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)

 

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