India Morning Report: Markets retain new bullish memes (again to 6100)

Markets will close above 6100 again but later afternoon sessions may see more enthusiasm as good economic data could be followed by expected passive investor moves and new EEM flows to show likely coming trends.

HDFC Bank is up and out of the 600-680 move with new targets to probably near 750 levels. Banks will expectedly support the next upmove too, ICICI Bank having made up new routes to at least 1030 levels, probably 1070 A look at some fund portfolios , interestingly shows Axis is indeed out of favor and Infy in a different block of memory unlikely to provide any traders with gains or hedges as it corrects to 3600 levels. Apollo Tyres, India Cements and JP Associates added open interest yesterday as main trends broke tin the nifty drop from 6150 to below 6100 levels. Sree Renuka stake sale does not seem like a trade at all, being a long known and expected unloading by the promoter. Open offer is apparently at a discount but Wilmar is immediattely extinguishing debt worth INR 12 Bln. Bharti is a great buy again in positional trades from 295 levels. Bajaj Auto will likely continue to 1950 levels for a stab at a quick double (century) The Adani Port move you heard today is so true,its the INR 80 Bln JNPT contract.

Japan is celebrating a bullish candle early in the morning as Chinese manufacturing, along expected lines, brushes near contraction levels. Fed minutes from January showed the Fed agreeable to  changing the unemployment targets and thus somemembers eagerness to discuss increasin gthe short term fed rate will likely be ignored as markets start up after a 5-10% cut since the new year. However on the flip side for India, the risk of an inflated Oil bill has increased. External Commercial Borrowing Markets are open for India Inc to increase disposition from, the CAD averted, but the small packet of Coporate External debt, now unsettling India policy markets. Fixed Income Markets and Currency markets would recover from yesterdays dip as the recovery unfolds into a more tangible item of import than just hope traded by domestic equity and consumption markets. KKR is also providing transformational capital in a new (presser in ET) bid, that could soon be emulated by SBI and ICICI as restructured assets hit a new high in the banking system.

A new endeavour at the Central Bank could see proposals to accept some or all the changes reccommended by the FSLRC. The recommendation, are likely to further aim to bridge the gap between Private sector growth memes and the larger PSU counterparts with capacity building and skills development (HR) guidelines

G20 is up later this week, IMF taking the opportunity to underline that currency concerns remain, obviating any choice of policy leadership for India at another G20 edition, India the easiest dog to put down in the revolt of the EM manger. ( twisted, yet really twisted, paraplegic choice and execution of simile (not stimuli) The Ukraine Hryvnia, the Korean Won  and the turkish lira are likely to be the largest exceptions not part of the mainstream in G20 trades and will be dominating the agenda, not to forget the Singapore Dollar which remains a unique economic substitute for the whole block ( try a whole fat analysis) and mexico a member but likely to stay silent too as Australia lead this round (2014)

Jet Airways’ loss in a sedate Airlines quarter, even as its etihad deal now hangs fire  at the Compat ( like the CCI but just the Appellate Tribunal) Jet has loans of INR 104 Bln as of this quarter, hardly $1.7 Bln but apparently 7X of the other nearest competitor. its market share is now less than 20% as it waits for deal approval. The INR 2.85 Bln loss a INR 3.60 Bln deterioration from its year ago profitable quarter, leaving unlisted IndiGo the winner with Sale and Leaseback economics still leaving maintenance bills manageable and the airline scoring on all the busy metro routes. Air Asia is likely to change that if it is allowed to fly. That would be concomitant with changes in regulation allowing all these Indian fliers to book international routes without a track record’ compulsion(Two dogs in the dogfight, Indigo and Jet, why are others even flying? – significant business case and consulting win with free markets allowing portfolio rationalisation).

And as Facebook found its Twitter-alike acquisition for mobile messaging that paid its promoters $19 Bln, India media look to another expat manager in the pile of 55 employees for the India story and there is as usual one solitary reaper, digging away in that bee hive(ant hill)

Kiran Mazumdar Shaw has taken stewardship at IIM Bangalore as Chairman of the Board . IIM also recently saw a new Director joining back from Boston University ( Sushil Vachani)

In other unlisted business, why wouldn’t a new Pharma business story with unlisted Capital or a PE try to fund a great Pharma business , not from a decade old Pharma attempts in Hyderabad and Ahmedabad but elsewhere. Cost of Equity in India is no longer that cheap as the Pharma market still offers unique advantages to scaled businesses in Export markets and domestically, while current entrants are likely limited by the $500 mln market for each generic molecule,a similar cap for the domestic market too, based on a limit to branded volumes in each drug. The model would definitely be more Chinese if it happened but it could really expand the market opportunity both at home and in the US and Europe

How about new moves in the big retail pie, which despite its propensity for political disaster, is still available in at least 4 states. One reason, hitting continuing entrepreneurship as India stands on a big comeback, holding India back would be the virtual withdrawal of Foreign banks from India, assets now down to 7% of the banking system, esp the unlikelihood of a public markets led such revolution makes it imperative that the easy flow of foreign capital to India be capitalised on.

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: Out; KPIT, Biocon, M&M Finl, L&T? In; Sun Pharma, HDFC

Of course the trade that earns is a good Bharti as ITC catches a breath at 322-326 levels and HUL tries to crowd the space after good results across the seas at its headquarters. However, positional trades on ITC are advised, we still like IDFC and Yes, ICICI Bank’s journey is a bit in the clear after HDFC’s straightforward increase in spreads to 220 points on the yield curve turning south across all points. A lot of “Sell on Results” shucked out in the pre open indicators (Call Auctions and if they are trustworthy? right now we are pretty stabilised on the morning indicators on bid and offer prices you”ll get in the market hours)

We would advise, that viewers and ET Now still learn to ignore Volume breakouts between 9:15 and 9:30 as the price uptick in that first flush is usually recovered with a correction easily assigned in markets in the midst of a positive rally. Thus we do not believe in the Larsen technicals either and they should rest this one esp with the bad prognosis. L&T’s dismal domestic scores preference in the Indian markets is a lagging Indicator for the Indian Economy and its being a Capex churn probably a function of the pipeline at best and payment collection habits not a pointer of the Economy returned to Normal that the markets are forcing on it.

Biocon is  agreat pick after the “Sell on Results ” shock,. At least it is apparent that new investors did not join the Biocon rush after results which are due today. Those Mid Cap IT stocks still in the ring, better have a story to tell with the PCR still not crossing into overbought signals but the market still tired at old highs and the 8% after fatigue for the Indian charts M&M results are 0% higher on NII in rural catchments. HDFC profit was up 12%.

Barclays, CLSA and GS are already tepid on L&T but these levels are definitely not the stock’s ultintisurfeitmate bottom. No sign of bulls there or the turnaroo. Similarily for Kotak, who cannot perform as a company but shorting it remains uncharted territory. Is it right, BEES ETFs are back in play? check the volume ludes. and check the bottomline as always. Chill pill for qualuudes?..an extra u to coin my own word

Indian Pharma remains the great big bet for this rally as its market characteristics have truly changed and the Indian players have ramped up on the business of generics at least with cheap strategies for the $200 mln molecules and more in case of First movers post patent removal.

SBI is still uncomfortable at 1650 and looks ripe for Sell on rallies at these levels again.  I’d pick up Bajaj Auto again in pair trades as the trading range bottoms out again, not so unlikely at 1900 levels itself. I for one am ready to add Glenmark and ICICI Bank to big trades right away but waiting for a confirmaiton and the 6320 cap likely remains

The AAP charts can probably prove pre-cognitive abilities as donations that peaked in the new year damped out a week before the (Somnath) Bharti chapters made a big event splash India bulls Home loans are back with INR 6.95 B and PAT at INR 3.95 B, Loan books of INR 390 B are hopefully in process of reaching a better denominator in a large unbanked market like India. Axis Bank could pick up where it left off but investors do not expect any NPA debacles in that neck of the woods, sufficiently loudly demarcated as out of PSU

In Policy matters, the CPI linked benchmark idea, we will assume , was another committee suggestion ( someone converted us, right?). Affordable accommodation units and Prop rights(garden variety TDRs) in Mumbai RE did take off but have not grown as a class.

In unlisted business, opening as a secular class in the Morning Report, AS in including both Global Corps and Unlisted PE business or the unincorporated merchants and Franchisee business we prefer Mike Fries in the Global Charts (Charter Comm – Liberty Global)than the local entry of frozen processed fries(McCain), and that is a definite final No from India for McCain as it follows in Gujarat after McDonalds’ merchant production for its restaurants . The price points will be out of reach and the consumption uneconomical for Vikas Mittal’s new effort. Walmart’s independent beginning on the other hand is another new victor of he Indian sweepstakes and should ramp up faster in the next 3-4 years. Amazon FCs are in Bangalore

Tata Global rush trade classifieds are back again but no corrections this month, unless someone starts up a maruti while its running!

Oh ya,  I have finally come around. India’s problem is/was feting Jim o Neil. It’s a wonder he came back despite betting bigger on China and biting a big fat Turkey. (I have to watch how much to put in the Morning ReporT)

zee entertainment below 2odma is a false and stock is a great investment. do not pair trade in US cash equities if and when you head there to advise or trade. stay invested in cash and speculate in f&o. rice exports at 2.3 MT in rice couldn’t possibly have peaked already did they? are the quota clamps back in place or no surplus production? krbl trades may follow real-time exports/orders in the next 2 quarters

Did you see Biocon’s brush with the NHAI in the Bangalore Mirror today? Taking medians out on NHAI highways is definitely a surefire way to asininely jugaad India’s hind out of global competition. Biocon sales (updating at 10 AM post Keki Mistry of HDFC) are a 7 B for the quarter and R&D spends seem still subdued because of other limitations at INR 1.02 B but none of that should count against the investment. Principal Global may end up showing us how corp governance and voice on the board are still a flexible parameter for India portfolios as we move towards harnessing and integrating the NDF currency markets into the mainstream And hey that Thomas Bata protege is still walking, so there’s no (h)urry!

O Gao, Jan Jan (ko Chhua) Janjivan(badla)

Ashwini contributing to his own sells by recommending 6300 put sells, that’s backslapping yourself twice over as Puts have anyway likely over priced themselves out of investors by today’s close and that does not make investing on te bull side defensible today. so the shorts are likely having a needless hope surplus till Friday in the pouring rain.

PSU Bank Dividends are more than justified, if the Banking Secy needs any props and tempting fate by linking to February Capital re-infusions and Banks’ demand for reduction of free ATM transactions per month should be denied aand the number of free transactions should be increased.

