuries, Goldman Sachs having updated their opinion and with US equities starting from record 16000 levels finally after 5 years other equity assets around the globe are also finding favour. India must be enthused because even without the Enclaves or any agro encomium (at the new WTO round in the ‘hood), India weights will remain ahead of European bank investments, HY Bonds in the US that continue to come back however will be something EMs and India cannot compete against.

I-Banks stocks are a good pick if your portfolio does not have overseas diversification yet, with Investing in fashion and rising by the EM watermark rate of 30% growth at least in the first 6 months. Again, these flows including US high yield and specific picks in Global equities do not compete with India flows, while Asia credit remains at its most constrained sufficiently tempting even without European QE to keep the arbitrage for Asian treasuries and an umbrella from Domestic Interest rates is always readily available, not threatening the CAD in any of these South Asian / ASEAN SE economies that seem to bring more relief to Chinese investors and pro reform governments. The winners however in the I Banks are HSBC and Goldman Sachs and other stronger names, and one should be careful to whom one listens and sets the morning alarm with.

FIPB approvals have come in for Singapore Airlines – Tata Air joint venture and Religare which will invest as holding company from the island state.

Another quick silly update: The linkages of urban and even rural India to radio as a media have again spiked into something tasty and a medicine to nail the hubris, without having to drink and drive, even as new year celebraions come around the bend in Lutyens’ Delhi and elsewhere. Home is where the heart is, they say, esp when the RJ is handing out your favorite Mall freebies and movie Tickets with Muscle and oomph.

A small slide in from Gold to near 31k marks just on the news of 40% investment demand of last year returning. Gold season is tough for Financial discipline. UCO Baank results? give them a pass and stay with BOI and PNB, and you must get short on SBI to save the India Fund you have been planning. Buy IDFC, trade YES Bank and ITC because you have already bought and no there are no retail investors to count in the Indian markets the residuall INR 50 Bln turnover of the class probably counting professionals in the trade, since the first 95 circulars from SEBI cut out sub brokers and MLM chains from Indian Financial Markets. QFIs have still not taken much to directly investing in India and apparently there is still something to be done about it..

Modi? Bad experiment!

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Hotel room, Hyatt Regency Delhi
Hotel room, Hyatt Regency Delhi (Photo credit: John The Geologist)

India Morning Report: The “growth-inflation dynamic” is getting flustered by the rates

English: The Classic view of Saving & Investment.
English: The Classic view of Saving & Investment. (Photo credit: Wikipedia)

While the equity markets are back from 6000 levels making up for those missing trading days last week, starting the week at 6150 levels, an ongoing investor conference revealed the likely India bull among banks getting the short trade for not being able to lend in Europe. CLSA Chris Woods asserting that the challenged growth inflation dynamic has not stopped inflows into the country. Similar assertions from Barclays in the morning, who quite track to our Top dozen picks as revealed in the last two-three months (previous trades though in very similar scrips are NOT ACTIVE) underline the fatality of Indian policy as presented to the new generation by Foreign investors coming to India at the bottom of the global cycle.

As we have written before India could well find a way like the Phillips cuve in Keynesian Economics to survive n the high interest Economy, but those waiting for a revival or reveling in China’s continuing misery would have realised by now that India having chosen to jump rates in October is now intractably going to ride up the spiral killing off any motivation for investment growth from the bank rates while the rate differential continues to press on the ECB borrowings and increaase pressure on the deficit. One way we still think, out of this spiral was to learn the importance of holding rates and a HOLD at 7.50% would have done the trick. India’s diagramming in the investment /Savings trade are rather inelastic on loan fund supplies or demand in the main stem however and so growth will go on.