India Morning Report: Gold Loan Norms for Muthoot & Mannapuram, Infy at 3400

Markets at 6200. Nothing would seem to have changed during our 2 day break this week, but for the fact that markets after declaring tiredness have found the will to come back to 6200 from a dip , probably to catch some Deliverable trades in the wind down as the Shorts get their day but most are bought into the 6000-6300 range. Option ladders have given way to Bear/Bull spreads and cheaper strategies of any combination in OTM Calls ranging a 6200 with a 1:@ ratio call ( from namesake Amit) with 6300 ( neutral on cash) or  a similar strategy on puts at 5900 (ITM) sold to higher Puts bought near the range as the markets are not excessively bullish (6100-6200)

Meanwhile, true to last week’s draw ins to our short list, Sun Pharma and Lupin/Cipla/Aurobindo have taken off/ are ready for a big run discounted for the weakness of the rupee being their marker as the Rupee is at the bottom of the range at 62.1-62.4 alternately. Divis’ is a great pick and Cadila is still in but some market movers would put Glenmark on watch with profit booking in place. Ashwini is off Jubilant Food again for the same reason maybe, but he is trying Jai Corp today I managed to note. Aurobindo is still good but I fail to understand the hankering for Ranbaxy again with promoters from Japan raising the issue of misinformation and misgovernance publicly

In the Zee vs PVR vs Eros /BIG and the rest again I find the PVR cosmopolitan equation still daunting and Zee the only balanced out performer despite attempts by Sun TV and the sports czars like Sahara and Kingfisher. Private Equity has a chance to prove itself again in India in Entertainment, Media and Education, the Y sectors but as of now has come out only in select E Commerce venutures in over a decade

Muthoot and Manappuram would be great plays even after this first CB. As per the new guidelines, LTV has been rolled back to 75% allowing both to lend more on existing accounts and having also gained the RBI seal of approval for moderating portfolios.  Disbursals are still by cheque for high value cases ( Same INR 100,000 benchmark) Apparently Ownership Affidavits have specifically recommended by the RBI as NBFCs probably pressure customers /claim troubled custom for original receipts for Gold more than 20 gm

IT firms would probably end the correction as Infosys result day is now key with Infy at 3400 levels. Both Product platforms and Consulting have failed to take off for the new no. 3 of Indian IT. However buy in select Mid cap ventures ( for the same tired reason, MindTree is still an in) continues as the Rupee story has unfurled. The smart correction to 3480 may be safe but the range remains between 3420-3480  and any new rally pre-results would likely be sold back to these levels. Similarily the short on YES Bank (Mitesh) may again fail as Banks manage to boost their share outlook on Private sector and credit performance in this week after a very dull prognosis again prompted the pick by Mitesh Thakkar (TGT: 340) and others. YES will still be a good buy and IDFC is again available at 102 levels so both should be bought into at these levels. YES commentary would be key as Indusind retail portfolio gets colored by being mostly in the sharply down CV sector. ICICI Bank may not keep the elevated 1050 /800 levels in earnings season this quarterly review but will remain higher and be guarantors of Indian performance both in markets and in the overall Economy with IIP and GDP rates still subdued and inflation a big part of the continuing growth imperative

Except for trades on exceptional earnings and sell on news, select stock picking remains the order of the day, going into earnings season next week.  Infy for example will suffer if the promised margin expansion of 100 bp and higher guidance for the full year is not delivered with or without commentary on taking out the Executive council from the company’s governance model. Bajaj Auto may see new highs as it remains important in portfolios with new picks in the other Bombay car/auto maker M&M. Bharti and ITC continue to see some exits but have more or less become nerve centers of a trading move despite the expanding dichotomy between Mid-Caps and the Large Caps

India would be happy enough with $30 Bln stock of FDI in the Calendar year 2014 as well and marekt expectations do not include any redefining execution elements into the stolid infrastructure story nor any PSU ETF can bring bank PSU investors or the BJP euphoria in a hurry. T2 has been commissioned in MIL in time howeevr, taking capacities to 40 mln passengers per year, while KIA is already expended into T1A with an overall capacity of 25 Mln pass per annum. GVK in the meanwhile , tries the land monetisation plan first at MIA while GMR continues to consolidate international and national bids ( Hyd and Bangalore) in it aviation subsidiary, the only post MRT/Metro good news for the sector now four years into its relaunched modernisation drive, where BJP assumed it will get the mandate to do better, but it looks likely that the electorate saw it was equally impossible before the Election mania picks up (after the Vote on Account).

(Anyone wanting to edit the Morning Report is welcome to formally request myself and email the direction/editorial choice parameters as well as the time constraints)

India Morning Report: A tough hand dealt in the Financial Stability Report

Loan
Loan (Photo credit: LendingMemo)

The Interconnectedness of the Indian Banking system, might have become prioritised for a global caveat emptor learnt but the Indian system has much more downside from our desi PSU style profligacy in SME lending as haircuts on even 50% of that stressed portfolio would take the government out for a long walk in the woods. Delving a little more indepth into our favorite subject, most of the stressed portfolios in India Inc’s first stress tests were found to be in Infra, Mining and Cap goods sectors or our core Infrastructure series components and those would anyway need to be treated differently than Ordinary term loans . Such loans constitue 54% of the Stressed assets identified in the FSR.

However as the Financial Stability Report remarks, there is a fundamental risk to about 60% of the credit stock in the Banking system collapsing banks even as they have primarily not created a laconic lee side for the Ghat monsoons in interbank lending primarily one supposes thru traded CDLOs and real lending on larger accounts  than derivatives without a defined underlying as in the global case. The risk as highlighted in the FSR come from defaults in lending portfolios of Banks skewed to single corporates apparently among other details one has to study from the disregard of concentration risk by lenders with the 20% to single corporate and 25% i think for group key limits to be tightened and enforced duly.

India on the other hand has to grow the Securitisation pie  from here and where the Central Bank would be trying to control INR 1.7 Tln in repayments due till 2017-18 from the next fiscal onwards (FY15->2014-15) , India would indeed face an uphill task the markets would do well to ensure they have factored in. HDFC Bank too never got that approval for added FII investments even as Axis Bank application was cleared last week(to 62%).

Back to the mundane diary of the Indian markets for the day, Markets trade leaving the upside intact as shallow trades characterise the last trading session to 2014, much like last week’s record low of INR 740 Bln in the full day of equities and derivatives trading on the NSE and BSE and Cash volumes are likely to stay below INR 30 Bln (the last week low was INR 50 Bln) probably. US and European Markets are closed on New Years Day including Fixed income markets (at least in the USA) The other thing to highlight from the watchful Fiscal Stability Report is RBI’s worries on the Growth – Inflation dynamics not working out as WPI continues above 7%  which we led with sometime in November.

Net foreign inflows continue to sweeten the deal for India inc into 2014 with a 1.5% CAD (FSR score 1.7% and a FY14 achievement score target of under 3%) and the Fisc even if the virtual spending shutdown (as in the last 4 years) from January will soon find another yawning gap even if FY 2014 indeed perks up reasonably. Hopes of a stable post election scenario have almost been crossed out in case you did not notice in the New Year’s eve  celebrations and the infra pack, high on investment hopes and leadership from IDFC, and a deleveraging trio incl GMR Infra and JP Associates with the Relinfra people facing their first AAM Party audit

Apparently new year’s eve also sees an uptick in Tata Power and Reliance , which one doubts will last esp as Tata Motors is receiving its recognition only for its minute share of the TESCO-Trent JV like in fact here was such when Starbucks burst onto the subcontinent scene. The Starbucks venture is well-defined however, and the ware tastes well, drawing in big crowds in now 3(Three) cities in India

Redesigned logo used from 2011-present.
Redesigned logo used from 2011-present. (Photo credit: Wikipedia)

What probably did not get highlighted but was tried earlier by RBI, also needs to be monitored for results as Foreign Banks continue to skirt the Living Wills issues at Global HQ and continue to rethink their strategy with regard to entering India. Apparently Gross NPAs will start trickling down as we long suggested but Fitch and a few others are still hoping the PSU disaster will play out to bigger stakes and at a faster rate to make a return virtually impossible ( especially if larger Government injections are requird to keep them floating – KV Kamath). However, I would just depend on the investment recovery and the credit growth performance by Private Banks and probably PNB as Deposits finally outpace credit in the last bi monthly reports on the Banking sector in Calendar 2013 and the ICDR hopefully comes back to respectable levels without Banks having to constrain such new lending in India’s recovery phase

Also don’t take me to be a cynic but Torrent and Lupin’s timed leaks about Pharma’s assault on a generic version opportunity for Cymbalta may be better timed but is still probably a few months away from translating into Dollars and one fervently hope ( and cannot claim to otherwise yet concretise) that the generic provides an opportunity to us more than the cookie cutter $200-500 mln with or without first mover advantage.

India Morning Report: Energy Cos, FMCG follow into the bull segment in January

English: tata steel lake black and white effect
English: tata steel lake black and white effect (Photo credit: Wikipedia)

The news of breaking thru to better levels in the next segment have started crystallising on expiry day as OMCs and  Tata Global catch up while Aurobindo is a strong candidate to become the trader sentiment fundng stock as it battles the challenges from a local branch of the US FDA in its new avatar(US FDA’s new avatar)

Divis’ is another if you think it needs a scratch to win the Pharma segment in 2014. However there still is significant (75% +) investment upside in stocks like Cipla, Lupin and even Sun and Dr Reddy even as they review their competitiveness in the blue sky territory (Ashwini/ET on Aurobindo) for their stock prices.

Mining and Metals are not going to get a broad rally and may sustain bear interest but Tata Steel and a few others are definitely heading for a better future, Jindal Steel on the flip side continuing into the nether. IOC  and BPCL could be strong picks, HPCL having compensated for the lack of interest within the sector in 2012.

The long stretch at 6200  now sees thinning out PSU bank trades and new investors looking for the non Quantum broking “hidden gems” i.e. analysed not in this block of 5 years but surviving the negative glare other trader favorites have been subjected to as Bank and Dealer trading rooms get increasingly traded out of the select short list making the back bone of the as always overall positive prognostication for the Indian Markets as a steady uptrend of more than 15% gain in 2014 has been divined for the overall markets. 

However the FMCG jump backs identified in Talwalkars, and Jubilant or even real estate newbies in listed trade like Prestige or earlier RKJ picks NCC have already shown their limited stamina in such rallies and the same applies to a McLeod Russel or any other such Midcap picks and Tata Global will probably lead a pack of 6-10 such winners . Others likely to be included in such a cross section of winners would be the winning infra trade from IRB, Lanco and even the blue chp pick IDFC,  and another from GVK, GMR and Reliance Infra on better leverage news in 2014. The ones rejected for quitting on the bank licence race or just trying include Shriram Transport and LIC Housing. ITC and Bharti are not good for the day but remain part of this segment of winners to provide fairweight to sucha trending portfolio unlikely to be able to depend on Maruti or Axis Bank (probably just because it was tired by traders thru excessive lay in 2011 slurring it as a bulwark of the bada$$ trader instead of India’s flagship trade) Punjab National Bank alone is making up for the required breadth in Banknifty underlying/components along with the usual volumes in SBI. Seemingly, Powergrid is also nearing a FII limit at its current aproved 24% part of the overall sectoral limit.

The Power NBFCs are good for the rush, HDFC Bank is not out of favor and REC and PFC continue to lead this other mrket spine overall, but the other spine/splines(if you read) would come back in Powergrid and GAIL. As mentioned earlier the L&T and BHELs (esp the latter) or the metal and mining Hindalco and Hind Zinc may not provide such an alternate portfolio enough weight to survive the daily storm in 2014

Also, on the overall, like Reliance in the earlier years from 2005-2010, one should stay away from a Kingfisher like future looming for Tata Motors as cash gets reinvested at luxe rices into JLR and it is fully matted in domestic markets

 

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: Markets open week with 6500 in sight, India hits stride (Business as usual)

Discontent emerging in the divide

The 30% electorate hiding underneath the planks of a whirring Economy in erudite and the shadow economy, showed up in strength to drive home their preference for a non political vote, loosely coupled to issues and worryingly coupled to AAP’s own concoction of manifesto promises at the local level. The markets however are apparently celebrating the vote for BJP led stability in this trademark play. The Rupee has already retracted to 61 levels after opening near 60.75 levels and equities have opened at record highs around 6400. Yields (10-year) have traded up to 9.13% including the days trading as the RBI policy announcement is just more than a week from now

Midcap and PSU Bank investors are standing by (Quant broking and Nikunj discussion on ET NOW) but the stock selection has worked wonders for the confidence and at long last the pockets of the FIs investing into India at the bottom of the cycle unfazed by DII sales and worries of a failing Indian economy

Markets could keep these gains again even as volatility trades remain impossible with strangles holding sway again at the new levels allowing writers to walk away with a rapidly growing Derivatives market in terms of all profits made. F&O trades have to be switched to a 6300 sold put and 6500 sold calls for the time being, with unhedged writes or hedged with weak end of the rainbow OTM strikes befitting the large volatility moves

The return of the L&T and BHEL trades in a universe of very few great stories shows up India’s hand n the markets and markets are unlikely to go swinging up from here as well, markets moving in block moves good for probably the entire month and 6500 a likely try for traders from current open levels

AAP’s apolitical mandate is likely to grow in other stats as well but political options are likely to change equations in the next General elections, a big risk facing Modi backers from here. Congress has maintained most vote shares especially as Chhattisgarh results showed and MP and Rajasthan ar e notoriously aligned to both sides of Congress and BJP in successive election decades, cycle spanning 2-3 General elections and state elections. AAP should consider formal linkages with likeminded hell raising Tea Party’ians in the US Congress

ICICI Bank and Axis Bank are good trend trades on the upside with levels unknown till the market tires out without funds flow supporting the euphoria by next Monday, while IDFC has come back strongly , this time without Citi and Macquarie portfolios running it or their being any strong correlations with the non infra realty pack. Midcap stories continue to be generously endowed with interest as the consumption take off continues to ramp up and make the inflation story insignificant. Congress (and BJP!) however has repeatedly lost with strong cries denying “accepting the verdict in all humility” but it seems more transparently this time a vote for stability. India should  finally learn to emulate the Rajasthan model in the General elections and go with the winner from the start instead of getting into another era of desi hotch-potch coalitions

India Morning Report: Record low PCRs mean a bottom at 6000, Iranian Oil to be feted in markets

Goin' to Iran
Goin’ to Iran (Photo credit: Örlygur Hnefill)

The Nifty already ranged by puts and calls at 6000 and 6300 is likely to consolidate signs of moving up as the 6100 puts start looking good for a ramp. Despite the global cues, including an agreement with Iran, the market seems to show the Call writers have finally suffered from overconfidence for the second time on the trot this month and second time this rally after having been caught in October. The Rupee tantalisingly at 63 seems to be a factor too but Traders and  other market experts seem to have decided not to wait frther to buy into India. Citi’s MD, Mr Pankaj Vaish as much said so about institutional investors too on the weekend.

Even as Jindal Steel makes an exit from the Sensex, markets are finally separating the grain from the chaff, KArl Slym and JLR not helping the failing Tata Motors cause while Bulls continue in Tata Steel, probably widening th ga before the Ratan Tata vehicle Tata air and Air Asia get into the fight in 2014

As mentioned above, Nifty decided against trying further value levels aand opened around 6050.

Worth mentioning n fellow Network Analysts’ would e that despite the preponderence of buys that favor Bata and also repeat Tat Global, some have decidely loved the short on Bajaj Auto. Again Bajaj Auto was the genesis of the bbull trap last time around and Bears and shorts will pay heavily esp in derivatives for remaining short on what is likely the most of all bull trades in specific scrips in India after Pfizer and Wyeth as Banks remain on the back seat. In PSU bank picks to short too, TRaders 20 on both leading channels showed the kind of mistakes that can be made as BOI may not yield further in the short and a UCO Bannk may already be at the bottom after a year long short on the scrips, the last month rally in PSU banks (unfortunate) never reaching UCO Bank

If played along the ground in the sessions till Wednesday the markets may well try 6350 sooner than later before Friday close, but shorts digging in at this high concentration seems to me an isolated uncorrelated event worth researching as the US VIX on the other side rules at all time lows in low double digits and ready to try new levels ona new high from last week.

Good news for Axis Bank as it enters the Sensex 30 by December 23. If Banks do respond to that as  a secular class, despite Axis Bank hit on the FII ceiling of 49%, it will not be a big trend to ride but a one off, as the Fitch/Moody’s restatement of NPA woes is a twist anyone following pSU banks was having a hard time swallowing and markets were eagerly waiting for a turnaround in Q2 results let alone letting the slide be ignored in the DEcember and March quarters as provisions likely shoot up

IDFC and LIC Housing Finance seem to be walking away with the cake and short term traders continue to ignore a wonderful opportunity as investos stock up on both playersI would back picks on All Bank and Andhra Bank apart from the return to weight for PNB and BOI as ICICI Bank comes back to 1050 levels i n morning trades

Gold’s probably going back to 27k levels if not 25.5 (‘000 per 10 g) and if Fixed Income yields spin back to below 8.5% aided by the exit of trades on the older benchmark, things would get smoother for cash equities and the December series. Polling is underway today and counting would unlikely bring any shocks next week. Bank nifty would be stuck at 11,000. Oil prices will continue south after the Iran deal for 6 months makes arrangement for Iranian repatriation of oil profits, oil sales and humanitarian trade i.e. export of food and medicine among others to the India favorite (trade terms)

 

India Morning Report: The Morning after and the rush to October expiry, pre Diwali

Maruti Suzuki - A Star - Reflection
Maruti Suzuki – A Star – Reflection (Photo credit: Balaji.B)

 

Banks get a further fillip after a great policy picnic yesterday as the 7day and 14day repo allowances of 1% of NDTL rev up Balance sheets and as Chanda Kochchar explained, large projects will stay away for the extended holidays that is Q3 of the Fiscal till December and retail lending will be in high fashion, ensuring a good economic fillip to non investment GDP growth and due dimensions of a recovery with a good monsoon

 

This edition of the Morning report is late because of an exceptionally busy earnings week ( though technically i was engaged in an all-nighter on one of the better games out there)  The easy availability of government collateral apart, the Indian Banking system also enjoys, despite its overt concentration on NBFC and Real Estate Loans a still largely unsaturated map of loan portfolios with both these stakeholders whose importance cannot be underestimated in the growth cycle.

 

LIC Housing results were a great start to the rest of the week with INR 22 Bln in Topline and INr 3 Bln in Net Profits, boosting the missed Net Interest Income with other income and  as usual one of the first with their wholesale bank funding tied up. Big brother for NBFCs, Deepak Parekh led IDFC reports tomorrow while Auto scrips like Bajaj Auto and Maruti ( i do not know why) are in front of the rally that survives. Given the market predilection for selecting concentrated risk after choosing winners from a diverse basket, 6250 is already looking stressed if only in the bullish premium of the series futures being lose in the run today with merely 40 points chalked up on the Nifty,..

 

However as of now there was enough with bank stocks having come back from out of favor and apart from YES and the bigger ICICI Bank, HDFC Bank and Axis Bank, the others, especially the badly run PS Banks with near 5% of NPAs on the Balance sheets must start receding and winners again return to glory for a move further in the same run. IT will probably return to extra attention to allow funding that leg of the rally if there is one. Pharma stocks have been up as good results pour in from challenged players like Ranbaxy and high expectations from DRL keeping away from interest in the real winners in the midcap sector

 

Bharti grew more than 5% sequentially and EBITDA margins grew 1.2% on year to 32% though a one time forex loss impacted the bottomline. Markets were quicker to shrug off the net profit miss as the Africa business , late to the party reported a 18% sequential jump to INR 70 Bln revenues, Dollar value of the Business also climbng to $1.11 Bln. Mobile Data, finally seemed to have taken off for Airtel and while India markets revenues dropped the exected  dimes to an ARPU of 192, Africa more than made up as the company wh $9.7Bln in debt had hoped. The Forex cost hit Financing expense which jumped 38% sequentially. Also Revenue per minute in voice finally grew to 36.74 p from 36.39 p in June. Growth was 13% on year in the topline

 

DLF is hurting from the pre festive season but with the continuing woes sequential growth is for Q3 is down here as well still expected to be near 10% on year in Revenue and EBITDA terms , EBITDA margins have grown to near 39% for this quarter too ( estimates from ET/Moneycontrol)

 

The currency and bond markets are still subdued though they have responded positively to the policy’s tone of finality for the direction for India Inc, open options not sunting corporate strategy into a crucial business season

 

Good returns with pricing advantage for Consumer companies and fuel decontrol cannot and will not risk the India growth story, nor is Indian currency going to be compared with the likes of Brazil, Turkey and Russia at any stage despite our structural ‘diversity’ and the unsaid inclusion worries as with other more developed democracies like the USA. PIMCO leads the return of the non ETF institutional Investors to the India story as the kitty for October inflows continues to grow ahead of tomorrows expiry which could still happen into the 6350 mark and definitely should close at 6300 as rollovers complete within yesterday today and tomorrow. Maruti should ideally return to more reasonable valuations and attention shift to M&M Bajaj and even Herocorp

 

 

 

India Morning Report: Bank Deals, 6350 targets, Decisive Earnings and No Taper but Overdone IT?