However, in the meantime, WPI has hit 7% and so there will be more rate hikes not impacting the residual growth GDP. Rest of Asia struggles as well with Israel cutting its GDP scored in September to 2% and the Oil economies or Africa the only refuge for high growth dependent Capital businesses. India with or without the Modi-nomists has done precious little to ramp on to the unaided infrastructure growth and is barely getting back to fiscal discipline with ratings still stuck in the 80s mode regardless of reform. The etihad $450 mln + investment in Jet including the 24% stake has taken agan crucial time off the managements available turnaround strip an India Inc is also running out of time stuck at 5% growth levels, now probably locked in till June 2014 without an escape hatch

JP Associates is a prime example of price negotiations being a sordid affair in India, Manoj Gaur doing well to hold on to deals on its Cement plants and others despite the markets probably looking for an even better price on the sale. The rresults showed again continuing growth without improvement in the CEment business. Monssoons good impact on grain and thus any residual impact on lowering inflation is again a sordid wait seeing as it is unlikely to stop the farmers or traders from spiraling up our food prices for the time being. CNBC 18 did a good focus spot on Pharma stocks in the morning, and they are doing well in this cycle, including Cipla and Lupin, the still funding trade stocks and IPCA it seems has rerated to 17-18 PER multiples. I hope they have a new drug or corporate news on the horizon. Again on inflation FinMin so can’t do anything about imroving supply lines for agri in this nation

ITC is finally back up again from 310 levels itself and is a good trade. IDFC is done till the election frenzy despite the Fin Min noise for infracos which unfortunately are still running their family businesses on the margin trade of their own stock. Network commentators have underestimated performance potential in Yes Bank and overestimated it in State Bank. The Maruti trade though is back as the Yen spirals down(up) into the hundreds again for a likely couple of months, taking care of the whole quarter

Automobile expors are doing well again so JAnuary will be quite a celebration of the tough times with Consumer Staples (Non discretionary, food and other FMCG) able to avoid pressures to reduce margins and not pass on input costs.

Last but not the leas, we are not issuing more Buys on Tata Steel but it remains a Biggie on the Buy lists and those deciding to take profits with the Domestic institutions at 380-90 levels will likely be deprived of the real cream on the cone.

India Morning Report: A little late and not better for it

Definition of Sub-Saharan Africa, according to...
Definition of Sub-Saharan Africa, according to the United Nations institutions (Photo credit: Wikipedia)

The Rupee reaction petered the rally at its 6200 floor well before the November series was out and so things do not look well for the downward pressure building in, on the news of the “cosmetic taper”(Marc Faber) deciding to take the markets for a ride across Asia. It is mostly as ET reported, because of the perceived lack of quality stocks and globally because Dollar bond yields need to rise regardless.

Yields at 9.12% do not really threaten the India story but signify a sell down which given India’s small base in FX, Currency and even commodity markets where a single import continues to equate the Indian equation to the underdeveloped Economies of Sub Saharan Africa if only in market perceptions. Moody’s and S&P mandate for India apart, this as we mentioned last week is just one or two players and hot money choosing a quicksilver trade and the Rupee as a target for such trade does not necessarily mean another big cut in India markets. Trade should pick up around 6100 levels only and the Rupee should not move to any risky levels above 64.

Gold investors will remain in surfeit in this stage in the Global markets and that need not be correlated as strongly with Growth as other crises jumps in buying.  Lack of Indian Investment demand for commodities an lack of demand at the pump in Oil in the US has still meant good overseas investment demand for Oil and Gold given the new lows

October data for Imports in this Fiscal at $280 Bln is down 4% and Trade deficit is still high at $90 Bln. The NRO/NRE Deposit swaps have apparently collected enough for a number around $20 Bln to balance this trade deficit as estimates for the CAD have been already brought down to $60 Bln. The October deficit is however just $8.8 Bln and Exports a healthy $27.7 Bln, the MOM increase in deficit probably immaterial.

The Sensex started the day 135 points down at open and is currently trading nearly flat from Friday’s big cut on Nifty and Sensex. Also, the Tata Motors trade on the positive, post results trned out to be a dud bag as we said . Shorts on the market can however pitch in, shorting the Index though IDFC, YES and ICICI Bank are quite done in independent scrips and Pharma being defensives are also on the secular buying list apart from being good India portfolio picks. IT sells will roll back in this leg as they benefit from the “India, Sell” tags

However, one still feels the /Indian yield curve and growth story were back without threat of inflation and the rate hike affected in October and to be repeated now in December to 8% on the Repo rate is the mindless exercise which is triggering this spiraling of yields and only strengthen the rating agency view keeping India stable near junk than giving its due and correcting the rating’ own regional imbalances and prejudicial biases, still favoring an untenable proposition like Brazil or Russia and a market failure like Turkey over a stable story like India.

Is India really fairly marked for a NBFC only kind of play with the coming high interest rate scenario?

 

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