NSE building at BKC, Mumbai
NSE building at BKC, Mumbai (Photo credit: Wikipedia)

 

The markets are of course steadying themselves as data shows (Analyst speak on ET) that cross currency hedges for FIIs also induced a short hedge on equity to prop rupee positions and that unwinding thus has emptied the rally by 6200. However as noted by a few others, this point is no longer the ‘death of the rally’ and the markets are enthused by the better earnings this quarter. Also as noted Nomura has bought a stake in Karnataka Bank and the offshoot of that is the trade in Federal Bank another correctly sized target for Foreign banks and institutions buying out Indian Banks with Federal Bank rising another 16% today , making it 5 sessions in a row. The higher US rates have already started a correction in Indian equities and could provide the fuel for a cascade correction at these levels but the Taper has shifted out. Rupee remains weak on th way down because of an almost closed market for the currency with a big hole for those wanting to make money while its gains are limited when the Dollar index goes even lower from current levels the Rupee starting the week at below 61.50 levels on robable profit taking showing this weakness, though Economically it is far superior to Turkey and the South African Rand

 

The Dollar will be moving south and as currency and equities both share the spoils and incite EM flows India will return to consumption and infracos in equities as well with banks holding and then leading the ensuing rally. Airlines have reported heady seat volume growth in both August and September and the Festive season months would absorb the high increase in seat pricing if not produce positive growth

 

However some stocks may see changing eigenvalues as investors come in with a different charter of preferences and the 6100 levels may still be maintained. PNB has started off in the Banknifty components as HDFC Bank watches on the sidelines. ICICI Bank has also responded at the right time while Axis Bank produced a great show, 25% higher on bottomline and an equally bg jump on topline based on growth in retail and cards, while its corporate book also outperformed bigger competitors

 

In size terms Axis is overvalued compared to its less than NII Of INR30Bln this quarter and profits of INR 13.62 Bln which though compare well with HDFC Bank of 4 quarters ago, meaning it has made some inroads only on the gross profit share among banks Gross and Net NPAs grew in size compared to its portfolio at 1.1% and 0.33% for the half year

 

IT will also be back in the second surge of the rally as we mentioned on Friday. The Forbes list of 50 most powerful women saw Chanda Kochchar(ICICI Bank) and Chitra Ramakrishna(NSE) counting fo rthe highest Indian contributions

 

Markets will remain careful at these levels esp throughout today for a big sharp exit from select investors to restart the upline trade but the scenario likely is of markets staying above 6080 /6150 levels in this leg Bajaj Auto and ITC are still gaining investors at current levels and a Bharti correction may lead the  switch trade if a mild correction decides to extend the rally at current levels

 

Related articles

 

 

 

 

India Morning Report: Bank Deals, 6350 targets, Decisive Earnings and No Taper

 

logo
logo (Photo credit: Wikipedia)

 

The markets are of course steadying themselves as data shows (Analyst speak on ET) that cross currency hedges for FIIS also induced a short hedge on equity to prop rupee positions and that unwinding thus has emptied the rally by 6200. However as noted by a few others, this point is no longer the ‘death of the rally’ and the markets are enthused by the better earnings this quarter. Also as noted Nomura has bought a stake in Karnataka Bank and the offshoot of that is the trade in Federal Bank another correctly sized target for Foreign banks and institutions buying out Indian Banks with Federal Bank rising another 16% today , making it 5 sessions in a row.

 

The Dollar will be moving south and as currency and equities both share the spoils and incite EM flows India will return to consumption and infracos in equities as well with banks holding and then leading the ensuing rally. Airlines have reported heady seat volume growth in both August and September and the Festive season months would absorb the high increase in seat pricing if not produce positive growth

 

However some stocks may see changing eigenvalues as investors come in with a different charter of preferences and the 6100 levels may still be maintained. PNB has started off in the Banknifty components as HDFC Bank watches on the sidelines. ICICI Bank has also responded at the right time while Axis Bank produced a great show, 25% higher on bottomline and an equally bg jump on topline based on growth in retail and cards, while its corporate book also outperformed bigger competitors

 

In size terms Axis is overvalued compared to its less than NII Of INR30Bln this quarter and profits of INR 13.62 Bln which

 

HDFC Bank
HDFC Bank (Photo credit: [s e l v i n])

though compare well with HDFC Bank of 4 quarters ago, meaning it has made some inroads only on the gross profit share among banks Gross and Net NPAs grew in size compared to its portfolio at 1.1% and 0.33% for the half year

 

IT will also be back in the second surge of the rally as we mentioned on Friday. The Forbes list of 50 most powerful women saw Chanda Kochchar(ICICI Bank) and Chitra Ramakrishna(NSE) counting fo rthe highest Indian contributions

 

Markets will remain careful at these levels esp throughout today for a big sharp exit from select investors to restart the upline trade but the scenario likely is of markets staying above 6080 /6150 levels in this leg Bajaj Auto and ITC are still gaining investors at current levels and a Bharti correction may lead the  switch trade if a mild correction decides to extend the rally at current levels

 

 

 

India Morning Report: 5550 and nose down, Banks give up consolidation

FO Update: Bifty(BankNifty) strangle could be a good sell so vol moves are up but one should stay away from buying bank puts individually or shorting banks per se. They are quite in line for a jump and won”t be characterised as the villains of this move

The day started well enough Banks shifting chairs with HDFC Bank and Kotak taking over the upside and ICICI Bank facing a small (less than 1%) correction and Axis Bank moving up smartly as well, but as we prognosticated, the Rupee is touchy and tus 5550 seemed like a top off, barely opening at 5573 before trending South. On the bottom again, the move is capped at 5400-50 and the Bifty could well stay above 9000 throughout esp if the Rupee manages to keep the bears happy at 67 levels itself, as the markets decide the new direction of the move in the rest of the Financial Year (Fiscal).

The Rupee has received considerable global attention it has yearned for and sellers have been keeping quiet not because of fundamentals or flows but for the attention alone. ( Any study ignoring other parameters and attending to the correlation with global fourth estate exposure would thus be able to prognosticate the new founts of pressure on the Rupee. Oil is going down and 4% GDP is post a not so tough Oil Bill prognostication at the umpteen downgrades that heralded the start of the week. IT is almost overvalued again, one windfall quarter per 25% loss in Rupee value (YTD :D)

GDP (PPP) Per Capita based on 2008 estimates h...
GDP (PPP) Per Capita based on 2008 estimates http://www.imf.org/ (Photo credit: Wikipedia)

On the market performers, accumulation of a disordered undervalud opportunity variety has started making itself felt in Caital Goods companies and infracos equally as Reliance industries which may look to E&P approvals in 6 different fields. Thus the sectoral technical picture is additionally cluttering the fact that no policy decisions would be forthcoming till after May 2014.

Savings in the Oil ill are coming  from the 13% share of Iranian oil, which because of shipping lines and insurance issues, are unlikely to be raised. True to form, Irnians do not really want t o use Rupee payments made to buy Indian exports except for its rice and tea demand.

Auto sales jum is more a victory for the two wheelers again, Bajaj Auto recovering Exports to 144K ths month and domestic sales on breath with value #2 Honda (301K). Maruti’s jump back to 87,000 units is still a poor performance below its run rate of 100k cars on average  pre 2010 itself. M&M tractor sales have dropped to near ZERO at 14,000 r month and Hyundai has been wiped along with Tata Motors for all the improvements in traction at GM, Ford, Toyota and VW.

Glenmark Pharma is a good pick to start the mid cap ride. Yes Bank and IDFC should e among the non controversial movers and shakers as the markets operate in an unwilling tight  rang waiting for the Rupee pain to go away. Sun Pharma will bottom out above 500 levels and start on its promise again as it builds on the INR 1 T capitalisation. The September trade data for India is due in a week

I do have a couple of questions on the detailed NH survey on housing price trends released yesterday. The 670 mln sft inventory for example seems to be a little bit of an over estimate and prices in Bangalore ,Bombay and Delhi are unlikely to move down despite huge inventories in residential , affordable, commercial rental and commercial spaces overall

Also ATF prices ( 71k per kl in Delhi and 77k per kl in Mumbai) are probability going to  strain the almost barebones domestic aviation pricing again and UDF are up for renewal. These are likely to remain hygeine factors to the India story ( low growth high cost aviation and high inventory of property) because of obvious inelasticities in the real estate pricing and the elastic nature of demand, roving a sea of red for aviation in the last decade. Thus inflation fears are probably dead in the water with Oil and Gold moving down globally.

Metals esp Tata Steel is back in the Buy lists in this run which will probably peak immediately after mid 2014 till September 2014

India Morning Report: A dark light envelops India Markets as the longest tunnel is in play

The New Sea Link
The New Sea Link (Photo credit: Prashant Menon)

There is a light at the end of the tunnel. After all Sun Pharma has retraced to 425 and Ashwini Gujral is recommending a short on Axis Bank, with the Axis Bank bulls freely shorting probably the naked shorts that make up a new residual market of speculators as PCRs stay in a lower range with FIIs not adding more short hedges.

VIX India is having fun at everyone’s expense getting back at markets for being called bad all over and staying increasingly bad. The Morning has already see the rupee enter the new range box between 64 to 68 and so it is unlikely that it will recover to 62.50 or that this is the last stage of the capitulation move.

But yet the new negative momentum in the indices is looking to close out this move in this week itself with a $100 Bln exit by FIIs on Friday necessitating a grave distance covered on Monday and now on Tuesday the same is likely. That means the indices could well compete with double digit yields targets on 10 year paper and the currency targets ( if any) to hit 5000 by Friday close and provide a respite week next week.

JP Associates and infracos have not started back and private exchanges and therefore promoters linked to that may not yet ever make positive lists again

I am like a kid, hoping the Banknifty cut today means the Reserve Bank has thrown the banks out to the wolves asking them to mark all holdings to market and push out a mandatory minimum to AFS portfolios. But then there are those that still think below 8 yields will be back

Buy Power NBFCs and Bajaj Auto has also finished its last moves. LIC Housing for one other NBFC can probably not move down after it hits 130 levels

Vidyasagar Setu, commonly known as the Second ...
Vidyasagar Setu, commonly known as the Second Hooghly Bridge or Second Howrah Bridge, is a bridge over the Hooghly River in West Bengal, India. It links the cities of Howrah and Kolkata. The bridge is a toll bridge. It is one of the longest bridges of multi Cable-stayed type in India and one of the longest in Asia. (Photo credit: Wikipedia)

India Morning Report: Sun Pharma finally breaks stride (ha! Stride Arcolabs wins)

Sun Pharma is snared into the last leg of mega short trades with Axis Bank an easy six pick this week and next. ICICI Bank has stabilised at 870 and after the Consumer stocks (a couple of hours before Pharma) the Pharma crowd gives up its measures of price vaulted in the continuing over-ownership by 2 or 3 ‘undeserved’ bubble notches by FIIs as they certify to their limited export potential and would be pruned as well. Chennai express could find some financial implications is probably what you would think as we continue to provide a 1005 demystified almost paperless review of the trends both in fundamentals and technicals. However, as far a s we are concerned this is just how the cow will be seen by the robot and we will continue this one off everyday before or after we turn to our day’s work probably in the same business with other banks and academia.

REC (and other infra (Power) NBFCs ) has ticked closer to its 13 levels that should also hold. You can probably safely short that one still from 150(wednesday morning) to 133 levels. 2009 they had established new coasting at these levels for the market and thus they could retain their primacy in leading the market trend horizontally or North deciding the times in between till the next rally

LNG/LPG companies again remain hot commodities with Gas prices signed up to move up by 100-150% by 2015 and following them energy companies, the OMCs could well settle down if WTI balances out new price pressures from OPEC as it increases export volumes

Banks would have no difficulty increasing spreads but may be hidden gems before the broader Economy realises that but nothing to beat bank stocks on a fundamental basis at this point. Outsourcing stocks start the unstemming bleeding today as they are also not contributing to the CAD deficit reduction as the first few investors had ensured in the 2004-2009 phase of its heady growth.

We dealmakers have also noted with interest that despite the hoopla around IPL

This diagram illustrates the Private Equity J-...
This diagram illustrates the Private Equity J-curve in which net cash outlays in early years are outstripped by cash inflows in the later years (Photo credit: Wikipedia)

dying down more corporate owned sports businesses are in the fray than ever before and may attempt India’s unique public financing iPO model even as Private Equity adjusts to the new view of the Economy, once again showing its inflexibility and habituated method of creating big, wide potholes with transplanted models and outlooks that have again failed in e Commerce and any remaining brick and mortar models. Private equity may however, finally be able to make the transformation and invest in local analysts not just for salary expenses but for more akin modeling of the unique parameters. It is a long uphill struggle

Not many private banks were timed to and tuned into HTM portfolios despite the threats to rupee and thus ill be blamed for the losses that happen on their investment folios this quarter. China’s increasing trade surplus similarly does not match its eigenvalues of resuscitating domestic consumption for those waiting for the first early signs from the same since 2008 ut consumer demand there seems more robust than India esp for engendering larger investments

I was also hoping Hero Moto would return to more realistic levels as any motivation for it to be the star of india should be also seen as continuing over-ownership by 2 or 3 ‘undeserved’ bubble notches . Hero tracing below 1700 could very well be the last of the vertical shorts in this market when that move is played out hopefully over next week itself

India Morning Report: Tentative market ready to reward India’s uniqueness to new 6150 channels

English: Hero Honda Karizma R
English: Hero Honda Karizma R (Photo credit: Wikipedia)

It is already stripped of all technical jargon and robust or otherwise complex mathematical approximates of financial Markets. It means the Indian markets would likely not go ( barely go ) below 6000 in the coming days even as bearishness engulfs sentiment because at its worst India would still be worth 4% growth, now a bottom subscribed by long term Economists for big bad China who has been dragging everyone down. Given that many were already invested in the big China story, China however will continue to see outflows and India will continue to see small but measurable inflows in the coming months before anyone gives serious thought to a turnaround.

Banking hawks and traders watch out because despite breaching some phantom 10000 levels used by the market, Banks hadly have any reason or substitute to lose more value esp the shorts on ICICI to 930 or on Banknifty to 10200 seem out of sentiment for the movement from here till 6100. The trigger being assumed is that of disharmonius traders not getting a return for being in India since May. But then the Rupee move is yet under cooked as Gold has joined the oil price rally and the dollar seems to have started a big upward climb at the start of the week, after recording against the Aussie at 92 cents, Kiwi dollar at 79 cents and the Yen losing its desired undervaluation at 99.95

HDFC Bank results for example will see, despite the reduction of float, interest returning after punters realise the limitations of a midget trade in the banking sector with Indusind which as of now does not qualify in Mid cap sectors much. But then Axis bank’s result punt has to unwind and that gets quite complex in selection of stocks supporting the downslide within banks and the now nefariously wide distribution of non banks used a s substitute even as Hind Unilever gets ready to bow out of the markets

Also, i agree reliance hardly had anything to redeem itself in superior Q1 results on the weekend and Capital goods and energy, rising in an uncertain market would act as some of the substitutes without much recourse to fundamentals in their sectors,t the technical eigenvalues avoiding banks as long as positive push does not meet extra ordinary resistance in the BhEL, L&T and the ONGCs Bajaj Aut continues to beat Hero Honda and a pair trade is increasingly safe still Hero Honda the sold vector in the pair

India Morning Report: 5750 is here and it’s Friday

The week will close out thus with FIIs exiting some equities occasioned by DIIs entering the market finally buying 3 days into this Friday and likely to end the day near INR 25Bln in buying ( ` 2500 Crores) for the week

Mid term traders would do well to avoid exploratory tips like SS bidding out BOB into a new spin after it hit 630 yesterday which is unlikely as Markets respond strongly to the week’s closing glad to go home with no outstanding positions and no Rupee trades left. As shorts exit the Rupee ( if they were still on after the GOI move mid week) there may be even more bullishness to close the week. EM bonds as of now do not equate to India and with DIIs also buying, any resumed buying will mean quicker move up in volatility providing keen traders new choices in scrips going up not down

Jet Airways and the sharply corrected YES Bank would be my picks to start and if none of the two work for you, switch to ICICI and IDFC or ITC and bharti as each of these twoples are likely to work together on different sentiment days on the upside not unlike Axis and Bajaj Auto or Axis Bank and Idea two weeks now. F&O straddles at 5650  were a great pick or strangles at 5600 (sell puts) and 5800 ( sell calls) but should be ripe in today’s open , vol having moved into the 2s.  The safer ones going by the network pick recommended at 55/59 should let it sink till expiry and pocket the 44-50 they might have turned in in the setup yesterday

Europe and US should not have much of a move left  to close out the week.

 

 

Bank Results Season: HDFC Bank Q4 grows 30% PAT and Net Interest income

HDFC Akkrama!
HDFC Akkrama! (Photo credit: prajayogi)

 

Net interest income for the Indian Market leader in Private Banks rose to INR 43 B from INR 33 B 26% on year/year growth. As dividends from insurance have also started showing up regularly every two quarters consolidated PAT has been growing unbridled past our 30% watermark. PAT for Q4 ended up at INR 18.90 B, a substantial shoring up of business performance in the last six quarters when it began a series at a strong but smaller share of the indian market with INR 12.5 B quarterly profits and  INR 26B NII

 

A CASA of nearly 48% however with Advances at INR 2.4 Tln nearly not growing fast enough, deposits have closed in on the INR 3 Tln mark. Though its cost income efficiencies rival the most superior in the industry, the funding structure of the bank still shows up in a heavy 16.8% Capital Ratio in Basel I terms which would not get negatively impacted in the Basel 3 regime for Indian banks and an Advance / Deposit ratio near 85% and gross NPAs of less than 1%.

 

Though flash reports have not mentioned it yet, Fee income likely tracked more than INR 28.8B and the bank needs to attend to credit growth as a main objective and define trade credit /transaction banking and commercial lending separately going forward as also wealth vs traditional retail and loan product income in retail where new blood is likely to strike alongwith limited competition from indusind and kotak bank

 

The detailed exposition of year end results will appear in our traditional HDFC Bank vs ICICI Bank face off after the Chanda kochchar led bank’s results are announced.

 

India Morning Report: Breakdown trades in progress, don’t get fooled again

An HDFC Bank Branch in Hyderabad
An HDFC Bank Branch in Hyderabad (Photo credit: Wikipedia)

5500 is not holding. It may be FIIs affected by Infosys, it may be that those who rerated Infosys already have looked not so hot on India inc despite replacements like ITC and Bharti that signify winning consumer propositions on a near global scale while brokerages still chasing the tech dream led by Morgan Stanley with an EPS target of 185 for Infosys in FY14 are bound to be bad examples for traders and investors not stopping the exit of the weak. JPMorgan and Credit Suisse have rerated Infy at long last to 2700 and 2450 and the stock may well provide buying opportunities at 1950 again thus ensuring a good index momentum to the downside

The other reasons for worrying about India Inc showed us that only a rerating of positive expectations will continue to happen in the post crisis world and India market returns and economic performance remain exemplars in the new investing heirarchy while China’s struggles continue to define Asia/India. Nominal GDP and GDP at Factor Cost have grown 6.0% (12.5% excluding inflation) and 5% respectively according to the Advance GDP report. The fiscal gap will bring discussion on cyclic impact of exits which should not be significant and as Gold falls on thru in India as well, to below 28k, likely pressure on imports will be found to be reduced but both the arguments are inane and fueled by the ir relation to the fiscal gap in basic math but unordained by any data linking them thru the years when fiscal balance and non exits have again become primary reasons for India to continue recovery. Today’s trades seem to signify a 25k level for gold and 42-43k for Silver for 10grams / 1 kg respectively

Historically this should also be the last negative growth in indian non food bank credit growth at 12% as Deposit growth remains strong enough but that is a challenge that banks have to perform to and while HDFC Bank and ICICI Bank deliver , PSU banks will struggle with higher NPAs till they reach a mean 10% of the PSU bank assets apart from SBI and PNB which are expected to have been done with systemised NPA growth

One is probably looking at more dealmaking in FY14 as well though bigger M&A is not as likely, with PE likely to find a string of deals to match the fresh deal flow in March from Kotak Bank (Temasek/GIC subsidiary) to others in aviation and likely in NBFC and other services businesses.

However back on market levels there is no stop after 5500 till 5350 and waiting in the markets again is unlikely to be worth it, especially with results season likely to be good for only large market caps and selected banks already on buying lists including Indusind, YES and Axis Bank where fresh foreign investment is still likely

India Morning Report: And here is the 5850 test again

ICICI Bank Headquarters
ICICI Bank Headquarters (Photo credit: Wikipedia)

The Nifty lows hit in the week of 22nd July 2012 at around 5100 were a strange time with the upcoming dampening of India’s growth prospects in the fourth estate seen as a future buying opportunity by the Domestic Institutions. That buying then with all the fund flows that have supported the rally since in these 33 weeks could have avoided the loss of opportunity most DIIs faced.

As the markets fell from 5300 in the first week of July 2012, DIIs were waylaid by the extra correction and instead of buying into positive policy announcements have been net sellers for the period on a daily, weekly and monthly basis in most cases. However, even today 5800 is unlikely to be breached and that itself be a cause forWmarkets to be buoyant again.

The Israeli branch of the "State Bank of ...
The Israeli branch of the “State Bank of India” located in Ramat Gan (Photo credit: Wikipedia)

In the meantime Banknifty is back to 11600 again, opening the day with Houlihan and Lokey’s signing up with Kochar’s Avista a small positive for the sector and the sector tracker(Banknifty is an index)  overshadowed by  disciplinary actions as the punitive sting of wealth acquisition (Cobragate) engendered 20 suspensions in the other Kochar’s ICICI Bank, always the worst offender on discipline and the fastest in Covering CYA, and other disciplinary action promised even as HDFC Bank, Axis, SBI and ICICI Bank prepare for the inquisition in their own banking tradition.

The Banknifty was in fact below 11500 , its new support being 11600 barely two weeks ago and any new test of the sectoral and market indices are unlikely to take markets south. India’s 6% growth being protected keeps India the ultimate defensive in this turbulent environment and the growth story is still out there hidden by old IIP series and mismatched inflation data.

Even if Economic data does not improve its semantics, and network analysts from Ashwini and SS (TV18) continue to search for lower levels to improve volatility, those tracking the fundamentals like Mitesh Thakkar and us, would be backing the bull move to the hilt with buys on M&M, Bajaj Auto and IDFC to start with. The energy sector also looks tractable now with petrol price reductions and Diesel hikes and its preponderence of investible large caps would be a veritable fest for Foreign portfolio investors and our own DIIs again.

The range being capped at 6100 and the RBI Mid term on Tuesday make it unlikely however that more interesting times that await us, indeed start off in this week or next and the improved volatility still no good for lasting F&O bets, writers riding the low volumes as one time trades expire in two weeks now.

COAL INDIA is also just being repriced for the new liquidity hitting the markets today down 5%.  The new Euro periphery bailout to Cyprus and the conditions affecting bank depositors (9.9% /6.75% levy) also means a new low for the Euro and thus for the Euro zone as the new liquidity’s wider impact is broken for the next 2-3 months by the fire fighting

India Morning Report: Week opens on a buoyant note

English: AXIS Bank
English: AXIS Bank (Photo credit: Wikipedia)

India Morning Report: Week opens on a buoyant note

Despite the run on BOB due to the herewarned jump in NPAs at BOB  and AllBank, the correction in others tracing the trend in BOB like SBI and Axis Bank are unlikely to fall through and banks like ICICI Bank and Yes Bank are likely to be strong bets for this move in February though the pre Budget rally’s happenstance coud be discounted by the end of this week and the market stuck at below 6100 levels.BOB’s NIMs have fallen on quarter by almost 15 bp though they are still 20 bp better than December 2011 at 3.08% and are likely to be hit by a falling knife as at Allahabad bank even as PNB and SBI walk out in the guise of reduced provisions,

The Solicitor General’s resignation might be a significant blip ont he horizon for India baiters and because such a category is waiting in the wings, the intellectual discussion around the government’s decisions pushing thru new ordinances that led to this falling off are likely to be muted and ignored as India Inc and investors look to firm policy moves in the wake of a wasted 2012 for India when it should have been coming in to prominence for its Economy’s staying qualities and instead was largely ignored despite new FDI invitations in aviation and retail

Banknifty is likely to start a new move from 12600 (12654 at 12 noon today) and probably has at least 10% to offer even as ICICI Bank’s opening gambits helped the bankex and banknifty realign losses from weakness in SBI and BOB post BOB results The bull run in DLF is a red flag though and might sour the uptrend as IDFC is rerated down with no moves on Infra financing in wake of the Fisc, though an untenable assumption, being a driving force in irrational investor minds. Reliance Infra and other Anil group companies however would be at the forefront of the markets vertical climb if it happens anytime this week.

For rivate Banks atleast the turn in the economy signifies the rush for CDR is over.

India Morning Report: Why not a 50 bp cut now, and is Glenmark the new blue chip

Does Rao have room to cut rates

 

Yesterday’s hawkish review ahead of today’s policy meeting and announcement was very clear about the CAD reaching 5.3% with another reduction in the Central Bank’s conservative GDP pronouncement. However, inflationary pressures have ebbed and since the Central Bank realises the importance of doing away with the spectre of a recession, now hinging on a rate cut with Credit growth stuck at a low 15% despite the gap from Deposits that grew 11% in the week ending Dec 28.

 

That it does, also means that the rate could well be a good 50 bps, accelerating the dissemination of liquidity and growth from financial easing in the Economy and allowing RBI another breather to study inflation in detail over the period till June when the next rate cut would become due. one wonders though if like bank desks have forecast, India can actuall live to the top of this Economic cycle with only 100 basis points in cuts or even 150 bp till March 2014

 

Axis Bank Mega QIP garners $2 bln

 

Axis being the speculators’ pick for arbitrage and weightage balancing on both Nifty and Banknifty,    the effects of its improving fundamanetals with a large $1-1.5 bln Capital infusion are going to be important momentum providers to the Nifty and as it fortuitously looks like it will not result in Cats and Dogs moving up with both Educomp and Jubilant foods lying low ( the latter having lost its coin purely on speculative traders’ dime), it would mean longer term Capital taking over some of the remaining float at Axis Bank and others in thelarger Mid Cap categories like Yes Bank ( who have changing ownership on the FII ‘float’ as a downside risk after having Rabobank exit)

 

Glenmark Pharmaceuticals
Glenmark Pharmaceuticals (Photo credit: Wikipedia)

 

Glenmark reports Q3 results on high expectations – ‘Enriching shareholders’

 

The deep pipeline at Glenmark with 46 ANDAs to go in the US market and 82 products already authorised its growth at double the industry rate fof 12% in the first nine months of 2012 ill only be exceeded by itself again in this quarter and lead to probably a count in the Top 10 pharma companies and even the Top 5 in the foreseeable future.

 

A healthy 25% of the portfolio seems to be domestic market driven and unlike other market observers we do not believe such 35% growth as it achieved in India in Q2 is likely to be beaten by others in the Industry depending on new compulsory licensing and expensive generics for the Indian market as portals for explosive growth

 

The domestic market remains likely to reward Diabetes solutions and normal OTC and low value prescription medicine manufacturers with volumes and growth from the current pathetic $2.5 B mark in 2011-12 

 

Glenmark pharm in the meantime is prescribed for having broken the barriers with consistent 20% Topline and 30% Net profit growth parameters.

 

 

 

India Morning Report: A Hindi speech for another wannabe and more such stable tenets of Indian realism.

icici bank
icici bank (Photo credit: Wikipedia)

NaMo made it to Gujrat’s top executive post again and likelyy will last there for a couple more terms after this new term is also over but those that can see around the media carnage opportunity for the new PM wannabe, I am still very clear that India will not accept this strong PM much like it doozied Sharad Pawar and Jyoti Basu’s candidature earlier(Jyoti Basu refused to move to the center despite being the kingmaker and a strong government in Bengal for 32 years).

A pan-Indian institution like HDFC Bank or new investors (domestic) like Tata Motors may enable however an Economic armageddon and even a Non Congress/UPA government at the Center as a viabel non coalition alternative. Rating agencies howevr inclined they may be to use that as a peg to hang India’s political instability on in the 23 country band between BBB- to BBB+ that includes Turkmenistan and Kazhakstan and other such resource only single product economies would still be continuing on a longer deeper folly they stuck to when India was actually near default once in the late eighties.

That leaves you with the question if the Nifty will indeed move in a new direction sooner and the seet answer is that despite such lengths of staple yarn wrapping this Tropic, 5850 is more than a stable support and ready to rush the bastions near 6200 and nothing else. Today’s 47 point correction as of 10:29 am however, gives you a chance to case the two banks HDFC Bank and ICICI Bank for a new run and Yes and Kotak to fight for that mid cap pie as they treble their deposit bases to become viable before the new generation banks grow into viable competition.

Consumer spend plays again rely on Airtel and the India’ economy again will not become a tireless skyscraper for DLF itself so the weak moves in the Alternate bucket reserve as the blue chips of this rally idle when the market tried to move with Axis Bank since seen as overbought at below 1200 itself or the continuing return of TaMo after the battle of Sanand and the battle of inventories not to mention the moving on of CE Ratan Tata.

The lack of clarity in healthcare plays as the Dollar driven scrips become a crowd show the rare space when speculators are having a field day and probably the entire half dozen of scrips where sell side domestic research ccan still count. Consumer spend and Domestic Pharma markets are likely set to break out of the hardly $7-8 B market they make in the branded sector finally for both FDI (Retail) and good old

Jyoti Basu (8 July 1914 – 17 January 2010) or ...
Jyoti Basu (8 July 1914 – 17 January 2010) or Jyotirindra Basu was an Indian politician belonging to the Communist Party of India (Marxist) from West Bengal, India. He served as the Chief Minister of West Bengal from 1977 to 2000, making him the longest-serving Chief Minister of any Indian state. This photograph was taken at Science City, Kolkata on traditional 35 mm film; the negative was scanned by Nikon scanner after 10 years. It is a little cropped image. (Photo credit: Wikipedia)

proliferation(domestic/ price control/insurance/diabetes cure/cancer drug availability spread) reasons

India Morning Report: Considering the velocity of the move, it is now improbable that the bull run is yet in progress?

Pivot table NSE Banknifty PSUBank index scrips...
Pivot table NSE Banknifty PSUBank index scrips from OJN for 20110609 (Photo credit: OJN2)

 

The 90 point move on the Nifty yesterday, trying to make spectators out of those opting for not such a roller coaster move means that the classic correction/ consolidation prospects have also improved apart from the secondary improbability of conditions improving as no policy execution is likely.

However markets would woot for Goldman Sachs’ revised targets and Moodys’ clean chit for the subcontinent’s Economic goliath “Mumbai dreams” upping growth forecasts to stratospheric ( and they were so “stratospheric” just 8 years ago) levels of above 6% by FY 2015

The Pre Open went along expected lines, traced the line in the sand for bear traps with fastest rising prices from Bharti and HDFC Bank to Axis Bank among others correcting to Monday levels before the Pre open ended with a sigh above 5730 , cutting out shorts from the lifelines to the next few millenia. Decks are cleared for all cash subsidies and other such tools that would ensure no Old India thus gets in the way of New India but I would think the more things change the more they remain the same as young India hardly owns any mints especially if high priced MBAs ( like us) are as few and young couples that are actually growing Bangalore’s per household income and disposable spend levels are actually as relatively poor as they are with MNCs leading local IT companies in correcting compensation to an affordable baseline suitable for fatter expansion of numbers on call from more working class ratios like teeth to tail ratio ( ratio of solders to commanders) and enabling keeping existing customers happy as possibly only viable strategy inputs including at banks and marketing consumer companies hitherto fueled by top management / boardroom expansions.

Of course for the markets that aside is as peripheral to the rally as the Moodys’ report they triggered to a big high yesterday and as peripheral as the bickering in Parliament led by that able woman on how to lose the no confidence vote to be tabled by the opposition in Parliament

Banks esp Axis Bank and HDFC Bank that led yesterday could exchange roles with ICICI Bank and because the fourth member of the trading independence consortium of the banks i..e. SBI or Banknifty (PSU – not a defined sub index) is incapable of leading from the front without crashing through it is unlikely that the Nifty will easily cross over the 6000 line yet again. I wonder what gives when the Nifty finally does it in a few weeks from now.

 

 

The Goldman Sachs Tower - Jersey city, NJ.
The Goldman Sachs Tower – Jersey city, NJ. (Photo credit: Wikipedia)

 

 

India Morning Report: Market forgets Hero hit in Reliance comebacks

Image representing Panasonic as depicted in Cr...
Image via CrunchBase

Hero is a forgotten brand today haemorrhaeging 5% market share from August 2012 to 36% in September even as Bajaj Auto maintains its key following of the brand and generates interest in new export markets. While the idle October till now sa markets reacting with aa dropin consumer Discretionary and non discretionary performance on the bourses in almost a synchronous reaction, the consumer brands including unlisted Sony, Panasonic, LG and Samsung with new lasting promotions and discount melas to save the festive season as consumers have not said they do not want to spend.

Financial markets in the meantime were roused appropriately by Axis Bank’s good enough showing though as promised Axis booked another INR 5 B in provisions on top of 2.5B in the year ago quarter, maintaining its 20% growth in Profits and a NII jump of only 16% to INR 23.2  B Both are nearly 10-20% lower than that of HDFC Bank and the bank is expected to lose higher NPAs than the industry in the coming few quarters. Non Interest income is stuck at INR16 B for the quarter. It seems credit growth has plateaued at the bank

Image representing Sony as depicted in CrunchBase
Image via CrunchBase

concurrent to losing restructuring battles and exponentially rising provisions. But as of now ‘like Citi’ this was expected for the bank.

The highlight of the day and probably all week was the jump in refining revenue for Reliance at a new $9.5 GRM for the company. Its other two businesses hasd petchemh holding to its share of revenues of nearly INR10000 Crores or INR100B, overall topline slowing to INR 90.3B down 6% sequentially instead of the usual larger drops due to the continuing reduction in E&P revenues as E&P slows down at KG D6. RIL revenues are up 15% over prior year and the stock has finally got a new range perhaps still redefining ruling Sensex levels after any correction as it moves up smartly from 821

 

RIL Logo
RIL Logo (Photo credit: Wikipedia)

 

 

 

India Morning Report October 10, 2012: Bill these to the neighbours?

Marico
Marico (Photo credit: Wikipedia)

The markets continue to allow a much pushed out correction but stand on 5650. While yesterday’s Bank Nifty risers were targeted in the afternoon itself Axis Bank, inexplicably ticks down further strongly to an almost binary state of 5650 = below 1000 target though once in four months mean  most traders have crossed the rubicon and are shortening the trade cycle this week to a daytrading drill even as Emkay pays up instead of cancelling the 509 trades that caused them grief.

Bear Calls on the IT sector are in surprisingly good time as the Rupee weakens this week and thus IT continues to enjoy support wiht Infy maintaining its hiwgh wter mark above 2550 right now. Verdict, irrespective of sectors rerating downwards, traders will play safe IT trades in results season, and will evoke retail interest as well. Consumption sector’s rerating may prove to be tempestuously short of the mark during results season as well

250
250 (Photo credit: Wikipedia)

as there are no real hopes for good results in Q3 December and the “bottoming out” may have only Q4 of this Fiscal. The prices of Crude, Palm Oil and the Dollar offer injunctive relief and market will probably pick and drop stocks as volatilely it does esp among tier 2 plays like Dabur, Marico and Britannia, instead ITC and YES BANK may continue their breakout in this uneven quarterly evaluuation in the coming fortnight, esp as 5650 is likely to hold.

JET and JUBILANT rallies may again provide the sparkle to the debate and the KFA story promises more twists and turns with its show cause notice likely expiring without KFA losing its licence. The already pledged USL and UB Holdings’ personal holdings of Mallya are likely to still carry some optimistic tones though you are welcome in anything except ITC, YES, JUBILANT and JETAIRWAYS wtill you can keelp a singular focus on these. BIOCON and SPICEJET probably stand out for special attention and may be surprise picks in the return of the bull tot he likely 6000 targets still open with the bull. That would not be in a hurry this week either.

Pre Closing Trading Strategies September 24-28, 2012 – Wednesday 3 Pm

 

Markets have decided to inch upwards is a clear prognosis and as of now even the new resurgent Dollar’s trade on the rupee to 53.52 seems barely able to survive new shorts and likely fresh shorts in Rupee are warranted now or after 1 more 1.5 more upticks before 54 levels depending on the resurgence of the post expiry buying that ensures the trade remains up than a month long correction to enable fresh institutional buying at local MFs and LICs

However banks seem to be quite decisive having dived 60 points to 11350 on the Banknifty and fresh buying in HDFCBANK and IcICIBANK is out by a week so more uptick will be in Axisbank led revivl stories of Canara Syndicate and the ilk like Union Bank and CBI which unfortunately is not really looking likely even now leaving Axis Bank a lone horse again to repair the points damage and ride in the first week to come Ye s at 375 and ICICI bank at 1065 may not see fresh buying now but like ITC corrections are unlikely to be deep even if you accumulate in the same levels before the upswing resumes.

 

As mentioned earlier however the rest of 2012 is unlikely to see hard data backing a recovery and is only more policy speak peppered with off market and on market deals with Etihad, USL, Ikea and Walmart among others.

 

India Earnings Season: (Bank Results Season) Axis reports NII jump to INR 21.80 B

 

Axis Bank Dream Home Festival 18th & 19th Marc...
Axis Bank Dream Home Festival 18th & 19th March 2012 at Hotel Pride, University Road, ShivajiNagar, Pune 411 005 – 2 (Photo credit: Ravi Karandeekar)

 

Axis tried to drown itself on results to break the jinxed 5200 levels but the results brought in more buying as the Topline jumped the usual 20% + on year and Net profits have held sequentially as well as on June 11. Net Interest Income is up almost 30% at INR 21.8B Net income is up 22% on the year. Gross NPAs are 1,06% , no further improvement but despite the school of hard knocks the bank comes from that is a best in class performance from the bank incl the CAR of 13% and Net NPAs are 0.31%

Net profit beat expectations. Net NPAs are 6 B from 4.73 B in March and was expected. Provisions have grown on a low base and INR 2.59 B is not the end of story and ill rise in future quarters even before Dynamic provisioning is sneaked in

The Loan portfolio is up to INR 1.7 T and that’s creditable 30% growth over June 2011 while retail portfolio has started ticking up its share after the bank’s thrust in cards and unsecured loans to INR40B or 24% of the portfolio. Both ICICIBanka nd orking Capital Experts HDFCBAnk have 50% of their assets in retail.

I am recommending buy before close of market hours today and adding to existing ICICIBANK and HDFCBANK portfolios. SBI may be sold on results as well

 

 

 

11 AM UPDATE ( As opposed to Late Morning trading Strategies)

Axis Bank is likely to do exceptionally well in a strong AMJ quarter in which yields moved down and lending business grew handsomely for the right lenders. Axis has also increased operational efficiecies in 2010 and 2011 which have since tapered off. Net Interest Income will see strong yearly growth but may struggle to rise sequentially from the high water table for Q1

The Rupee does not encourage much trade at lower levels seeing spikes on every transaction in the NSE and may have bottomed out at 54.9 for most players being on the long side. However, the global moves and the Asian correction in korean WON and SGD may be followed by the rupee which does represent  a large transaaction island of 5% growth and Exports and imports make 1/3rd the GDP now.

Unfortunately the shorts on IT have taken the wind out of the up-move which is strange considering the bulls are still  on in Banks, Healthcare and even consumer goods performance though that has a bleak outlook after results season  A single MARUTI short from here can test the Sensex 5200 and even 5100 levels after Axis Bank results are sold in instead of jumping further etc.

 

Morning Trading Strategies – India July 12, 2012

Sell INFY in the morning even if you get high 2380 levels as the cut would go deep

Buy BIOCON and buy the banks esp stay in your holdings in HDFCBANK. Auto shorts are unlikely to give too much in returns, Healthcare and Consumer stocks should be buy on dips. CIPLA my stay up and SUNPHARMA shorts work for the street though keep a tight stop loss on the same.

Buy a few Nifty Puts at open regardless of any strength you see, do not buy Banknifty puts and if you are tempted to sell a few puts to lock in the banknifty levels it could actually work but then it is temptation

Hopefully by 10 AM you have started biting Nifty Calls

Late Late Morning Trading Strategies – India July 11, 2012 (Results season preview)

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

Infy strikes first on Thursday morning followed by TCS results after hours and then the limelight quickly shifts to banking as HDFCBANK reports on Friday itself, MindTree having skipped signal bars to run the results on Sunday and one feels HDFCBANK might run things late too as

Bombay High, South Field. Undersea pipelines c...
Bombay High, South Field. Undersea pipelines carry oil and gas to Uran, near Mumbai, some 120 NM away. (Photo credit: Wikipedia)

growth in credit will be stronger and also catch up on rural growth while NIMs might not keep up before increasing realisations on loans again inthe April – June quarter.. HDFC Bank is unlikely to be compared on Fee income growth with Indusind but may continue back on a handsome growth after an average Q4 while 30 growth in Profits and 20 growth in Sales is a given, again handsomely beating INR!0B expectations on NPAT and . Axis Bank will have reported by Wednesday and may have mixed tidings with a sharper cut in NIMs for a SELL on news flavvor by Wednesday

The street is as alawys positively expectant on Infosys after de-rating the stock but being the eternal optimist, my followers may be a little shocked to realise that I don’ t think bad news in i/nfosys has been factored well enough. But this time around, weak global demand will be welcomed with less derision and more participants ready for a short play on the ‘bellwether’ as Dollar guidance of 8% growth may be struck down further because of the same reason they are postponing hiring – no clients, less additions.

TCS is expected to gorw profits 35% over Q1 last year and Infosys itself will improve EBITDA by 100 points on the Rupee average rate moving out of bounds but that is unlikely to keep Infy at 2488 and thus see an intra day correction in TCS tomorrow before it is ready for its own results announcement. Ideally , be very sure of the sentiment before you move in these scrips.

Buy JUBILANT FOODS and TITAN INDUSTRIES

An HDFC Bank Branch in Hyderabad
An HDFC Bank Branch in Hyderabad (Photo credit: Wikipedia)

The Rupee has trended down and MCX and FT finally up only 2% to 1180 and 800 as they make the happy announcement for MCX SX which has been trading just currencies

TATAGLOBAL and PRIME FOCUS seem to be the best picks int he sideays move the market is hoping to stick to and REC and PFC have been creeping up. ONGC is likely to outscore 280 on a diesel price hike and BPCL already up at 782. If there is another Vertical move HPCL and BPCL will move further

q

India Earnings season: (Bank Results Season) : Axis grows NPA beyond expectations

As usual the NPAs of 687 cr or 6.87 bln would be marked to high growth in some long term analysis with NIMs still 3.75% and gross NPAs still 1.10%

CAR also seems ok-ish and not too great at 11.78% Can’t match the growth in NPAs to a PCR of 87.7%, harddly management attempt at efficiency, likely an anachronism. Write offs as expected never went near

Images_IRRIDB0210_DSC_3980
Image by IRRI Images via Flickr

even 2-3% of net worth with a NPAT of 11.5 bln above expectations. NII is 21.4 bln and growth in sales is 23% (incl other income) Asset book must have grown largely in retail

I am ready to short every fin stock at 5050, probably results season is good but the marks have been reached

Banking growth: More policy blowback – Subsidiaries refused

ICICI Bank Headquarters
Image via Wikipedia

Where banks throughout the world are now deleveraging having hoped for an extra bit of govt sponsored handholding to survive that was refused in the Inidan and Chinese environment faceoffs between regulators and bankers are more regular as banks alternate between traditional models on one end to unverified arbitrage and sustainable global opportunities on the other. The RBI diktat of merging all subsidiary businesses and banking business to a single Financial Operating Holding Company ( FOHC) some time six months aago is one of those. Banks that have already set up elaborate structures incl. ICICI may be able to do that without much fuss, but unlikely find it critical to their operations to do so and expect the regulator to understand.

Similarly, public sector banks have tried for long that they be alllowed to circumvent uniform compensation

South Indian Bank
Image via Wikipedia

guidelines that apply to them so that specialized talent may be held accountable to existing / new profitable lines of business at middle and senior levels. Bank of India’s proposal to hire such staff at different compensation thru a new people subsidiary was rejected by the RBI according to Business Standard(BS)

South Indian Bank was also asked to conduct business in gold loans directly thru branches instead of setting up a NBFC (presumably) subsidiary and Axis Bank and ICICI Bank were earlier stopped from setting up separate Infracos after differential funding norms were offered to NBFCs in the sector allowing a distinct 15:1 leverage

RBI diktats suggest it approves subsidiaries only for businesses that cannot be conducted thru branches and current licenses such as insurance and securities broking which is now expected to moved to an Operating company rathwr than current conditions where these are subsidiaries of the banks ror have stakes from the banks.

LVB was refused choice to set up a distinct housing subsidiary, probably in which more banks would have used the strategy to ‘follow the herd’ and unnecessarily crowded the space without effective business growth

A separate report highlights how Indian companies have banking business in branches abroad with PSEs SBI and BOB leading with 50 branches each and ICICI Bank having come up int he Private Sector with 19 such offices outside the country. All these offices end up without transaction banking mandates or even an effective market share of NRI deposits and are being asked by select governments to concentrate on local lending in that jurisdiction without any apparent results

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.

Axis Bank to aim for 1 million cardmembers

Axis continues its late thrust with tied cross selling from deposit desks / relationshi p managers at its retail branches ans India gets into the act for increasing the unsecured (credit card ) loans portfolio. In the US also with regulations well in place, banks have started wooing consumers fed up of retail charges on debit cards etc to new credit cards. Axis Bank plans to explode on card member enrolment even as ICICI Bank and HDFC Bank work with a smaller 600k members each and State Bank of India even smaller at 400k . 

Since October Debit Card spending has shown a higher rise in India as credit card spending though bigger by 10 times than 5-debit spending each month stays dull in the new economic ways of the country. US has been growing Auto loans at a good pace month on month however India had ponly one small bump up in November (in both the fortnightly reports of Nov 4 and Nov 18) and may well fall back as banks look at new ways to get back customers that have not returned since the sun went out in September 2008

Indian Private Banks : A global mid-market bonanza

The Bombay Stock Exchange, in Mumbai, is Asia'...
Image via Wikipedia

A sea change

The global credit markets are no longer a quest for safe haven nor are they any longer carrying any lesser risk premium than the equity markets. While global correlation stepped up in the last few months in equities, it has increeeasingly become tied at the bone to moves in the fixed income markets with terms like sovereign risk or spreads between sovereign and corporate risk making a good hot fudge and no business.

Opportunity for Indian Bankers

Indian Private sector banks have long struggled in the international arena but despite foreign competition in structured finance and leverage products and a norma regulator-local bank close relationship in USA and Europe have ventured out and established foreign branches in 5 continents. While the earlier propensity for choosing non resident indian customers for credit and deposit products , the current opportunities in Transaction banking globally and their comfortable liquidity position are the right fits for a global custom. While they will have to start out by buying foreign credit portfolios as customers are equally choosy in these uncertain conditions and the banks must choose quality credit.

The quantitative leverage in terms of Tier I Capital of 11.5% and Capital raitios of 18-20% for ICICI Bank and HDFC Bank would be wasted on Indian credit as quality borrowers are not available in the local market and public sector bnanks already carry nearly 66% of the share of business, ICICI Banka nd HDFC Bank contributing to a 30% share of Indian credit with Axis Bank

Though a much more detailed analysis is planned, this much is beyond doubt and not much in terms of options is available to Indian players, India’s tiered international access in banking and insurance having long created untenable costs in their being branded as risk averse and or market unfriendly in inter bank markets unnecessarily

THIS IS A PRELIMINARY DRAFT

The bitter pill for Indian Private Banks

India’s Forexonomics ensure that india’s capital and outward ambitions automatically make its best large cap efforts look like mid market plays for the global audience. A bitter pill to swallow but one India and I myself among others of mine and the next two generations have long resisted. The behemoth of an ICICI Bank or that of HDFC Bank, being from Asia have long been identified as new players in the global arena and because of risk parameters self defined, they are yet to use their international businesses to extend credit to international companies, not that many quality businesses would approach them for syndication either.

Having all the research time I need at my disposal though

Foreign Banks in India: Looking cheerful again

Citibank Handlowy i wieżowce Stalexportu
Image via Wikipedia

While Global results did temper Indian ambitions at HSBC and StanChart, tidbits confirmed from last month and anew show the magnetic pull of a 7% growth for India as the baseline factor.

1. HSBC is recruiting heavily in India(HT). With 50 branches and a retail operation that is almost profitable, HSBC plans to continue expanding its India footprint to a $1 bln profit by 2013. This 6 months saw it make $394 mln in Corp Advances and $451 mln overall in India, incl Investment Banking and Asset Management, no mean feat and Stuart Davies has a hard time recruiting enough, confusing watchers who probably just left the bank and more..

2. SBI’s results have been noted and HSBC Global has already put out a buy on the stock, raising its target to 2600(ET)

2b. Citibank is restarting its unsecured lending business in the country while HSBC continues to be careful in retail assets given large NPAs(BS) India’s Private Banks hope to restart the competition in the space with Axis Bank going after existing customers and HDFC Bank increasing the share of new customers to 25%

3. Emerging market funds see most outflow again for the third week and Paulson got out of more than 50% of his BofA and Citi holdings in June according to his 13F filings. All hedge funds filed their 13F and see idf we have the right analysis in quick time at advantages.us

4. Of the $3.2 bln leaving Emrg Market Funds $2.9 bln came from Asia ex Japan funds. Also in the first half of August FIIs have sold INR 53 bln in Indian equities Emrg Funds saw outflows of $14 bln  in total in 2011(DNA)

5. StanChart PE is investing a good $250 mln in MSM, 60% owners of Sony, SET MAX and SAB channels. StanChart PE is buyin g stakes of opvt investors including Jackie Shroff, Sudesh Iyer and Rakesh Aggarwal – and infuse fresh capital into the company. (TOI)StanChart profits in India fell 39 %in the first half

6. StanChart Economic Research  in general has committed to using the Dollar forty rule from the looks oof it committing rupee to an appreciation cycle till 2013(Kudos to me-self at the the Banking Intiiative). Equating Dollar to Forty rupees is uplifting, simpler and generally true for all investments spanning till 2014 and more

7. The New Private and Wealth head, Ananth Narayana at Standard Chartered confirmed his faith in the Indian Economy’s restrained performance being in a select band as repeated by many network commentators throughout the day today

8. He and other commentators also mentioned a pause in RBI September 16th policy, quite some noise on that. I would not mind another two rate increases. Been there India. And we will never outperform anything anyway, might as well not stay a lossmaking enterprise

9. ING Vysya raised rates a day after RBI announcement and HDFC Bank upped policy rates by 50 bps today in response to the RBI hike

10. SBI and ICICI Bank also upped rates by 50 basis points today, ICICI Bank’s base rate now a round 10%. While ICICI Bank improved profits year on year, SBI managed to increase margins, with NIMs improving to a never before 3.89% on a Rs 8 tln book

11. Indian Mid Cap Bank, Axis Bank is raising equity & debt from Foreign investors, with IFC chipping in a $100 mln

12. Citi India is ramping up its FICC and equities trading teams in India according to CEO Pankaj Vaish last week(IBN)

The key appointments include those of Rohit Dusad, who joins from JP Morgan as director of origination in credit markets trading; Aditya Bagree, who joins from Nomura as director of credit structuring; and Chintan Shah from Morgan Stanley, who joins as Vice-President for credit trading. In the past three years, Citi has helped raise close to USD 60 billion from capital markets for its Indian clients and advised on nearly USD 25 billion of India-related mergers and acquisitions, the American banking giant said.

13. Indian M&A scene has lit up Asia pacific, with Asia ex Japan reporting a renewed $270 bln in deals year to date (only M&A) out of which India has reported more than 10% at $26.9 bln

14. India’s foreign debt? India owes INR 4.17 tln ($105 bln) of which $66bln is interest. Look at this piece on delusions and economic fallacies

While Global results did temper Indian ambitions at HSBC and StanChart, tidbits confirmed from last month and anew show the magnetic pull of a 7% growth for India as the baseline factor.

 

Bharti Airtel replaces Axis Bank as defensive :D

AXIS Bank
Image via Wikipedia

For those looking for good defensives in lieu of HUL and ITC, Axis and Bharti Airtel had become good cornices (to fill the ice cream, to slip on the tongue)  while the markets tanked up and down. While dear departed ambitions of HUL have been lost to the East India Company’s seas, ITC has become a new aggressive growth stock.

Axis Bank however will not be able to deliver the expected growth lines from it for the year or even next till June 2012. Dabur that just entered MSCI is looking like a budding candidate while markets fill upw ith Coal India’s new sensex entry. Bharti Airtel remains a clear winner in the sweepstakes

Bharti Airtel added 2.5 mn customers in May 2011 and has ramped up to  half a billion dollars in Africa

Dabur
Image via Wikipedia

A Whimper for the results season! Ewww So Awkward!

NSE building at BKC, Mumbai
Image via Wikipedia

How my daughter would have reacted to them market story being played out..

The trading stories really lack maturity here in the NSE minefields of INR 1 Trillion — two trillion on a good day — with most value plays (Mid Caps) strapped on to 4 investors and 1 broker playing an amusement park ride and nothing so intelligent or scary as a roller coaster.

The results season just showcased how easy it is for Indian companies to grow double digits quarter to quarter but it is just not getting the bang for the buck as we look on to someone to start rolling fresh cash into the markets.

DIIs buying of course to reduce the impact cost stick on to this purchase cycle and are ending up with value picks where most of the leads coined by india bulls have gone kaput led by “rate sensitives” > Where SBI’s deposit rates and cost of funding was as low as 6% in 2009, its raising deposits by 75 bps to 225 bps along with lending rates as thankfully however been noted a s a great positive, but why they are waiting on ICICI Bank despite the big results or HDFC and HDFC Bank.

The erstwhile Mid Cap, Axis Bank has of course pegged on to a new size as the Big 4 locally and plans to grow slowly, an example of a stock market darling that got her ambition and served the investors well. But many more are waiting none fof them likely unresearched . The drawbacks are there nonetheless but not the ones recognised in the marketplace.

For example, without due liberalisation, most sectors now have leading stocks with larger sales and growth numbers, not listed on the Indian markets, we have the Emerging market ETFs supplying regular funds to India keeping India at a lowly7-8% weightage and the India ETFs getting into pretty laconic and clubby investment cycles some where probably because of the small number controlling larger sums. None of the drawbacks is so contrary than our predilection for the worst grade of investors/traders., like Morgan Stanley leading press and networks into a decided trend.

MS has a long history of catching the BIG LOSER pretty quick and in lthat it is almost a 99.3% consistent leading indicator on picking the wrong trend or a trend dying out. I am so tired and confused.

Morgan Stanley's office on Times Square
Image via Wikipedia

Up ↑

%d bloggers like this: