India Morning Report: The rest of the week is bullish again

indiaGiven Pfizer and US Authorities continuing crackdown on drugs from India ( Pfizers fake drugs lab featured Ranbaxy on Bloomberg yesterday, 100M users (see ET)  did not vote for Ranbaxy and founder Dilip Sangvi definitely has an uphill task trying to convert his $4 B revenue acquisition of Ranbaxy into a paying deal. The price even at Rs 447 was probably a face saver for Indian Phartma as Indian pharma contitnues the quest for bigger stories in the $200 mln – $500 mln molecule categories and even more and the US generics story also relies on academia to cut the costs of innovationand drug delievry with and without Obamacare.

As of now however, prices of Sun Pharma continue their rally as Ranbaxy finally stabilises at 447 (offer price) and markets look to complete their pre poll rally with benefactor Modi piping up some hot Indian curry to Foreign investors around the world. Recovery in consumption is not converting to better Auto sales apparently and poll time spend also seems to be down witht he fortunes of the Congress known well in advance.

In Financial Services and Banks, the IDFC story has multiple positives even as the markets nurse a big bruised ego from RGR’s matter of fact disposition of other applications and the Infra Financing story for India inc seems to be back on track, the Indian welfare state a survivor of other political questions as BJP promises to bring back rural employment and education schemes.

Stories like Bharti and ITC are unlikely to lose because of the changes in Political fortunes while the Pharma and It story probably come under the scanner being at market peaks and the Rupee responding in the NDF market to more than inspired business inflows and remittances from labour abroad.

The movements in JP Power., JSW Power (Nasik and Maha areas arnd Jabalpur?)  and obviously Adani Power ( Amit Shah connection) are interesting and likely to be back int he limelight as news on the business channels remains on target for a big 7000 breakout and is safe for a 6800 score by far, markets continuing to test the levels after each 100 odd points of rise, studying the ramifications and choosing a select dozen every 100 pointswith shorts back in Kotak and Hero Motors. BHEL and SAIL seem to continue to be short favorites and their fortunes and that of IDBI Bank are unlikely to be affected by market direction now.

The best derivatives strategy remains to sell puts at this point for probably 6500 levels on the safe side, markets likely to signall enough if the breach below 6450 levels in 2014. Buying risk may seem tobe in, but new investors are likely to be priced out by the constant rain checks and risk buyers from early 2014 will continue to be rewarded till end 2014 if they stick around.

JP Associates is unlikely to move upop from 56 historically a support for the stock as it continues its tortuous strategy of deleveraging its listed stock

Bank credit growth remains steady at 12-13% and deposit growth continues to outpace, leaving the changing GDP target forlorn at new higher levels and the GDP performance for 2014 and Q1 2015 unlikely to hit above 5%

Market highs around 7000 levels are however already justified by continued double digit earnings growth by top performers.

 

 

India Morning Report: IDFC gets a bank license, India goes to Polls, Sun buys Ranbaxy for $4B

Though the trend is no longer on the up and up, BS revealing that IT and Pharma earnings have reached 20% of India Inc scorecards in 2013, doubling in 3 years on the depreciation dragon that caused a 14% run on the rupee just in the December Quarter. Meanwhile the Rupee is ratcheting back to 55 levels. According to RGR, the threatening levels of the Rupee appreciation start near 55 where it is overvalued to even 50. Remittances from the Middle East are flowing in mercilessly , leveraged by 5% loans in dubai and Abu dhabi as NRIs continue to fuel the investment boom’s precursors almost like any other Fed stimulus (QE)

However, as traders picks have shown in the week gone by, almost all shorts have been closed out and a further upmove for stoicks is not ruled out from here even as PSU banks and leveraged realty stocks like DLF remain outside the reach of good news and hence hold back most of the trading capital. As mentioned on Friday, March closed with $3 Bln inflows and almost two thirds is in Debt. A modi rally pre elections is scored in at 7000 as he steps closer to an absolute majority but it may prove over ambitious even for the NaMo juggernaut and markets may accede to pleas for a reaction this week before or after 6800 instead of hitting 7000 before counting closes on May 12. Assam and other NE states go to polls today

Bank Nifty has done creditably in this rally at 12550, without flatulent acccession by PSU stocks that have tripled NPAs ionthe Banking system adding INR 65 Bln NPLs to INR 3 T in Gross NPAs this quarter. Apparently metals continued advancing last week on news of a Vedanta upgrade to stable by Moodys, finally a piece of good news for the merged Sesa Sterlite and the acquired Hindustan Zinc

Arun Shourie and Arun Jaitley made the customary election time appearances for the party and are unlikely to be part of the governance framework in a Modi government that  has also sidelined MM Joshi, Yashwant Sinha, Jaswant Singh ( standing as independent from Barmer)  and son, even as LK Advani made a reasonable comeback on Modi’s behalf on the weekend as Modi asks for a personal vote for PM in the final stage. Sonia and Rahul also continue through a tough election schedule, made grueling more by continuous adds in Election surveys and a virtual estoppel on government business

IDFC’s bank license is indeed welcome for the strong business model of the company but as it starts running up to a grueling 18 month schedule to conform to all guidelines required for executing its license, most investors will be watching at current levels as a plan for reducing FII stakes to 49% is also confirmed within the new NOHFC structure for the bank. Bandhan was the other licensee. Most NBFCs in the fray including L&T finance which fully well knew the limitations a year ago, led the mid week breakdown as the RBI points to existing NBFCs and corporates to explore a differentiated licensing model. Policy day macroeconomic report for the quarter showed a limited recovery underlining the unlikelihood of any further improvements in RBI stance as recovery remains limited to fringes of the economy and a panic over the incoming government’s reform stance slowly takes hold during the crucial polling month

The mega deal announcement by Sun Pharma, taking it off its Japanese buyers for $4 Bln is still being digested by the market as the ramifications are mostly negative for Sun Pharma unless the game plan from the group is cogent and quick acting

Yes Bank is still a buy at 423 levels. Market indices are likely to continue adding straddles in the 6500+ ranges this week, unlikely to allow a sharp correction except for other news.

 

 

India Morning Report: Markets gain confidence in the rally above 6500

As expected on Monday, irrespective of weaker global cues as the Dow travels back from new highs on weak Chinese follow through, sold puts have moved up midweek to 6400 levels on way to making a bottom support at 6500 itself before the end of the week. Mislaid punts in old Economy stocks like L&T and Maruti provide market shorts ready ‘bakras’ to support bigger longs in the rally segment favorites with PSU banks, tired from all the browbeating are also ready for a short short and BOB is teetering at new 650 levels in March.

BPCL turned out to be the surprise winner as ET Now also highlighted, gaining 20% in 2014 as PMCs and Oilcos caught up with neglected mispricing in the first six months of the rally from the Rupee’s endless bottoming in the last week of August as the Rupee leads the global charge to stay relevant in a post taper world.

Along with the continuing winning stock specific plays in all the new consumer stories of 2010, Just Dial’s F&O inauguration may well be one of the sterling performances that mark a lifetime winner as Titan, Maruti and L&T head for the dumps.

SGX Nifty  continues without a hint following Nifty to its close yesterday unable tpo provide cues to the Indian markets as FIIs continue buying, adding another INR 14-15 Bln on Tuesday. Asian markets opened exceptionally weaker after a Dow falll overnight as they remain sensitive tio the situation in China and need a significant depreciation in the Yen in 2014.

IDFC remains a superb trade and the expected corrections in ICICI Bank and HDFC Bank and thus the Banknifty continue to elude any other buyers waiting as the stocks remain poised for a big upward push from 1100 and 720 levels, FII trades switching the bottom of their range to 6400, writing 6400 puts even as Naked 6800 and 6900 calls continue to get more OI now instead of Call writers who can see the end of the rally before taking a position despite higher PCRs.  A hidden Short Straddle/Strangle ranging the market between 6400-6600 may well win the day ( Bloomberg F&O had a 6300-6800 recommendation on the 12:45) in March though it is still not the recommended trade, Call writers likely though to be not penalised with global volatilities at extreme lows . L&T Finance could likely catch fire from here as goroudns are laid for the trade on new bank licences limiting itself to just key candidates.

Only 35% of Indian Cars are compliant with new mileage efficiency norms applicable from 2016. Exports are down not just in Precious metals and Jewelry but also in Pharmaceuticals. From all visible indicators, Hotels and Airlines are coping well putting the almost recessionary two year spell behind them with double digit rate increases and new fare discounts respectively. EIA yesterday also confirmed that Crude prices will remain low till end 2015 at least while Natural Gas is likely showing an uptick even as Copper leads the metals down as usual at the start of a new Chinese year spooking the browbeaten sector needlessly before the murky waters provide real hints in Chinese take outs two months from here.

Questions on Indian Exports however, seem real as Indian Exports refuse to break the strangle hold /saturation around $27 Bln a month mark and FDA continues to eye Indian export consignments with due suspicion. FIIs may also be done with debt buys in India for this segment. One has a feeling the next month’s elections may not return a unique government mandate but are likely to see the biggest turnout in recent history, with more foreign Observers looking on curiously, Crimea and Turkey, not tomention China and Russia underlining the unique prism of stability offered by India.

IIP and CPI data releases during the day set the ebullient tone for Policy day next Tuesday /Wednesday for Governor Rajan.

India Morning Report: At the top, VIX = 18, NSE Nifty = 6535

DIIs are again trying to correct the market levels hoping for a bigger correction sooner than expected as markets having scripted a recovery trade from all time highs of 6500 level look to executing the same fueled by FII investments. Hopes of a mild correction in Banknifty continue as trades from 12000 levels in Banknifty are also stymied by the lack of positive PSU trades, SBI and BOB still counting as fundamentally short picks. PSU Bank Capital plans are likely to strain Government finances as Insurance companies also reach their sector exposure limit of 25%. It remains inadvisable to increase sector exposure levels from 25% as well and the problem is likely to get complicated as many PSU banks are unlikely to stop NPA accumulation at the 100 bln mark they magically topped up to in December 2013.

Meanwhile the Powercos (Distcos) supplying to Delhi have a long expected bonanza in regulatory assets allowed to be claimed by the State Regulator (DERC) (–see BS lead of date )but apparently the price rise and yield is already been priced into Rel Infra and Tata Power ( Tulsiani)

The VIX trade in the meantime flies off the handle at a tepid 18, the move from 14 to 18 completed in all of two trading sessions on Friday and Monday as Option writers finally got busier and naked calls and shorts covered out at Monday highs and markets continue upward. The PCR also is likely to be stretched at best to 1.30 and till then considerably larger highs could be established for the markets to return toa as indeed foreign buying of INR 16 Bln on Monday is likely to be followed by more such thrugh this week with many shortlisted stocks showing new stamina including Bajaj Auto which is likely to go up to 2050 levels if not 2150, Bharti which is still at  305 levels and can trade up to 335-345

Buying opportunities in ICICI Bank and HDFC bank would be grabbed by the markets though shorts re likely to succeed in Axis Bank as well, with its NPA and management problems unresolved. IDFC is one of the rare scrips that offers liquid trades witha 20% range from current levels on the long side to under 130 levels and YES Bank is also still a big gap from its earleir high valuations of 6000 valued  on the same economic scenarios back in 2011 as India repeats its unique performance twice within th single minded slow plodding recovery after the banks broke in 2008

Reliance however seems saturated at 855 levels and GAIL seems to have been ignored unnecessarily at 355 levels as Pharma is likely to be ignored till the end of the week Cipla headed to below 350 levels, Sun to 580 and probable 1950 marks for DRL while domestic producers with an export portfolio like Glenmark, Cadila and Aurobindo Pharma are likely to get a fresh batch o f long term investors from current levels itself

The Rupee’s trades at below 61 levels , opening at 60.70 in the morning are likely to be followed by better and lower yields in the Bond markets as investors follow the currency buying with some debt investments in India and hopes for an investment cycle upside to India increase with easier availability of “ECB” debt

One should choose pedigree and portfolio when choosing infra stocks and not follow for leveraged small promoters as deal wins in the space almost threaten the existence of such corporates instead of improving their chances given the debt raising limitations

Infy and TCS are already topped up in investor portfolios and current falls are fundamental revaluations and not much institutional trading is likely happening in the two stocks right now

The 2010 consumer flotation offers including Talwalkars, Prestige , Page and LL remain premium stocks with Thomas Cook for FIIS looking at sectoral picks

 

 

 

 

India Morning Report: Markets start the day at all-time highs from 6400

Though, it could have been better for the fundamentals, markets have not caught up to earnings increases over the last decade and will probably keep the gains in this weeks rally as the Rupee finally responds to buying and moves back to 61 levels without showing signs of tiring. As it moves further along to the top of its range to the 60 mark, consolidating yesterdays gains over another week, the currency does have a limited headroom as the Dollar Index is trading below 80.

Banknifty and IDFC are keeping their gains and moving north even as the indices savor a moment at the top and a lot of the individual stock memes switch , with Energy and Pharma both offering unique ignored opportunities that may well be taken up, without ruling out the better consumer scrips consolidating to new price levels or for ICICI Bank and HDFC Bank ( including a final decision on its cross holding by HDFC , still pending for renewal of its Foreing investor limit)

In Consumer we continue to back Bharti , ITC and Bajaj Auto. Yes Bank seems to be popping the champagne again, while the real estate pack will lead the way back for a quicker correction if interest in the sector runs up a bigger tab

ITC may again start up from 320 levels , if you are a trader and need to offload the stock currently. Bharti seems to have a new partner in sight for its retail JV( which I will tell you later why is not the ideal reason for backing the stock, like its financial foray earlier) but there are more fundamental reasons for owning the stock

Exiting DRL is a good idea at these levels

A lot of cash stocks have steam trading much below their lifetime highs despite good fundamentals like GAIL while the PCR is also a bland less than 0.9 with PUt OI still being extinguished , probably a precursor to Puts being written as confidence in new levels increases in the Indian markets , as they lead a global equity rally with the Dow a little behind as it is already at record highs. Markets have a long week ahead next week before 6400 Put writing becomes economic and the markets rewrite 2014 forecasts.

India Morning Report: Markets continues the ra-ra-rally to 6350; Business as usual strikes

The Rupee has finally moved into 61.50 marks, investor interest in the tech quartet unruffled by a climbing currency as Dollar indices moved to their lowest levels. The Banknifty is squarely above 11,150 marks on Thursday in an eventful week for bulls, enjoying a cash and positive calls led market supremacy over the cagey watchful investors with BJP backers having decided 200 seats in the National Parliament was worth a celebration too in the face of defating th eBears, an opportunity that does not come by regularly in every market segment and cannot be passed over.

PNB is back near 600 levels and the short trades are gone from even Maruti and others for the moment, likely to come back any time now below 6400 levels itself once the Put Call ration reaches 0.75-0.80. One hopes the shorts come in Index Options and not entirely in Index Futures or worse continuing in individual stock series.

To my mind PSUs like BOB are already looking overpriced again with their asset quality woes not done and BOB likely to be among the PSU strikes leading the way down, with a news driven exit in Adani remaining a probability after a quick rally in the same as this rally segment will unlikely see the one sided euphoria in Jubilant and Titan in 2010. The markets apparentlt kick into gear for welcoming the change in aviation rules allowing International flight without fleet and footprint restriction

Bajaj Auto still has a rally left for brave longs at 2020 levels, using Maruti to torque the trade ( Buy Bajaj Auto Sell Maruti) and starting a similar trade in Hero at 1850 levels ( unlikely to get lower levels int he same) The Trade will likely last thru any index led direction for the market. Index moves are matched tick for tick by the new LIX 15 showing the hold of rare liquid stocks on the market. Markets will correct once pre elections or immediately after results so broader interest can rride on the secular move to 7000 warranted by FY14 earnings and FY15 forecasts even in absence of a recovery

The Cement stock rally indeed seems a little too precocious even this late, as expat commentators would dig their heels in to say in three months time when the GDP recovery led trades start a final swing at old 6400 levels Construction and RE stocks should be avoided.

Your pharma portfolio picks may see a sneaked in ride as markets consolidate, as IDFC finally crosses back into the Century plus marks, both Glenmark and Cadila coming back stronger ona Green only map day for the markets , twice in this week

Time is probably ripe for selling in IT now esp with Infy at 3900 levels. Media scrips have again seen older bullish levels in an almost hidden move on an all green day hiding poor Sun TV(no longer media)  in plain sight with more secular picks like ENIL (Mirchi) and Zee

Bharti is back at 280 levels and the big trade in the stock could take it quickly back to 335 levels , GAIL and ITC is also a long only pick at current levels

India Morning Report: Did investors buy into the Rupee last week, and the Suntory deal

Friday’s  closing rushes on the Rupee trade could be just another chimera as the China miasma refuses to scare foreing investors from China and other shallow EMs renamed MINTs. China also reported an improved Services PMI implying the trade situation could improve for it and its partners including Aussie, USA and India. However, things overall continue to look bleak for global growth as dependent on legs of growth in China and Europe.

Europe has been importing more, however, esp as Germany probably focusees on its own consumption for a small break after a Target imposed halcyon end to 2013. Rates are likely unchanged in Central Bank announcements and Global liquidity reprieve trades, may be ephemeral at best as Yellen returns to post snow recovery prognostications to hopefully continue along the same taper gradient $10 Bln in each policy date.

However, not to be confused by the Global Economy’s internecine interactive brusqueness, the India trade remains a leader for the Global benign trend continuing in Equities and HY debt this year and is likely to turn in better performances on the bourses than any other.

The 4.7% GDP score was not so bad except that it included at its best form, not more than 6% contribution from Services. As expected, Agriculture did not continue an extended rebound from Q2 and thus contributed to an overall disappointment for policy watchers with Governor RGR still on the edge of another couple of rate hikes and CPI close to plateauing out at a high 8% itself

Radico Khaitan is one of the bigger winners as the Equity trade in India opens to new bull scenarios, we choosing to watch after every 100 points as traders fill up the gaps and bears might give up most of their extraordinary gains in the following 6 monthsas they take each plateau of waiting for more investors as an inordinate sign of weakness or overconfidence having nbrought the hcicken count home to roost

Volatility remains at an extended low and the PCR below 1, implies one should batten down the hatches as most price levels on your choice investments would carry very little risk on sold puts . SBI and Maruti also proffer extraordinary choice to traders that need financing and are not selling puts ans positional shorts in both continue to dig for lost Mayan Gold, making it at least a year or 1200 levels before they exit with profittaking trades.

JP Associates may be out of the index but is a great plus trade ( opnly post redenomination of the Nifty) while Adani Enterpricses catches supplementary caucus support from the Adani Port bull trade. GAIL may still not make it to mainstrem positional trades or transition into a defensive but we reccommend buying the stock with IDFC and YES, while ICICI Bank and HDFC Bank individually will carry the Banknifty, PSU shorts making the Index tradea patchy non performing long

Foreign buyers saw $2.2 Bln in gross trading on the NSE itself on Friday. The return of bank investors and trading rooms including StanChart and HSBC to the bull trade on the Rupee, counld confirm secular up trades in Asia even as China gets ready for a currency depreciation battle. However, first order of business would be to observe if equities can keep up with the smaller selling that remains part of the trade in the first half of the week as markets start the series at fresh new highs of 6277.

The Sun Pharma and Hindalco trades should catch fire by the middle of the week in that scenario as mainline picks remain good for the goo but new buyers may not get them at better levels . Bharti , ITC and Bajaj Auto continue to hold strength in the consumer investments story and Services PMI returnign tot he green likely for 2014 means aviation, trade and tourism could critically support the good guys from here. The LIC and ONGC/OIL buys for BHEL and IOC are confirmed but sectoral trades aer non existent on either side. Pharma’s big week returning to substitute IT is the one certainty and not an immediate bulltrade so more consolidation is likely this wek esp if the Pharma trade does not kick in. The inevitable short trade on Hero as it yields ground to a bad February sales data will only land blows till 1850 levels as the news f the recovery should kick in the sector after new excise reduction and recovery in buying from March

India Morning Report: Markets start the Maruti short 1 month down

As expected, indices are holding and the degradation of Maruti’s role in Suzuki strategy has finally clicked into real trades early morning, that will probably keep the broader indices on an even keel, Maruti no longer a portfolio pick despite a 50% share of market and being the listed representation of quick and easy Indian growth components ( not many left there) as protected cash flows fail to assuage investors

A $2 Trillion GDP really bloated up India’s old economy bottlenecks and one needs to gravy the Indian infrastructure boat, but with hot money and leveraged inconscientous promoters the only steed, it is unlikely markets will try for that 7000 index just today

Cash equities have a lot to catch up with on the Futures that closed at a grainy premium, but I am not sure volumes are still low or if only one player is around, as India with 200% of GDP in equities, has deeper markets than most other Emerging markets including Korea and Singapore who still have a story to tell.

The traders picks continue to show six old timers without a growth strategy and apart from regular stories of restructuring on 1 or 2 of those stocks most others like Tata Elxsi may not be good trade picks either way

If markets are so indiscriminate and all mice come out to play on Friday before the weekend, there may be some reason to looking at short picks when they open dstarted in August and now for two months of 2014

I still worry about the Tech Mahindra story, apart from the possibility that they are playing with another i-banker to get the deal flow into a continuous stream. KPIT is a good pick but then insiders know when and till where 🙂 as PE picks up stake in the fast growth play with legs in embedded/systems programming/chip design and the normal outsourcing meat still available form more than one sector and not having been wasted on product /enterprise investments like at infy or wipro

Those foreign funds still underweight india will not get another chance to come and invest in India and may likely underperform Asia benchmarks at the end of the year, like HSBC Securities

Banks are hot again in this segment, and SBI shorts will strike before the end of next week as interest spreads across Pharma and some Consumer

In unlisted business, IIMA infra naming rights story headlined in ET is a late thing but a good start. One hopes there is also a base endowment fund when the Subsidies are let go from this sector. The Annual ioutgo from the HRD ministry could have well come for each institution from a single/individual endowment

StannCs back in an indiabull avatar but one wonders if there are beaten down sectors left this time for late entrants. Most Foreign investors who stayed invested over 2013 are going to score much higher this time onwards and one hopes this can become a doable tradition for the indian markets finally rid of old time ponies and bad trades in a new era

Unlisted Captives of Global Auto companies have the best chance to make a statement and increase Expoprts traction from India as Ford gets on it.

The Rupee has nowhere to go after hitting 62 from the up and Gold is stuck too even if they try to reverse the bear trend with some late late buying as markets can grab the precious metal at 30k levels itself for a good short and adding to equity trades

Indian residential and enterprise ( Retail Malls and Offices etc)  sector has some potential to add new inventory, last years smaller sales not having added new inventories at all. Chances of Bajaj Auto in the 2-wheelers producing positive surprises in next months data have increased but traders are right in clamping down on Hero, Bajaj and TVS as February data is released into the last months of deteriorating production conditions over most of the manufacturing sector as IIP uptick will include a negligible contribution from manufacturing. A new bite, though, the residential construction intel comes from one of our steel producers. Not the way to go , India so there iwll be another sad story down some months but I guess Jindal (JSPL) was a dead story anyway

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: Les deux ex machina, et vous? Les fou de cirque n’est pa!

In singular, it would be the Ghost of the machine or the fool in the circus. A market of course has more than one of everything. Apart from that there is cricket too, where India turn a win opportunity into a clarion call to stay awake

Markets ‘jumped’ overnight to 6080 levels at the close, with US markets closed on Monday. The VIX trade is back again, 2 weeks from expiry, ( though the last week in Indian monthly expiry is usually the busiest in contrast to more deeper US and European markets that trade weekly expiries and expire by the Friday for Third Saturday in monthlies staying untraded the last week as most of the busy series are in the “next” month or new weeklies.

The banks are back with a bang but the Bank nifty trade is a good strangle range pick , even a sold straddle will give you a decent range (as Ashwini reccommended yesterday) as PSUs and SBI get exchanged out for new buys in ICICI Bank, HDFC Bank and Yes. While one is not sure of Kotak, PNB definitely has enough detractors yet despite the great performance with controlled NPAs and fully provisioned balance sheets at begin of year allowing improving provisions while releasing profits. That means PNB might again be a buy after the big run to 550 levels is cut on profit-taking.

I”d try a short in Kotak and let you know what happens. IDFC, Bharti  and ITC are great picks and starting from the bottom of the trading range while the Power NBFCs are ready for a move as well.

Bajaj Auto gets first mention on the Excise giveaways from PC’s last presentation, which was technically just a Vote on Account.

Excise Cuts on SUVs and Medium and Large Cars to 20% and 24% mean the gains in market will start for all automakers including the listed Maruti. The markets preferred Hero management coming out after the excise cut, but with Hero also biting a lost mandate for a grip back, Bajaj is still better off with Egypt exports hit by the import ban meaning less than 100K units to be recovered from the drop in excise duties.

The Indian Macro is easily the best poised for most fiscal adjustments to be burdened at this time and the VOA optimism could well prove to be PC’s gift to the parent Congress party in its new roles after the Elections as a fiscal deficit target of INR 5.3 T is not a shakedown or bleeding optimism in the projected Indian Balance Sheet. The nominal rates of growth at $1.10 T base in FY13 we assume may yield $1.26T and $1.44T targets for FY14 and FY15, that may very well be any other number at the realistic 11% nominal ( achieved in FY14, LV-CNBC) and 13% in FY15. However the 4.1% target look daunting esp as Food subsidies have been duly increased to INR 110,000 Crores (1.1T) and Energy subsidies understated at even INR 650 Bln (65000 crores) with INR 850 Bln scored in FY14 after the deferral.

A great Fisc performance thus at 4.6% will be greatly rewarded by the markets esp that includes INR 2.46 T and INR 1.8T only from Tax revenues but shows 100% achievement of Divestment (INR 400 Bln ) and Spectrum sale targets (INR 600 bln) and the new government make the usual drop down ravines for itsel fin beating the other government’s VoA, before trying to dump comparisons in the new Budget post general elections, All inall, not a great day in parliament for the new government as it would never sound better than boring humdrum in the whirring engines of growth that have to take over this year. A last note on India Macro stems from the continuing dissociation of Investment levels in the GDP at 34% from the true investment which has barely just hit 5% growth and mostly in the Consumer areas. Unconstrained Bank lending continues to remain available in India and interest rates are likely to continue down from here at a fair rate, allowing Fixed Income portfolios a bigger boost

There however is no comparison of the difference between any remaining expectations on Infrastructure investment in India and real participation to any other subject to kickstart India’s new millenium story, yet to begin after in stalled in 2009 and infra funds have to prove versatility in financing the new projects still blamed on bureaucrats or the Congress. None of the private cos as the markets have shown they realise, are in any position to take new project debt into these balance sheets at GMR, Relinfra or JP Associates and conventional bank lending is not the answer for them

Kejriwal and AAP brought the AAM AAdmi back but failed in their mandate by leaving from the aisles before the start of Act I.

Energy cos are getting the best possible deal with INR 1.1 T in payments despite the deferrals with more than INR 800 Bln already paid out , so they should have already been discounting much better levels, at least 250 for IOC for example as the fiscal did see a consistent unburdening of the energy infrastructure and a more rewarding marketplace, even as the Power regime gets more competitive

India Morning Report: Agricultural subsidies are a Global Constant, bullish trend remains

U-Car 2014

Sugar Export markets ar unlikely to ruffle any other segment of the market as the issue of agricultural subsidies was settled for good in the latest renewals by Asia and EMs led by India and continuing noise on farm subsidies are likely to be brushed off by most including customers of Indian sugar. The government has approved a INR 3.3K subsidy for 4 mln tonnes of Exports of sugar in February and March.

Of course, India’s battle with Export competitiveness is past most winnable battles and we are just increasing our tendency to be a worthless ( in terms of premium) commodity exporter, as is the wont of most resource Economies as well with far more disastrous Economic consequences like Brazil and Indonesia.

India will never be confused with the likes of the same despite setting at 4.5% and 4.9% growth in two consecutive years of GDP growth and a 25% decline in currency repeated twice in a block of 10 years, a far mitigating circumstance than Brazil or Turkey’s Economic history and one could have also included China in that list but for the almost independence of policy and execution in a democratic form of government.

India equities maintain a bullish trend ( to 6100) as a cognition of far reaching reforms did barely enough to pick outstanding dozen or so large Cap companies, usually more than enough for any broad market to survive.  The missing depth cannot come overnight and Investors are more than satisfied with the new crop of 2010 IPOs in the Consumer sector including Thomas Cook now dealt with, and Page and LL continuing older trends. That also means scrips like ttk , Titan and others that do not represent the broader market will not recover interest and those with very wide off the mark correlations to sectoral growth will not be propped up despite weak governance and order book issues at L&T and BHEL. Crompton Greaves trade is likely to sustain as the Investments and Capital Expenditure segments of the GDP stay in focus.

The Rupee started early yesterday catching the advantage of depth and domestic markets back to the Indian Debt and Equity capital markets, as a US long term bond auction also registered a new faith in reduced tapering promised by the Fed, allowing Global investors following the risk money to come in without the wait and watch chip reducing their participation

Citi is betting this will transpire in India having come out on the CAD front after extended delays and qualifying others dependence on Foreign debt skewing the CAD dependence factor, however it likely to be secular Dollar dependence worries for such resource Economies which will again qualify India ahead of the “EM Basket” and China as well in this year, though on a smaller order of magnitude of FDI flows.

I would also think the Tata Motors bull trade is vulnerable to falling off sooner. However, immediately Cipla’s results have extended the trade in both Hero and Tata Motors apart from individual stockpicking decisions.Cipla reported margins that are 600 basis points lower.

India Morning Report: ICICI Bank, Bharti surprises on bottom overriding expiry sentiment

Or rather the headline should probably not read having overridden and markets continue weaker as a Strong Earnings calendar for Wednesday in the US drowns out brokerages and analysts still following the Indian open. Asia is weak on Thursday as US Treasury yields have continued south despite the additional $10 Bln in Taper added to the Global tab by the US Fed overnight. With only $65 B in asset purchases, it is a measure of the importance of sentiment in fund counts as Global markets respond in weakness after a weaker China spectre makes EMs already in a bout of outflows a queasy place. Leaving apart those who believe India is apart of the Fragile Five, this could be a huge buying opportunity as predominantly unlisted markets like Ukraine and Turkey bear the brunt of asset volatilities. Indian Rupee has opened close to 63 and pressures have receded quickly again. 6050 levels on the Nifty make it almost not tradeable in any direction this session despite expiry

Bharti’s results were an eyeopener, and the stock should be an overpowering Buy in morning trades at 304 levels. ICICI Bank also reported positively and is duly being punished to 975 levels for its rising NPA score and a gross total of INR 120 Bln or 12000 crores in restructuring assets including the 100% pipeline ( which is a 100% count on probability) but is a great pick at 930 levels probably and adding the risk it would never fall to that place, I would have been accumulating before he spurt and now after I should continue to buy. IDFC is surprisingly again substituted out for making space in portfolios and is dull ahead of tomorrow’s results, another Overpowering BUY call.

Bharti did well to double profits to INR 6 Bln esp in catching up on Data with a INR 75 ARPU and improving call realisations to parity with Idea at 37 paisa. Quarterly losses in Africa will likely continue around the $100 mln mark (qualitative expectation) Analysts apparently expected much more from Airtel coming in and that is why the Earnings business remain highly qualitative in India and expectations score less than Economic surveys and GDP inflation estimates on accuracy.

Nifty would probably not drop out of 6000 levels, but there would still be a square chance ( in double digits) of the index not coming back over 6100 at expiry and starting North in the mainline trend, with stock specific calls in closing trades today itself for the new series. We still expect a  short trade in Maruti in the new series. Biocon and Auro Pharma have definitely made a mark with investors and Glenmark /Cadila continue to be great picks. Markets at score additions t any blue chip portfolio. NTPC announces a 20% jump in sales as Coal supplies make for better ower generation ahead of new incentive structures

Overall though the correction remains a proactive wait and watch on news from the US and China, it has taken a sharp toll in four short days. IT exits will continue es as Hiring season news is no longer neutral for the biggies and Genpact reduces its dependence on assured GE business in BPO sector

Markets are also looking at thick fund switching as Proprietary books try to fuel the Hero boom and defensives get churned from earlier in the week though Pharma has not seen many exits except in Sun Pharma. Adrian Mowat had a great story to tell in the pre open and we all wait as the market along with Hero also plays out a 10% fall in Titan’s quarterly revenues reacting to proprietary favorites in a shallow market

The Banknifty, after a single trade whisaw from 10600 to 10300 is likely to be a positive trade in the new series after the bashing on the rate cut refuses to yield anything in now undervalued plays except the NPA/PSU stock. ITC remains on the upswing, likely bottomed out in Baja Auto before Hero earnings as well ( less than 50% probability)

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: Will India follow the midweek ‘Global Gotchas’ now?

Chinese Bank of China
Chinese Bank of China (Photo credit: epSos.de)

The small budget deal ‘induced’ sell off in US equities as markets talked big about another expectation of a grand bargain gone south was a chimera and institutions maintained trading volumes in the last month of business. Level watchers probably look for any excuse to start off the markets in 2014 in a position to beat the hitting target level under 10% gain estimates for 2014 and is nothing ore than the correction as a big rally build up ensued since November in the Global markets. However, Global and Asian impact correlation aside, markets are due for a bigger move south from India itself to the 6250 levels as the NSE universe of stocks has been totally blindsided remaining the same in the current shucking of picks.

Most good picks maintained their levels in the open and the NSE A/D line continues to show deeper gashes while the BSE transient update continues to hold the open as around 45% advances at 320-400 on last watch

With Capital outlays lagging business recovery, the 38% IIP reported in the core industries ( Infra index) lost the entire 8% and in September while the trade data was positive on yesterday’s release (updated yesterday’s report)

The inflation data will remain strong and so RBI will likely continue with its contraindicated stance of increasing rates into the recovery till Capex comes back ( well into the second half of 2014 ::CY). HDFC Bank leads gainers as ICICI Bank and Axis gets into consolidation while YES and other midcaps react to the economic indicators expected to shoot back up into December’s reports from the gainsaying we have had around a recovery.

The bitcoin logo
The bitcoin logo (Photo credit: Wikipedia)

Bitcoin has made big inroads in the meantime on the global scene if you want your computing time to be used seriously while waiting and we remain on the verge of over-thinking in the rally instead of neglecting weak vacillating December cues from global markets with the Indian Rupee caught on the precipice.

A 9% interest rate is not doing anything great from the Bank and Auto led cyclicals either and not surprisingly at such a time the Bajaj Auto – Hero pair trade has reversed to favour Hero probably to catch up to the gains made by Bajaj Auto in the secular cycle though Hero continues to cede share to Honda in the two wheeler business and this will be estopped in two months to the secular pair trade favoring Bajaj Auto after the markets right the discount on Hero’s final achievements of a sharply focussed new strategy in the Honda break aftermath

IDFC remains a great investment pick and markets are unlikely to follow this day’s downtick into Thursday as markets correct the desire to correlation. Some market watchers already see no further FII inflows to add to the $17 Bln already entered into in this Calendar Year (most of it since April)

Paper Heroes Location 2
Paper Heroes Location 2 (Photo credit: roadkillbuddha)

India Morning Report: Powergrid 78 Crore shares on offer, LIC and IDFC better picks

A bond from the Dutch East India Company, dati...
A bond from the Dutch East India Company, dating from 7 November 1623, for the amount of 2,400 florins. (Photo credit: Wikipedia)

The Rupee in the meantime and the bond markets again showed up weaker to announce that India investors remain Hedge funds and non standard  investors ( read hot money) already exited commitments when day began (  on any day) even as the US taper possibilities receded ahead of Jobs data but bond investors sold out just to drive the point home to the US Fed as well, keeping their pressure on after being denied a just reward for having supported the Fed when they expected the taper to start in August – September. The Divestment program is likely to continue in Coal India/BHEL (5% on offer). The Oil swaps window has been closed by the RBI in light of required action being completed ( Second Quarter Q2 economic data near the end)

The quality of India investors in the offshore markets/or of the so called Foreign Institutional investors aside, Indian markets enjoyed remaining flat in the session up to 11 am (We try to make the India Morning Report before 9:45 on most days) and ahead of the European markets enjoying a year end surge of interest as US gets Holiday fever.

Powergrid seems to be well received though no data is available yet for the first of its three investor days. Retail investors can continue to apply on Friday. Post issue purchases in Powergrid are also likely to stack u despite institutions having saved up on trading in the stock for this week of buying, and one can accumulate the stock with excellent India business prospects. The additional 7.8bln shares men 1.9 mln new F&O lots in the NSE. In the US markets in derivatives in Chicago that would have been 78 mln new lots of F&O contracts possible on the available floating stock itself. F&O shorts in Powergrid and colgate currently are likely to peter out and are bullish with individual series’ like Glenmark that is powering ahead already

LIC Housing and IDFC have finally become part of hot pick baskets and infact one or both will be de rigour in all market portfolios including those with stock derivatives strategies as both are actively traded, value investors may still find game in the two that can really build up volumes in play to the period till at least June 2014 when they might lose the value tag eventually.

6250 seems to be a good mark for a breather and may even break the monotonic correlation with Currency and Bond markets allowing RBI to consider more options than a rate hike threat for markets governance. Auto sales reports were as disappointing as post Festival month readings could be with people also postponing purchase decisions to the new year in India and the CV/Truck segments crashing through compared to last year. Traders 20 scouring reveals good shoting skeet in NMDC, GMDC and TN Newsprint (ETNOW, Lancelot D Cunha, Rakesh Gandhi)

Stocks like Lupin and M&M fin also show restless investors in the trading tick showing south while Rel Cap and Rel Infra are back in the good books. As of now Tata Steel continues to just about outperform Tata Motors but soon it may be immaterial to play Tata Motors anyway as Global steel markets relax a vice like bear grip and stabilise with some Chinese Demand pushing up. Commodities including metals are also bottomed out as end of month Chinese data confirms a better November

Exports are stronger even as Domestic Auto markets slow but the winer would be Bajaj Auto and not Tata Motors from our vantage point. The wai for a mid-cap boom seems to coincide with other rtail traders entering markets

The Trade deficit for the quarter was an almost non existent with remittances helping the CAD to a low $5 Bln or 1.2% but the Rupee seems more under slag for equities which will continue to move up regardless. Rupee thus cannot be pushed down now either with full Oil demand in play. Q2 also saw Debt outflows at $5.7 Bln in the quarter though Equity inflows according to Bloomberg ( carrying the GOI press release) are upwards of $17 Bln

This may cler the way for the Rupee rally eventually as Exports showed up above $81 Bln this quarter and imports stayed under last year’s usurius figures of competin growth beating Exports additions as Gold imports remained virtually stopped at under $4 Bln in its biggest market, global rices continuing to hold $1245 marks. Indian trade deficit at an average of less than $12 Bln may see this as the botom in the years to curb when Gold import curbs would be lifted. That reduces the prospects of any Rupee rally

Also, though no affecting any listed stocks Unitech has completed asset transfer to Telenor for the uninor licenses according to reports

A news report (ET ) yesterday highlighted the change in investor tastes in Auto as Bajaj Auto has grown 6X times from 2008/9 while Hero enterprises has exited Honda and grown 1.5X times to now equalise at 800 levels. The pair trades if anyone dared in the initial period probably because of the changeover for Hero are still a fair trade for years to come as Bajaj comes out with a 20% + motorcycle share with much better margin stories. Hero has announced a new JV with Magneti Marelli

 

India Morning Report: When the woods are lonely, dark and deep..

English: this is bajaj pusar
English: this is bajaj pulsar (Photo credit: Wikipedia)

Don’t Flip the lid though. Markets are finally moving on last call on Expiry day, to close at 6100 in November but the standoff till yesterday taking deep positions at a sell from 6100-6000 may not transpire, the play being caught and a reaffirmation of positive  moves from 6000 usually good to  start the rally from 6000 levels.

Also, as we usually are easy to predict, Kotak Institutional picks and that of some network analysts are again the wrong crop and definitely not good for harvest. L&T a late harbinger , its results likely to lag India Inc general investment recovery ratheer than be a sign of the same.

Axis and Bajaj are good again though the banking sector must face a few questionable glances purely in market valuation terms as Tatas withdraw on the question of operating ompanies esp outside India not being allowed to make a banking company in the NOHFC guidelines. M&M also did not want to move around its Finance companies as posited in the new structure directive but the structure is sound and not getting the desired response again. Also the Foreign banks had to be given concessions despite which they are not responding to the RBI invitations

Bajaj is favored by the continuing robustness in Rural GDP even as a farmer suicide on the same Sugar support price highlights unevenness in the national picture between rural and urban areas. CV sales are down 20% affecting both NBFCs and Indusind, or the auto industry majors relying on the sector. Tata Motors ahas effectively exited the sector along with a dismal Nano launch in the retail segment

Yields keep dropping back from last week’s 9% levels , starting the day at 8.67% . Buy picks on the Power NBFCs are instead good to go, with REC and Powergrid both alternating strikes on the bulls sides IDFC will also see big buyers taking positions in the new series and the only thing stopping ICICI Bank at this point is the lack of Banks to short further with Banknifty keeping to 11200 levels albeit on expiry day

US Markets will stay out of action till Monday as Thanksgiving day is here and shopping season is seeing a lot of uptick with cheap iPhone offers

The world's toughest fighting man. Yet, deep i...
The world’s toughest fighting man. Yet, deep inside he is just a lonely, homesick kid, praying for letters from home. – NARA – 535228 (Photo credit: Wikipedia)

 

India Morning Report: Nifty switches up range to 6100-6300, Is 6200 on the horizon

Anjum Bharti - 05
Anjum Bharti – 05 (Photo credit: Adarsh Upadhyay)

 

The Aside of the day comes from Network Analyst picks, with Sandeep Wagle who is seldom wrong on the trend change running with his bearish bet till 5950 which he had to exit. His buy picks have come in sleepers like USL and Kotak, both of which we think will not deliver much this year.

 

USL sell off of Whyte & Mackay while being a cash boon to the debt on the Balance sheet, is still a sentimental stab in the heart for that scotch brand could well have created that elusive broader market for top of the line alcoholic beverages in a market addicted to imports at usurius prices, showing in profits in the F&B  in the Hotels segment

 

Meanwhile, Compatriot Mitesh Thakkar has been better endowed switching Sandeep’s non run scoring cap ex giant hope L&T with BHEL and I think also his TVS Motor was better switched with ”

 

Philip Capital (USL defender but long term buy on the stock, not short or intermediate) also had good FMCG picks and though Starbucks has opened in Bangalore, one thinks the same Longer term view is true for their FMCG picks including Tata Global Beverages and Dabur. Ashburton, despite the India specific commentary seems to be an index based fund across EMs and India

 

Sun Pharma is back in the bull basket of traders with an announced buyback being the post election surprise and the Bank Nifty has settled in at 11k marks probably gathering shorts, thrown out of Nifty in a big lurch on Monday. The Cairn buyback is bigger news but with outstanding results still away, one may not get the bang for the trading buck there

 

Markets have hit back as of yesterday and the new 10-yr bond trading has immediately rushed yields back to 8.7% in the morning, Rupee revitalised to 62.3 by 10 am, showing the potential untouched as markets took the yields of an expired bond so seriously, it was probably to the extent of a ‘not funny’ slur on the extent India deserves to be labeled a Fragile Five member ahead of Institutions making fun of the Tapering business on networks. US yields will rise and the Taper will not happen so soon, all that has happened in between is that Janet Yellen has been confirmed and she does not think a $5 Tln balance sheet can say Taper is a bad idea. The Rupee propably making this entire year pre taper more a challenge test (agnipariksha style)

 

NREGA will be a nice hit to Election pandering ‘in-throne’ incumbent as BJP struggles with a cause and high turnouts could indeed be another factor for Congress to weakly hold on to in making a comeback election happen. The media dissing of Congress can still hardly be ignored despite the survey technology of the wipe being more than 3 Fridays old

 

NREGA wages will be increased based on recommendations of a committee led by India’s Chief Statistician Pranab Sen

 

Yes Bank was bit by the regional bug in a sudden switcheroo by the markets on the Banknifty, trading still at 350 as it seems to have showed its Punjab hand in picking up the Title Sponsorship for the Indian Hockey League. However, they would still be a national brand, as would be Field Hockey as Zed comes back to bowl the Pakis out on South African soil. My generation is probably not the best to assess cricketing talents of the new look South African, Aussie and English teams either as they all look uniformly weak in the deluge of fresh faces, making West Indian whitewash by India a mystery incomprehensible. Also, Yes Bank may have not given such a signal to the markets or such picked by them, this being an erudite observation only to my eyes as I equate the game with a certain neighbour of Delhi in the north nor Yes staying bak with the media team push of the game sponsorship.

 

The Energy trade seems to have finally hit GAIL and the other LNG stocks as Oil stocks enjoyed a big relief rally on Monday and one last month

 

Big is back in reckoning in banks with ICICI Bank showing more uside. I would also recommend to continue trading upp in ITC, IDFC and Bharti. Bharti is singled out today leaving Bajaj Auto breathless only for the day as Bharti gets out an ECB card from its PR team before the final date of the Spectrum auctions, where they have certainly won themselves a near value for money tag in the relicensing forced on the huge Indian market and avoided a lot of unnecessary expenditure if the CAG report had indeed come out on the winning side.

 

Meanwhile Lehar follows Cyclone Helen on the Eastern coast but the Seemandhra and Telangana GDPs are pretty much safe, except for the large scale destruction of seafaring life and human villages near the coast .

 

The Sugar trade is a lost cause, the volatile commentary not helping the midcap stocks with limited contribution to India’s humanitarian and Western Export which hold the key to riches and a better CAD till 2019 when the next General Elections com around and China would have found a new normal it has ‘founded’ last two-three years

 

 

 

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: Lets get some money from call writing quickies – Mid November hubris

Siège nord américain d'UBS
Siège nord américain d’UBS (Photo credit: Wikipedia)

It’s probably the limited upside, but mostly the markets were pretty itchy at 6200 in the middle of the November series and so the shorts have worked out. Also importantly, none of the good to great outperformers/strong buys like YES, ITC, IDFC or Bharti and Bajaj are down except for the Bank trade again weighed by PSUs hurting Private Banks in the dominos game and ICICI Bank remains a leading call writing target . The new 2023/24 bond being released day after has meantime ensured the fixed income shorts for yields look at bonds above the critical 9% mark inciting the sceptical trade on India deepening Money markets and Fixed income trade

However, that move in mind, this market could have easily moved out of the woods at 6100 levels,  and will probably do that before end of day today. Despite UBS and Credit Lyonnaise (Bhanu Baweja , Fixed Income and Chris Wood , Strategit of favor levelsst), markets move to 5900 and not behind 6100 will be that bottomless pit one wants to avoid sticking cash in.

Power NBFCs are good buys again. The Reliance Infra trade probably also opened two way liquidity where one side of the trade is actually close to breaking its margin wall, thus tempting predators with no downside targets in mind, led by Ashwini Gujral  (perhaps unwittingly) and as I mentioned the ICICI Bank trade (SS). Currency is stable at 63 levels. Any hits to 70 levels post elections cannot be avoided as a fresh slate of CAD and Fiscal worries are definitely hard to wipe off the scoreboard without real investments, Europe cannot make and the Taper that will come. Staying invested rather than exiting with Cash and Gold is however the strategy at this time. M&M springs to mind and one fundamental intelligent strategy would be to limit exposure to depreciation stars like IT, esp third tier players like Infosys and Tech Mahindra

Those rushing to Mid Cap rerating up are also fresh out of ideas. The real factor steaming down market levels which one can separate in the meantime is the fundamental variation of the 2080 rule playing out in the mrket. Instead of just the select 20 stocks in the large caps rising we have the other 80(Eighty) being almost disbanded to permanently(seemingly) out of favor levels as evidenced by yesterday’s A-D line. This “acceleration of reform” undertaken by the market segment needing to justify shorts, is misguided and ll only bring the other 20 to shaky two way disrepute as good scrips add on unwanted volatility

Today will thus see an unwanted spike in volatility which will test these new found memes laser focussed on jst the best 12 or 20 scrips that are equated to yesterday’s “Sure things”. And, of course ( with no thought to grammar as you read this as spoken) , the bullish State Bank trade or the frustrated India shining trade post Jet Airways sell out to etihad or the lower expectations from full priced aviation going forward, SIA or Asia Airlines Tier 2 town strategy

Welcome home to India, expats. Less than 10% of our current imports are Chinese

 

India Morning Report: 6220, then, true bottom, market move up please.

Namma Metro
Namma Metro (Photo credit: ashwin kumar)

More impressive than Horn OK Please, but then two wheeler riders deserve beter(sic?!) or not, National Highways are safer for Trucks and Four Wheelers and so no, this headline is not about the mow down of two wheelers or by two /three wheelers in the urban meltdown. The 1000 odd rich families in the People’s Republic are treated with such disdain twice as vitriolic as attributed to the rowdies on Indian roads and they are definitely equally cognizant of the traffic rules as the four wheelers. As I write S&P seems to have marked India’s rating to stable.

More often than not, these urban snarls on the way to work have lately been marked by spots of new construction hanging because of bankrupt cities and states or other EPA/non EPA but documentation relation bottlenecks the construction crew is pretty used to. The BMRTC however, continues to break the mould in setting the benchmark for delayed and inept project handling, while the Bangalore Metro remains the only pristine mass transport crew in the world, after 15 months for nothing else but the 3.5 km distance it covers in totality to the CBD.

A “Dadi Balsara” inspiration that could work for the city and other Indian cities, is to break Bangalore into 3 different urban entities, not a loose conglomerate /federation of municipal divisions/organisations like in Delhi but cities with passports , if required, to travel in between. Singapore has managed very well with the urban transport problem and along with the Scandinavian cities that started it, London and Singapore remain great examples of how to create and grow a city infrastucture and plan urban Transport

But then, I am in the 9 to 5 mold like most Indian 18-40s and more or less wait for work to come to me because that is the smart thing to do.

English: COMPULSORY SOUND HORN sign
English: COMPULSORY SOUND HORN sign (Photo credit: Wikipedia)

Markets are dull, lifeless and the nose is pointing up as 6220 held and will declaim into the biggest rally yet as Earnings season successes have put the GDP growth residual to the crisis into a proper perspective, India becoming one of the most undervalued domains and like US equities, the depth of the market gets its own sponsors while Currency and Fixed Income woes almost strike a t will, the lull taking again a single seller to push a sharp toll on the incumbents, the currency lopping a wide ball to 63 and yields kissing 9% . The RE60 quadricycle will be good for the Indian soul and perhaps sponsors like Prince RJ will even push for it to displace the 800 (in the minds). Bajaj Auto, suffered a setback despite  adding export numbers in October as markets remain uneducated about its portfolio and expectations are at variance spurred by the single line item hope of the return of Hero in this Festive season. Three wheeler sales are strong again and M&M is making a comeback in the Global Auto sector citizenry where they have made a unique impact ( not from 60s history but here and now)

Those who watched it will be carrying it home as Rajeev Gowda handed the BJP and CNN IBN an apt rejoinder on the Poll /Survey action initiated by the CEC ahead of state and General elections. Results season is over not just in the USA but here as well. The remaining PSU banks and Dhanalakshmi Bank and Dena Bank report over the weekend. Next week sees more MNC Pharma results and Sun and Stride Arco labs  report big earnings quarters, Sun Pharma closing on the 14th. Both Cipla and Sun Pharma report on the 13th and Sun could wait for 14th morning before appearing on the networks as Stride Arcolabs reports. Tata Global (Starbucks) reports with the Reliance pack on Tuesday/Wednesday

RBI guidelines on Foreign banks entering thru the WOS structure plug in the statutory gaps  but cannot more than show their good faith and welcoming arms for Foreign banks who are already staring at cutting themselves out of more regulatory capital holes cropping up to bear the expense of global expansion hitherto unfathomable in an industry used to being welcomed on the strength of an opaque global HQ without farming Capital to such “territories” Even as the regulations are required and Indian Bank sector will expand and mature with a growing debt franchise , India has already been bracketed into an “exotic” category with the likes of Brazil for its reliance on traditional lending products in the credit basket and the split from shadow banking ties or one still believes even the lack of depth in wholesale funding. Also none see India as a pioneer for having always kept the inter bank market to a minimum as global banks fight the war with regulators for drying up the inter bank market. Credit continues to contract in Europe at near double digit levels, the single most factor affecting banks even as they stabilise the new era of growth and the best in class retain double-digit RoEs.

India Morning Report: A post festival dawn, markets churning sector and memes

corus / Tata steel IJmuiden velsen beverwijk
corus / Tata steel IJmuiden velsen beverwijk (Photo credit: Wikipedia)

The Goldman spiel actually are quite a Venus flytrap “MODI-fying” India targets to 6900 on the Nifty as it wanted. However, markets haven’t really closed around any specifics except the “Investment dozen” which could include ICICI Bank and YES with IDFC and ITC among others. however the morning rush of re open advertorials on the networks today, especially saw me frowning a lot at ASK’s shallow commentary on ETNow, and even Sukhani got caught in the vortex of sellling Tata Steel and /Buying Tata Motors ( ineffectual, near total failure in India) as SS tried to look for a deeper correction.

** The investment dozen is our(mine) selection and does not match the broker , Goldman Sachs as reported in TOI/ET/other Bennet coleman properties

On the other side, Cognizant results , till now shackled in their being listed in the US only, were being feted by the market’s unholy trinity in bull spats on the HCL Tech and even “Wipro” counters, showing the day had not only been bought in by the Bulls, the correction strategy was completed midway thru closing trades yesterday before 3 pm and the day is trending in the positive again. Apart from that trading hint, I also have to let you in on the secret that market volumes are still going to be building up till after the Superbowl in the US when all yearly earnings will be over and EM flows will be in focus again. However Q4 inflows will be dominated by Emerging Markets and China is in play again so India will get its due but nary else, romantic fund managers like PIMCO, the Fink or even George Soros being in short supply and having already decided on India a while ago in 2009. One ears Madison Square Garden is a little silent today but its a long way from being a new advertising strategy for Indiaphiles or Global market conversations involving authors. AMBIT is hardly a help , ET Now perhaps looks at shining at this plateau and ceding a little back to moneycontrol/CNBC18 again.

Metals are indeed in the bull ring and contrary to those still waiting for outperformance in results before the stock selection, the metal rush is on. India PMI and Services PMI crawled back to 47 levels this October and china again reported an expansion in the Economy. Singapore is doing well despite curb on overseas investments by Chinese dominating that flow.

New Banks will be a new story in this new year though most will be reusing attempted model plans from 1995, including rural distribution and Home finance or FX and structured Finance with increasing/exclusive attention on derivatives to spin risk into profit and out the door again for more business.

Sells on Bajaj Auto(Ashwini G)  or Tata Steel(SS Investments/Trading) are contraindicated and those on failed PSU banks still accepting deposits and making credit a funny way to establish anyfaith in India stories. There are very few Bank of India stories out there

To reiterate this market was quite done with the correction at 6250, and seeing that it is flow led, it is likely to push forward faster and probably YES and IDFC are better single cash trading picks or Bajaj Auto and ICICI Bank or HDFC Bank pair trades. Bharti and ITC should be investment portfolio stories throughout the remaining December quarter and till June 2014

Petronet LNG(SS) and Tata Global(Trader20) seem to be good mid market picks though overall I maintain idcas will be ignored in this stock selection spree which will still see some victims . 300% Onion inflation is of course an election gimmick and stays one as monsoons create a win win for India Inc

India Morning Report: State Bank and PNB ride off BOB, BOI earnings

A Maruti Driving School in Chennai
A Maruti Driving School in Chennai (Photo credit: Wikipedia)

Markets remain equally challenged after a victorious close to the series as there is no sign of retail investors ever coming back to cash equities let alone Futures and Options but BOB’s great recovery earnings built on the same devious Syndicate Bank strategy of reducing here to fore provisions to a large quantity as they are no longer legally required to keep higher provisions. BOB gross and Net NPAs continue to grow sharply with NPLs reaching more than INR 105 Bln, and still rising ven as the street celebrates its doubling of Net from a year ago after a long hiatus of subdued quarters. BOI seems to have really made inroads but here again the restructured asseets shot up to more than INR 10 Bln on advances of more than INR 2000 Bln in the September quarter. Net NPAs actually climbed down for BOI and prompted the big rally that took markets to record Sensex levels since Jan 2008. Unlike US banks making profits out of reducing revisions, BOB will likely have to make fresh provisions in the coming quarters as the NPA rates keep up.

Sun Pharma has grown to 5X times its prices in the 2008 boom and mor such rerating in the index shows a more focussed approach in the Indian markets as retail faded away in this edition of the Global crisis, Tapering fears still on tap after having induced a crises from withdrawal of excess liquidity over the summer. Lupin has also rerated up 6X times

PNB has climbed a further 5% in the morning after a 8% climb yesterday. SBI which is still unlikely to report a great comeback next week gained a further  5% yesterday to near 1800 levels developing into a ripe short even a s performers like PNB finally get their due from the stock markets after having survived on a dedicated core following as it gets sidelined in favor of the macabre theatre of the underperformer s who apparently provide more value from the sharp cuts they faced. Bank nifty  started the morning beyond the 11,500 levels it closed on expiry Thursday. BoI is a good investment. Allbank and BOI both reported 2.93% NIMs for the quarter below par but rising for BOI while ll Bank continues south in further NPAs that are likely to hit the INR 100 Bln mark before  the rot stems

IDFC as expected has taken to the bulls in this month’s series at 108 and YES Bank broke 360 levels to go north. Meanwhile as moneycontrol informs automakers Maruti have jumped turnover 2.5 times to INR 100 Bln since Q2 FY09 when the Sensex last saw these levels. As F&O analysts informed the Network audiences yesterday thi s series is likely to see further inroads into the Sensex and the Nifty will easily cross the 6350 levels. Th long term targets of the Nifty will thus be closer to 6600 peaking between 6650 – 6750 come 2014

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: No, yesterday’s mid-day rush was not enough!!

Welcome to ICICI bank Page
Welcome to ICICI bank Page (Photo credit: denharsh)

Of course, ITC and ICICI Bank will be reporting during the afternoon as well and the market closing is unlikely to be weak enough to discourage a big move possibility next week and overnight positions are unlikely except the refreshed long straddles (short put 5700 –  short call 6300-6500) and exits from 6100 shorts built up mid-week again. J Associates may see flash floods in light of the F1 race weekend but Bharti, ITC and Bajaj Auto will lead the way through to close.

Banks may be in pressure again but only because of the legacy of NPAs in BOB which built up an entire portfolio of NPAs / instead of trade receivable in a bid to export Indian Banking Capital and lending in the last two decades and PNB lone cannot stem the tide. Also the unfortunate positive attention on SBI though under a new chairperson is unlikely to escape keen valuation specific traders for more than a few trades.

The ICICI results may thus see a complex short-term trade unfolding which will beat down PSU earning expectations and correct the recent run up in undesireds except perhaps in the big-ticket PSU Banks like BOI and Canara. Taking the examples of the bottom rung from good old ET(yesterday’s op-ed pages), Corporation Bank, Indian Bank, Union Bank and that other are unlikely to get picked up soon either even as they trade down to less thna half their book values as they tot up more of the impressive 2 Tln NPA in the PSU Banks

SBI’s steady stream of recoveries at INR 4 Bln this quarter is no small feat too and is no small measure contributing to the revival of the stock after Chaudhuri’s exit.

Blackrock and JP Morgan ( with a new Middle East Fixed Income Index) are leading fund managers as Europeans garner more cash from Emerging Markets in their Wealth Management saves and EEM continues to bring good tidings with a big rush in midday trades, again signalling a big push to break down the 6220 limits faced by the traders. Tech M has in the meantime done it again, extending more bad blood to investors as it loses a big renewal from BT to little known Virtusa

Powergrid results enthused the markets and would be a big draw for Foreign investors with more than 80% of its top line Net Interest income translating to profits consistently and the NII now crossing INR 40 Bln close to a quarterly $1 Bln target. Also the Power NBFCs have been fairly active in QIP debt and are a known international entity.

US Banks in the meantime walked out of one frying pan into another as the closure on some mortgage settlements was followed by an “unfavorable award” by the Fed demanding higher thn expected liquidity reserves. The ensuing collateral shortfall and rush for short-term liquidity ( of more than $200 Bln) may hopefully not impact Emerging Market portfolios as BankAm has completed most of its domestic restructuring and government intervention preventing international expansion ( with frequent non US asset sales) ebbing down

Kotak’s results yesterday were less than spectacular with deposits still less thn INR 100 Bln and NII of INR 10.24 Bln on Loan assets of INR 512 Bln ood yields ( NIMs of 4.8%) but hardly any expansion commensurate to its size, and YES Bank already more than caught up except for perhaps a few more wealth clients with Kotak (UHNI)

Fixed income yields are back to 8.6% at the close of the week ahead of the Bank Policy announcement on Wednesday. We do not think a rate hike is on the cards and are long on YES Bank as the MSF will anyway further come down by 50 bp. If instead the repo rate is indeed 7.75% and MSF thus stuck at 8.75%, then the Rupee’s refusal to complete any upward movement would have been vindicated and it may further move back to 63 levels . As of now a move to 60 still looks like on the cards for the Rupee to be vindicated as the stronger Asian currencies as the CAD shows into the good books again and PSU banks complete a two step Capital bonanza with more Capital post the retail fest from the government at the end of the quarter

The markets should close above 6150 in anticipation of the next week’s move or unwinding should hit quickly to more than a uarter of the outstanding in F&O markets. More likely it will as 6200 positions in shrt calls again go to cheaper OTM  6300s in the straddles

Also, I did forget, Will India welcome another to the Kingdom of Fries as “Burger King” heads to twon with the North India franchise of McDonalds already down to underestimating market demand for the McDonalds’ menu

India Morning Report: So, what exactly is out of favor?

Bengal Ambuja Upohar Condoville, Kolkata
Bengal Ambuja Upohar Condoville, Kolkata (Photo credit: seaview99)

 

That seems to be the important question settled by the markets at 6200 levels as they now plug out of trades that may not happen and get a chance to incentivize good results by penalizing worse performances in erstwhile favored stocks including defensives. Thus capex companies like L&T and BHEL are out of favor with BHEL leading declines as punters drop the hot rod for the new variety available. Globally Consumer discretionary have had an exceptional year so more QSRs and ITC will be available for the switch as the Indian markets complete a small measure of transformation with new gen IPOs.

 

Exide similarly will be penalized heavily for a recidivist score, ike other traditional family managed Indian companies including Asian Paints. The straddle ranges moved out but have come inside 6200 again and the markets will lose steam till 6100 maybe as confusion reigns in research and trade between how much of a urban winner like Bajaj Auto can score int he same trend when Heromoto has come out with a pre festive statement in its results. However good Heromoto may be, an exit from Bajaj Auto at this point is likely to be a missed opportunity as also probably the chance to catch M&M and M&M Financial as they make it to FII portfolios and ramp up scale of performance. The CLSA short on Bajaj Auto however seems to be a pime example of research gone wrong and could be ignored by markets

 

Pharma and IT are not out of favor and banks not leading the rally post Capital infusion also is a done deal but banks will pull up more than most others in the Diwali season and before the next state elections are completed. ACC and Ambuja similarly posted bad results but are probably at the end of 13 consecutive not so good quarters ( Except for Ambuja’s strategy specific wins) Energy is as of now a big disappointment in the last 20 trading days and again may see some speculative interest as Oil at its lowest for WTI seems to get stuck at 108 levels at least for Brent and other Middle East varieties

YES, IDFC and ICICI Bank are back in the running and are definitely your best positional longs at this juncture for the entire shorter two week or longer 13-26 week horizons apart from the usual additions to investment portfolios

 

 

India Morning Report: YES, ING Results follow up and rural consumption

Bank of Baroda at night, at Dubai Creek.
Bank of Baroda at night, at Dubai Creek. (Photo credit: Wikipedia)

PC’s conference approved PSU Bank performance over lst year with 12% growth in credit highlighted SME credit growth along specific objectives even as above INR 100 Lacs(00,000)  borrowers continued to account for maximum defaults. However that pushed most discussion on YES and ING results to the next morning. ING kept NIMs higher at 3.46%  but NII grew only 20% showing the bank’s reluctance to grow in India and CASA for ING a for IndusInd is still just 33% behind industry biggies at 42-45%.

Yes on the other hand grew advances to INR 477 Bln and deposits to INR 672 Bln posting  30% higher NII to INR 6.72 Bln. Non interest income booked a swap income of INR 1Bln even as the HTM AFS transfers were already accounted for an INR 1.12 Bln loss in June making linked comparison moot and setting up for a bigger NII jump in December from the running gowth maintained by the bank and better margins from reducing MSF corridors as RBI policy rationalises. PNB became the firat bank to tap the ECB market in the last six months with a $500 mln QIP this week in short debt YES did not report any restructuring additions even as ING added one from NPAs ack to CDR approved loans which increased provisioning power in the balance sheets

Meanwhile short cash picks led trade from 6200 levels in lackluster morning trade though multiple analyss finally rallied around our long lost Nat Gas pick in Gas authority presumably as the pricing decision is finalised. Pharma scrips are up to. This correction with 50 points eaten in half an hour maybe the result of IT scripts uptrend being limited as they prematurely bought in interest into the market and topped off at yesterday’s levels. Also suspect is the long in Bank of Baroda, still dumping old NPAs into the wheel an the return of interest to Allahabad Bank which also uniquely invites shorts back on unseemly shouts of overvaluation

Tales of a repo rate hike are over rated. Also the markets may be back in the afternoon as HeroMoto rides back on rural consumption growth after a good monsoon but the probability is limited as the urban Bajaj Auto has rather created a schism in earlier running analyses on its potential in the future as the post split Honda climbs back every month on higher market share The monsoon also hits Cement stock prospects badly even as they were already in a lurch following  weak pricing trends lasting over 2-3 years now since the industry was hit by record fines.

Sugar production has risen only in UP producers this year after decontrol. WIRO shorts seem to be on the mark as talks of improvement are unlikely to last the stresses of recovery in the industry

The rush to SBI shows a funding trade that is likely to lock the market to 6200 levels as the bank will inevitably rear up on ugly assets that hold sway on the biggest bank balance sheet in India even as ICICI Bank could power ahead in that wake and market targets for November post Diwali at least remain 6350

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

 

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India Morning Report: A double trade in IT and the falling Gold prices but China is not good for the Dollars

Before we proceed however on the mechanics of an extremely juicy rally portender yesterday, I/we must recommend you dig in to Bharti, ITC and Bajaj Auto irrespective of your faith in the Network Analysts out there recommending fresh shorts. The thing to worry about is the weak prices in Gold right on the edge of festival season, as buyers tend t o stay away unless there is a heady cheer and while import limits CAD, Gold is still below 30,000 per 10 grams in trades around the country and on MCX.

The MCX resolution is also a matter for some grave restructuring and not an easy one as the promoter being the Technlogy provider and if they have been given permission to create the public exchange in such, the regulators must also bear it and not fall for a half baked compromise.

That said, the correction in IT stocks yesterday was a simple reminder that ESOP mechanics and Wealth Funds still hold sway on that sector as it is overweight in most global portfolios plus ESOP managers have a real safe exit if they can recommend take profits on post results euphoria. However, other insiders may also be involved in that they guess the “Q4 Winter” about to strike IT prospects may really simmer down market interest in the IT pack. However, as the rally proceeds this correction ahs also made possible for short term traders to dig into the sector as a fail safe trade probably before the first two weeks of November series are over.

Rupiah
Rupiah (Photo credit: Anis Eka)

Also, the banks are back as policy tones clearly show Repo rate pressures are off because Taper is moving out at least another year and that also means a stronger Rupee, Baht and Ringgit or even the Rupiah and Won that have shown up as pressure spots again in the Emerging Asia economies because of a uniquely intractable dependence on the US Dollar(“single currency” ).

Rupee however may skip the party even as inflows return because of the Crude prices ratcheting up the difference again and supply chain pressures will keep food inflation also high, rural consumption at a better tick thru festival season and it seems a dead Bollywood except Anil Kapoor’s above average attempt at bringing professional production to Colors ( as usual) KBC is working up the consumption dime too. Rupee will however seemingly head to 60 before the investor celebration begins with fresh inflows exceeding expectations into Election time

6100 is already back an the straddle at 6200 (sold call)  5700 (sold put) will have to move up again to 6500 levels but you should not switch till it is time

China GDP is still at a resilient 7.8% bottom and the credit squeeze, real estate asset bubble or a sad 2014 outlook mean the sun is not shining on private and llisted share portfolios in the biggest and only superpower enticing OECD funds and locking them in by the month, now at a 72 month positive inflow trend, and likely unbroken. Also China orders for Iran crude are up 60% that may still influence crude prices stabilizing.

Hindi on whimsy: Akasmat(Sudden, equally apt in both up and down moves); utavala na hona(to not look too eager)

India Morning Report: Another “Happy Thursday!” for the markets

Bajaj Auto was the biggest story as it expanded margins more than 1.5% to above 21%, putting behind shallow stories of losing share that have mostly affected Hero Motocorp and changed the Automobiles trade as four-wheelers dulled down in Q2 and Q3 to kill the recovery India Inc was to prescribe for the Economy.(we promised to shutout the debt deal bingo and we did, the compromise anemic as ever and the Taper posted now for post Q2 2014)

Mindtree also screeched up the noise with better margins but the coming Holiday Season quarter is likely to ascribe a sea change between Bajaj Auto and Mindtree in sales and bottomline performance

HCL Tech however completely the IT revival story with a big bang jump in top and bottomline and keeps the defensives on the speculative list for the rest of Earnings season, l likely to jump further from the 60% rise on the bourses year to date(Udate: HCLT really milked the Rupee for a EBIT nearing 24%)

Banks will remain dull and Indusind may indeed be proscribed, but with not many stuck on to bank scrips any short in banking stocks is likely to be not more than pennies

In case investors are kept away from the facts yet, most of the good companies have performed in duble digit increases in topline and profits have been strong, likely to not just outperform but fuel the rally. Bajaj Auto broke the $1 Bln quarter mark nearly and will do so comprehensively in the next two quarters itself with a INR 51 Bln topline and gross proifts at 21% plus margins

Mindtree’s $124 mln and toughening of pipelines to nearly $150 mln is good as they hibernate for the winter, Infy having started off with 5 large deal wins and TCS getting back into New Jersey’s Big Pharma offices plus another Bank/FI even as Data Centers popped up on everyone’s radars especially in Europe and HCL’s growth in the segment will be good to follow for other IT satraps If HCL does not grow the IMS business (Data Centers and Helpdesk) it is likely another stumble ahead for Indian substitution services

DCB and Heidelberg both matched up to a INR  3 Bln topline and have already been traded for coming out of a hole, in terms of performance

The Banknifty in fact is due for a buy in at 10200 levels with great bank results leading the way for India having proved itself in the quarter and the Rupee gets blamed for the expanding margins, taking the currency down again to 63 levels before it comes back and yields stabilise lower after the policy turn. MSF rates will continue lower to 8.5% mark eventually if Rajan does stick to the recommended 7.50% repo rates level and does not increase it again for the 6.5% bears in wPI

Hindi on whimsy: Akasmat(Sudden, equally apt in both up and down moves); utavala na hona(to not look too eager)

India Morning Report: It’s a Eid Holiday! AAP votes and the beadth of career progression in India

Banking District
Banking District (Photo credit: bsterling)

It’s the first half of the Festive Season wth Navratras and Vijaydashami followed by Eid accounting for school closures and Eid today , usually lost in the break , accounting for a Market Holiday as it does every year in the middle of the week. As usual the reminder that US also had a short week for markets but it was closed for Columbus Day on Monday and it would have been a longer weekend if we adopted such a rationalisation. It is however what worries me that I will take up only today as it is probably more nettlesome  now or at least I can imagine so.

The AAP will get a new fractured coalition in place in New Delhi and even as Bennett Coleman and others tackle the problem of sufficient workforce of college educated journalists, there are oher fractious developments that all arise from the same problems of all and sundry from every discipline xcused to violently fish market into any discussion stopping them from learning about any subject coherently and destroying the remaining memes for growth. This is not the bloomberg/Google video meme but the meme on the flip side of the Breadth of career progression as the first step of primacy of education is more deeply entrenched than statistics would admit to India Inc. That problem of statistics aside, the youth in urban centers are definitely a step closer to youth in cosmopolitan centers than they were and probably as the rural hinterland always keept ties of commerce with small towns the Indian villarge is more a part of the highway story now than it was before the days of 3 PL (GPS/RFID) Logistics and Satellite TV

Consumption data aside, rural inflation is still under 10% and though one can imagine the editorial changing perhaps claiming to a new generation ( that appears for CAT within a month), ducking HDFC Bank ‘s sterling results under the TCS performance was probably more than just a journalistic travesty. HDFC Bank performance was a good showing esp as Derivatives volumes has clipped up to INR 5 Bln in volumes and securitisaion though much maligned can relaly spread liqudity around. The Bank showcased a  bottom of the  cycle 16% retail in growth even as NBFCs like Bajaj Finserv and Bajaj Finance jumped lending and bottomlines like any other growth quarter , ensuring the success of festive season this month and next with the big Deepavali celebrations and then the roll into Christmas and New Year with school holidays.

HDFC Bank may have lost cosmopolitan markets but has not lost its magic and keeps the 30% bottomline growth faith within a reasonable band because of its power of distribution keeping the primacy of retail in the bank at 53% share even as Corporate and Institutional Bank steps up to the plate. Going further into the 20s it would not hurt the bank to get an existence outside ‘branch banking’

‘Siwai ki kheer’ is always a welcome break on Eid and though larger family celebrations are passe in the overall meme of urbanisation, there are hangouts and the 0% durable loans esp on smartphones and cheap car loans ,  and Bollywood will help in no small measure.

Results season is active today with Bajaj Auto, INOX, MindTree and Heidelberg Cement taking pride of place in almost every hourly slot in the day. Unfortunately we do not have results radio.

India Morning Report: Nifty treads lightly as shorts disappear (Priced to 6300+ levels )

English: The West stand of the Tata Steel Stadium.
English: The West stand of the Tata Steel Stadium. (Photo credit: Wikipedia)

Monday saw 6100 losing the pins as markets drew interest from investors on good Reliance results. TCS follows. IT and Pharma  outperforming expectations similarily throughout will probably see that elusive 6400 mark to set a new Nifty record it at least seems improbably probable.  Short hedges should move up to 6600 and 68-6900 levels this week or next.  The 6300 call continues to see increasing prospects of a devolving positions as the short trade exits the market. Tata Motors, Tata Steel and Idea may remain strong except for funding trades to enter short profit positions in results calendar Private Banks remain dull as the higher interest regime and larger account restructuring news and its containment are both seen as  insufficient and unresolved.

As i write, Indusind is reporting a 37% jump in NII., largely from retail yields as NPAs were contained with market borrowings helped the profits. The cost of deposits if an issue is also likely to nettle the smaller candidates as th month’s bank policy confirms continue the higher interest rate regime.

The 6200 market will likely be reached except for a sharp negative news trend with less than 4-5% probability and will continue with IT and Pharma keeping “beat expectations” premium and Metals incl Hindalco and Tata Steel or the M&M picks counting for more buying and thus volumes of trade as the scrips also need  boost in liquidity. IDFC and YES, or Bharti, ITC and Bajaj Auto will spring any consolidated market moves. ICICI Bank is finally consolidating to positive marks and Bank Nifty may se a change of the flatlined visage before the end of the week but still unlikely.

10 year yields have hit the 8.65% level but this might just be an aberration as new securities get hocked on Friday with the 10 year adding INR 70 Bln

 

India Morning Report: Infosys slam starts off a results season rally

infosys pune smoking zone at night
infosys pune smoking zone at night (Photo credit: srijankundu)

 

Probably the consolidation is good for a big move, probablyit is not. However this would definitely mean the PCR increasing again with the right Put strategy ( sell Puts  and hedge with a 6500+ OTM Call/ 5500 PUT). Hero Honda seems to be getting some sympathetic gain too in the move with Infy as Infy likely crosses 3500 also in early trades on Monday. EBITs have crashed from Product Solutions drop in sales order books, but any defence of that is unlikely to impact a new guidance push up for the industry that foretells IT will support the Economy’s return to life

 

Bajaj Auto and ITC will kick  in , in the later sub rallies hopefully from higher levels as the good moxie uncoils into the market  capacity. If there’s a reason any NBFC sector including Realty or Telecom Demand has bad news to offer , then that should be an important worry in the run. LIC Housing and Bajaj therefore will continue to pack in volatile buzz before and after the move while KPIT and MindTree scotch up even to the point of making margin security this month. Statistically data is unavailable of these security positions ( in the open)

 

Rupee will definitely move back to 60 as the Rupee trade is picking up and Stanchart (listed here) and HSBC will likely be key movers. Pharma unwinding is just a funding move and Glenmark remains positive. The markets are definitely making a run t o break the 6100 cap but as of now Friday closing being positive is about the only fact out there.

 

The USD Index hovering above 80 means a small move further weakening to 78-79 is improbable but Dollar s weak and Crude has never broken 108 lvels in Brent in the Post “No Taper” announcement.

 

 

 

 

 

India Morning Report: Here comes 6000? and what the banks will do in 8.6% yield scenarios

Yes Bank
Yes Bank (Photo credit: magnusvk)

Apart from the unremediated concerns in the Fixed Income market, yesterday’s rally created an awareness of the potential inflow obvious to insiders earlier this year. i.e. Around the Globe, India remains the most attractive investment destination after being clamped on with the rest of the globe in recovery awaiting elections to be over here in policy action and growth parameters and local consumption and investment makes this story unique.

Infosys is also likely to deliver significant outperformance at the Q2 announcements a week later and interestinly, the markets are correcting Infy’s recent run up already to 3000 levels and that could mean one rally is due in October and even September saw 6148 based on the return of inflows.

Banks of course in the meanwhile are looking askance and a standoff with the Central Bank is in the works while Markets continue to worry about Banks other than PNB, BOI and the private Sector banks. Banks probably still look for opportunities with the currency not stabilised and may have to worry about increase in Deposit rates. The Bank Nifty churn would have been isolated easier if they had concentrated on shorting SBI which despite its distribution continues to spring a growing NPA basket every quarter instead of delivering on the retail growth and profitability they continue to tom-tom to any analyst who would spare time for management commentary

Considering that this 8.6% yield on the 10  year comes after banks got a whole Trillion and Half from non penal overnights at the Central Bank and NIMs are protected and increasing, it is quite likely a matter of concern es in the light of the Rupee strength that yields are wary of coming down

Penal rates and those new effective rates on the MSF may however still be withdrawn another inch or more on the October policy to bring the channel back to 100 bp. ( For details flip thru previous issues or ask us) PSU banks received another large Capital infusion yesterday to keep lending rates in check(SBI is funded separately)

Bajaj Auto and ITC probably continue their northward rally till the mid results change of weights while those looking for a correction in Tata Steel are likely to have given up now, while Tata Global investments may take off only after the company itself stakes out a minimum of 200 Starbucks stores ven as wholesale auctions improved pricing for India exports but output and hence export takeoff was lower

Pending infra projects are not going to take off in a hurry but 5900 levels should see both DIIs and FIIs buying and F&O interest has definitely moved up the range from 5900 to 100 &6300 than yesterday’s 5900 Call OI that signified markets ranged to 5900 levels on the upside. Gold and Silver are still negative. India and US in the meantime, the two strongest markets and recoveries continues to once again falter in Services PMI and thence composite PMI because of spending cuts

 

India Morning Report: Bajaj Auto reaffirms successful transformation in September sales

Rajan Bharti Mittal, Vice Chairman & Manag...
Rajan Bharti Mittal, Vice Chairman & Managing Director, Bharti Enterprises, at the 2010 Horasis Global India Business Meeting (Photo credit: Wikipedia)

 

Sell Heromoto, Buy Bajaj Auto – A pair unheard in India trades till 2007, post crisis we have seen it win since 2011 and have been telling our investors. Of course September’s 367,000 unit sales could well have taken the sheen off festive season in October but the bigger news is that the company feels good enough about a price hike of up to INR 5000 and export markets have responded well, as he just quoted examples spanning Nigeria (46,000), Kenya and Uganda. Its RE60 may well survive most objections in India for an introduction before 2015 but even if there are hurdles, the company is protecting profit margins and market share in an uncertain situation.

 

September may in fact have seen sales being advanced from the festive season because of an extremely dull prognosis and Indian consumers are diving off consumer staples brands in general. However, one feels that this current secondary upsurge in inflation/WPI may well see better realisations and hence profits from price starved staples companies and so the queasiness around ITC and Bharti”s retail foray may well serve to mark the return of Dabur,Marico and these two bigwigs itself as results show better profits and earnings growth , any positive number would be  consistent with market expectations not th double digit growth consensus reached  earlier in the year. As for Bajaj Auto itself, it is protected from flagging sales year on year in festive October as it is going through with  new launch of Discover whose sales make up for it

 

Meanwhile, the market took 5750 /5800 levels as a sign to return to performing PSU Banks but with the punters preferring sinking ships earlier, the take off in PSU banks thu PNB and Bank of India is rather subdued even as Private sector banks make almost one off corrections between yesterday’s F&O buys and today’s trading.  Th incremental AD ratio of 83% actually is rather standard for India Banks as Deposits proceed to grow at 14% behind credit recovering to 18% thus meaning the RBI will be instead under increasing pressure to conduct OMOs even as banks hang on to over INR 150,000 crores (INR 1.5 T) in overnight borrowing from the Central Bank, washing off any advantage except the sentimental from reversing of more tightening measures in the October policy.

 

The Rupee pirouettes around 62 levels again but Gold prices in India falling , accepting the global prognosis sounds ominous for subdued growth in 2014 as well apart from meaning better diversification and disssemination of global fund allocations even post Tapering at least in equities, markets having taen to bonds again in the interim till the schedule for the Taper becomes clear.(Duct tape now that Octaper is almost certainly gone- Duct tape = December Taper)

The new ABCs of Indian stocks, listed as Asian Paints, BHEL and Coal India figred among those fastest and strongest in the rally to 5800. All three stocks have however lost their leadership of trends as 2 of the 3 fall into sectors creating corporate goevrnance hols and braking India’s development cycle prematurely. Nifty meanwhile keeps catching up wth the air gap creatd by its futures moving faster in the morning (bigger premium) in turn as Singapore Nifty reaffirmed no investors had left and moved quickly to 5850 and higher levels. The rally will again falter around 6000 levels and as the fight gets dirtier its better to dig your heels into the better stocks we listed including YEs, IDFC, ICICI Bank, HDFC Bank and Tata Global if ineed Starbucks follows thrgh with the plan to ramp up outlets to more than 200 this year

 

 

 

 

India Morning Report: Banks earnings, GDP scares markets despite inflows

English: comparative advantage in economics
English: comparative advantage in economics (Photo credit: Wikipedia)

The longer term investors can finally see the difference between potential and fact in India inc but are unlikely to leave in light of the comparative advantage India still holds, while trading flows may well continue to come back to India at 5900-5950 levels as markets bother with important questions across Bank earnings disaster spilling over to Private Banks despite the unlikeliness of the scenario.

Banks apart, breadth investors except for passive funds and India bulls since nineties are also likely to be worried instead of being enthused by the markets remaining bulls getting shepherded into Pharma and IT which remain defensives but are being listed only for their Rupee Depreciation advantage, and thus not a real page turner for Indiaphiles

The Rupee strength thus breaks correlation from equities and with GDP numbers likely o breach negatively in non agri sectors, the situation for Monday open is also grim as is the PCR rise in the rally till Monday/Tuesday. US yields have come down pretty low yesterday after the GDP announcement. Ambition targets are back in Gold and Silver and retail consumers might even be hoping markets ring the bear in Energy markets and Oil goes below 100, which might erase the questions rought forth by Export parity removing margins for Oil Exploration and Oil marketing Companies

Rupee raging stronger than 62 levels might also see slower additions to NRI Deposits while raining inflows on to 5950 levels was easier for all categories of India attracted offshore investors, QFIs and NRIs

However if markets expect better Auto and consumer sales performances in non durables to shore up immediate performance, then this might well b the end fof the rally. Money is staying in however and Energy and Metals are likely to be th new stars apart from the continuing rlly in Pharma. With Sun Pharma and Glenmark leading from the front today, Cipla and Lupin cannot be far behind and next week will continue this discussion of India’s prospects from much the same levels than breaking below 5800 or such as whatever possible policy measures are enacted , look positive and on eecution rather than playing to the galleries.

At this point another market created distinction may be also worthy of reminding. ICICI Bank  portfolios in loans , retail and commercial are likely as resilient and more than HDFC Bank which is already recognised among winners in the Higher interest rate scenario and the pressure on ICICI Bank may well be just the wishlist of public sector banks and DIIs and margin financed players trying to equate the inefficient public sector with the private sector counterparts.

Bharti, ITC and Bajaj Auto lead my list of high performers, while IDFC , YES and ICICI Bank may see lower levels yet but are good investments. One feels SBI is about to take a nose dive for its own follies rather than be part of the market standoff, and is not really at value levels especially as the higher interest rates hide its already bleeding NPA portfolio and the ssame is not true for PNB and some others but not UBI and BOB either. ING vysya may b a good pick but their emphasis has not returned to India and Indusind has probably already done whatever it could and will enjoy some sedate growth yet along with HDFC Bank will be scoring 20% topline and 30% bottomline growth regularly

BHEL is obviously our only turnkey project executo es in the Power sector and probably will not hit any below book value pick (from Religare) in  a hurry and at worst may prove a big struggle with the bounceback already started. One might look at Kingfisher’s example which lasted a full five years as a everything for everyone scri from 2007 – 2012 on the back of a improbable comeback and which has just started paining lenders while paying slaries yet to executive management Which remids me, heling Laloo with the Ordinance delaying incarceration due MPS suspension/exit may actually be quite a big setback for India tan imagined by a coalition government extending the courtesy

India Morning Report: Rally enters fourth day with steep move up to 5850 levels

Line up the confetti balls and the piniatas as the fourth day of the Rajan Rally engenders new Slumdog Billionaire, Kaun Banega Crorepati and a successful Indian Badminton League probably mean the start of another even if the 2014 Airtel Grand Prix at the Noida Track is under threat and the IPL is sstill al knotted up from the Hawala Masala

 

Historic Valuations, Trends disregarded as flows rush in

 

Leo Pharma
Leo Pharma (Photo credit: Christian González Verón)

 

Piggybacking the global weakness of the Dollar, investors not predicately assuming to undo damage to the Rupee, nevertheless brought the currency back into play for the 60 mark to the Dollar on Tuesday with a 64 open as flows returned to India debt and equities. With INR 1600 Crore returning in debt and 800 crore ( more than 25 bln ) in equal measure into the chosen investments in stocks, the IT and Pharma largesse from the Dollar was no longer the defining mantra of the market by Friday itself.

 

As the 260 points in the Nifty to 5850 on Tuesday at 11 am show, the market may well take the indices to 6000, bring India firmly to the centre of the 2013 and 2014 investment maps as was three months ago and thus probably caus ethe currency to further climb back to 60 levels again as there are absolutely no buyer or seller levels in the move from 55 to 69 in the last three months and 10 odd days.

 

And much like it was Matt Schaub and Andre Johnson for the Texans in a star filled roster or the veterans Dravid and Ganguly playing India in on one o the many English conquests last decade, it was veterans that stuck to the India script rushing the momentum early morning into India with ITC back to 330 levels and still worth a few moves and Bharti and the banks not far behind, moving secularly together as rates fell below the 8.25% mark on the 10 year paper and ECB short-term borrowings interest rose again from Rajan’s moves to allow FX swaps at 350 basis points (on deposits till November for now).

 

The 5750 mark was expected to hold in the morning, the 20,000 mark on th Sensex seems obvious now on the BSE Index and

 

English: Amitabh Bachchan photographed by Stud...
English: Amitabh Bachchan photographed by Studio Harcourt Paris Français : Amitabh Bachchan photographié par Studio Harcourt Paris Harcourt Paris (Photo credit: Wikipedia)

 

thus 6000 is almost a certainty and as inflows measure interest and levels, there is no reason for indices to now fall or turn from these levels even if OMCs have not really gained till now on the Oil basket prices in India’s PPAs vis a vis the refining margin impacted by the appreciating Rupee or if no exporters seemed to have been selected for the overall CAD gains except for Bajaj Auto and It and Pharma are still available for substitution. Even if Infy has  new target of 3500, a balanced indian market is unlikely to let it reach the same in any hurry with value available across sectors, including last months star sector in metals. Sesa Goa weightage s increasing in Nifty by under 2% and Tata Steel is still available under 300

 

Kaun Banega Crorepati 2013 started last week on Sony with another veteran Amitabh Bachchan returning as its iconic face in the Indian version of “Who wants to become a millionaire?” (kbc.sonyliv.com) One Taj Md. Rangrez has won the Jackpot in this edition in episodes shot till now

 

 

 

India Morning Report: Is 5600 the new 5000? Rupee is holding 65-66

With the  Rajan effect crystallising over the India investor skies, a new definition of India’s winter seems to be up as global liquidity withdrawals accelerate availability of funds from the exodus fro US bonds and a small portion is likely to start trickling back sooner than one would think.

The earlier expected recovery cycle threw up banks, infracos (IDFC, Power NBFCs ), ITC, Bharti  and Bajaj Auto and others in FMCG and Consumer Goods sectors and more or less they will make the bedrock of larger EM portfolios with or without MSCI index dependencies. Metals are good for this cycle and Tata Steel can still make it even if Global demand does not respond the way it is expected to recover in the end

Weightage maintenance is also in play and at 5600 levels that means sizable new buys fr funds that sold just a week back. The volatility till yesterdy will continue to affect timing of new investments and most invstors ahve oodles of time to play out their vaalue and growth leaders in the portfolio .

Now did I hear someone mention Rajan has to perform? Rajan would not be credited with bringing individual accountability to the RBI’s various senior officials but it is happening as we speak and Rajan hmself would know difficulties of thinking of implementing structural reform before May 14 decisions are out for India inc. The rajan effect itself was really areiteration of everyone’s agenda since 2000s , and the currency responding after controls on speculation were lifted is the unnoticed vote of confidence for India as a destination. ECB funding should be proceeding on A+ paper and equity QiPs

 

India Morning Report: Markets out of short opportunities at 5350, Rupee actively down to 68.63 at open

ITC starts the day at 305 levels, a good buying levels as the FMCG opportunity tanks.. Markets will be unaffected by shorts like Voltas and Tata Chem (Mitesh Thacker) or even shorting in Titan with buying Idea (SS) even as indices jumped to near 5400 levels at open after a scare from banks not jumping in at 8600 Bifty levels RBI norms on Developer loans from banks on the other hand obviously come as Banks’ lack of opportunities again lead to a ramp up in rel estate loans through 80-20 loans allowing developers to drawdown on bank project facilities before starting construction.

The precipitation for yesterday’s 650 point fall on the Sensex and near 200 points on the Nifty was the missile test by Israel and Obama admitting he is deciding between Congress cooperation (prefered) and otherwise attacking Syria after the Chemical Weapon deployment by Assad Bashar

IDFC and ICICI Bank are slow on the uptick and more worrisome is the Power NBFCs failing to shore up the trends as Powergrid falls thru in double digits in 2 sessions, to 87 this Morning. Bharti is still a buy and Bajaj Auto has started off the day smartly.

REC is floating around 166 levels and PFC and PTC are up barely in a bullish market, probably moving only on a sustained move up from tomorrow. Oil risks to the CAD seem to be contained with India already having reduced its exosure to Iran to less than 15% and unable to increase it.

Jet and ITC may sustain higher levels as domestic aviation price realisations are set to jump in airlines’ and encouragingly Jet would just be following Spicejet. ITC jumped its own retail price ponts in the tobacco business by around 14% per brand variant

Tata Motors rerieve as it counts its chickens from JLR based on last quarter’s EBITDA seems short lived and may be an avoidable investment. Tata Steel however is a good lace to start your post crisis 2013-14 portfolio

India Morning Report: Thursday’s bounce engenders positive weekly closing

Foreign currency reserves and gold minus exter...
Foreign currency reserves and gold minus external debt, based on 2010 data from CIA Factbook. (Photo credit: Wikipedia)

Long targets have returned to traders even though no net position longs would be carried home at close as en early end to the bear festival on Thursday engendered a great change in mood across the three markets in Bonds and Government Debt, Currency and Equities. To remember despite  the targets for a 10000 Banknifty and a 5400 Nifty uts ale in some quarters you should not take the change in sentiment to heart too early and endanger your precious capital as markets may take less than the 4 remaining sessions to send the Nifty and Bifty(Banknifty) options south on Calls and gaining more than 300% on Puts in the spirit of Open interest remaining strongly on the short end despite the offing of short positions yesterday. Sorry about sounding pessimistic as the bounce could be meant for serious investors but such blah is unlikely to save the India oriented investors in such traps as created by this early bounce back rush by the shorts themselves.

Sorry Mitesh and best of luck to those winning daily contests on predominantly long positions on the weekly close as indices at 5400 are not overvalued but the currency run is not complete and with the propensity of correlation binding all the different markets to be true for a market yielding negative returns one must suspect shorts to outweigh longs in the market and stay away. Banks are unlikely to have serious impediments to loan volumes at higher rates Credit growth reported for the first week of August returning to above 15%, a supremum for most markets above the size of $1-2 Bln per month in new credit  Also banks are not going to be paying for the rising yields for time to come int he interests of financial stability keeping their share of GDP intact India’s FX reserves are in the bottom fold globally but a s a global Gold home market, it may continue a bounceback on days when Gold s indeed favored over withdrawal of global liquidity by OECD Central Banks with BOE Governor and BoJ unlikely to favor tightening despite the chance to follow the US into a change in stance after 5 years.

Equit y indices moving t 4700 lus will again erode value from the perfunctory jumped prices in IT s their Export oriented Metals and Pharma sectors get entrenched in investor psyche and Banks, Metals and eve Bajaj Auto, Bharti and ITC are likely to hold investor interest. Which makes it rosy peach for investments in IDFC and YES Bank while ICICI Bank may continue to list among the few advances ona daily basis making i easy for Bulls to survive the remaining stressed days till september series exits though 4700 levels could be accelerated to reach by mid September itself given the easy moves down in the Rupee by more than  a Rupee each day to the Dollar

 

India Morning Report: The weekend cometh, markets head north for the final relief rally for the week..

Detailed map of Indian national highways.
Detailed map of Indian national highways. (Photo credit: Wikipedia)

Almost like a movie building the relativity of negativity into the eigenvalues, the markets will duly uncoil in the week’s last trading session to entice investors back. Idea’s 50% PAT growth performance on 8% year/tyear growth is probably the best for the industry which makes it Idea’s seventh or eigth such hurrah ina rush order for the street. Data s now pobably double digit revenues after another 100% jump in subscribers. Infra and FT saga continue with the National Spot exchange and the IRB kind of market leverage habits of promoters showing up the small companies into veritable oblivion in 2-3 sessions indian QIPs may watch out as short term debt issuances from Indonesia failed putting markets on hold for the continuing Dollar armageddon even as dollar weakens at home in light of better growth prospects

Jubilant results won’t be so do not bother but some media houses may be back this quarter and the next as advertising revenues will likely imrove after the rush of sports events in India in the last couple depressed some revenues, ( and some other reasons, private to experts in that business sector)

IOC is down 50% from its peak in May when Banks were still in our cross hairs ( we were and are taking India up with the banks, if you sill want to snipe instead into our homes) The December 2012 closing values of IOC far too depressed and ata time markets had not recovered value in that sector, were still near 260 and today’s prices are a quarter down from there even as hikes went through in time.

Powergrid and REC are back and we will continue to use them both in the same breath and thus not in the same pair trade, which would be with “xxxx” IDFC, PFC, PTC are also all headed north but may still have hardly 55 on the downside before markets delink them from bankrupt, over leveraged infra mid-caps as earlier.

This may be your PIMCO year in India even as Al Erian recovers his Bond Fund equanimity with some including me still defining a double digit interest rate scenario in India as not improbable. PIMCO, if you recall lost two years of the crisis betting on interest rates steaming out of their ears when they were taken out by good fixed income demand for bonds in 2010 as I remember. But the Pittsburgh Pirates and PIMCO are since doing well.

Bajaj Auto correction on drop in monthly sales portends of more naysayers testing the automaker for continued sales performance above 300k in motorcycles as the peers give up sales on the auto sector’s trouble with slackened demand and an eye on primary sales inventories remaining too high at this time precluding that Vendor strategy. 6 new discovers are launched from July to December and B A is avoiding invoicing the old Discover for lower numbers this month)

Motor cycles were 280k in July 1, 295k in July 2012 and total , with exports also breaking stride equally, 320k this month

YES Bank and HDFC Bank have started recovering value, and HDFC Bank may well trace the market’s upside trips switching off during correction for a great single stock accumulation strategy for those wealth makers not interested by available SIP and STPs in Funds

 

India Morning Report: Markets staying the course as US responds to GDP

US Markets reaffirmed their commitment to stronger equity markets going north from here as the Fed noted inflation concerns on its latest FoMC release. Of course US is worried about falling for the stagflation/deflation trap before withdrawing excess liquidity, while Global markets having been awash in that liquidity without it reaching industry, reacted by exiting US Bond investments in a hurry.

The Indian impact due to Oil and FX is still unfolding and today the Rupee made further inroads from the 61 levels of yesterday while Oil might remain low priced for times to come because of the ‘disturbing’ innovations entering higher shipments of the same into the high seas from the erstwhile importing only US oil industry.

The difference between Brent and WTi has vanished too and thus crude mechanics may not be able to force the desired course esp for the global economy if India can withstand the onslaught for a few more months and in fact strengthen from here.

July auto sales are down 21% for M&M including exports, as are two wheeler sales with the deep cuts across the industry but an improvement over June as Bajaj Auto remains above 300,000 motorcycles for the monthand honda would have gained the continuing depletions in Hero Moto that has moved down to 490,000

BOB NIMs have come at 2.4% and the ain is not going away for time to come.  The indices at 5750 have again exchanged productive businesses to the downside correction bringing back supernary outsourcing valuations with HCL counting its frst inr 250 Bln score in revenues across the full year.

Banks are a great trade and investment as 5750 holds and though traders that finally saw the rush from shorts in the green may not be able to start new shorts from the weekend trades Friday before great Volumes return in the next weeks. As mentioned yesterday FIIs are already covering index shorts on the hedges.

The Goldman Sachs downgrade does not match its own long term review of the currency pinnin g65 to 2016, a fairly bullish evaluation and investors would continue to bit at these levels strengthening their exposure askets to india which have remained underweighted probably related to finer point correlations and larger unlisted opportunities available in east Asia and others including Mongolia and turkey that must return to normal eigen values after the beat down because of political rushes showing up governance in a bad light

 

India Morning Report: The future path to robust corporate governance was lined with crises

Holcim and Jet Airways continue to test India’s commitment to robust corporate governance even as the Rupee’s shallow provenance means that the Central Bank is still per force holding Indian finance sector to ransom and channelising Gold Trade to exports. Talking just about India further , the Holcim deal ‘s 7.4 /6.6(after funding Holcim into Ambuja) share exchange ratio shows also the potential exits for Foreign investors not looking to be good governance leaders that cannot be covered by loophole based laws from a nearly dozen regulators, instead of a full investment into India”s new priorities much like relayering a road than taking each pothole out with a “minimum valid quantity” of tar and a pass through roller every time it rains

Infrastructure investment aside there are other parallels with the missing wholesomeness in India’s corporate governance story here its policy leadership and a crisis less 2008 fail to cover the basic lack of provisioning for Good business practices, Good Employment Practices and Good Investor practices that remain yet valid shareholder criteria in India to find out stories head and shoulders above the others who will thus sustain better growth and power. Ideas that are good on all three eigenvalues are probably not overvalued but some (Havells , Heromotocorp ) have been disproved for sustenance from their consumers in their expectations much like Jubliant Foods that could grow higher than 50% for a year or so only and one round of Capex subdued the tiger in it unlike previous examples at Bharti and HUL in the eighties

India’s triage of these Business practices, investor practices and Employment practices  is unique despite there being global movements in the three areas as in india there are barely a Dozen from which the Top 10 lists of employers, investments or businesses to corner among the variegated field (motley crowd) of unlisted, unlisted MNC, Globally owned, Indian Globally owned, outward investing (Bharti, ONGC) Indian Global , Private, Private-Public (ICICI, SBI), Public (Coal), internet only ( ecommerce) , Private Equity, Cooperative , social or other holding structures  that dot India’s Business landscapes. Some sectors like india’s Higher Ed defy any such categorisation as well and have no link to the Corporate ends of the trail to synaptically make the neurons work together.

Hardly 10% of our “interest sample” is even listed or accessible to investors precluding complete sectors like Advertising, Information etc instead of the global sample of a few mutual or private businesses which are nevertheless well-defined with market pricing control policing them much more effectively than any government However shorting private banks like Axis and ICICI Bank in today’s conditions is a n unforgivable error brought on my such extraneous pressure  in the Economy as such banks losses on short funding squeezes are eminently reworkable into their secular 20%+ topline and sequential bottomline growths except for the immediate quarter ICICI Bank esp seems at a bottom at 930 levels and the trader short interest is basically an overwrought hedge for knowing that their is no lower mark than 5980

CNBC’s The Firm ( Menaka Doshi) and citizen denizens like Anil and others defending minority shareholders are a new breed and barely survive in the noise on promoter manipulation, Sahara and Jet’s revenue headquarters migration to Abu Dhabi. We wish all of them the best

All said, Bank Nift’s holding at its bottom, there are no ears to speak of an if you still think the above scenario should somehow affect India’s valuation further negatively, give me a call and I’ll try again.

ITC results will be an eye-opener as Yogi leaves and ITC indeed transitions back to  Tobacco led Consumer behemoth, making profits at Ashirwad and Sunfeast( I hope! for my noodles’ sake)

Wockhardt is still in a bigger soup for its digressions barely days after investors returned to the stock and Bajaj Auto is the only one among auto majors whose Export story has worked throughout from 2006 onwards without a break despite the challenges

India Morning Report: Markets swing to international sentiment on India

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

 

The proof of the pudding is in the eating. in the weakest correlation ever to its presence n the Global markets, as shared by global investors and markets that largely ignore Indian events already, with mirrors available in east Asia/turkey and even other developed economies, India itself typically stands alone and the imperceptible nod to trend shifts remains the only hint to international investors. again though the banking system has been asked to step up to tighter overnight liquidity yesterday with a 4% CRR now enforced daily instead of twice monthly(fortnightly not bi monthly) where earlier it was required to e 70% now it is 995 That would affect the base SLR stock too but with most in excess on SLR, banks would have additional motive to hawk those securities for others CRR requirements and a domestic mini bond sell off may yet be avoided if there is a real overnight liquidity crunch. Which there is not.

 

So the entire shortfall of INr 900 Bln pointed out as likely by analysts like UBS’  Bhanu may actually be a mirage for inter bank markets though interest rates will respond likewise the first shock of two weeks ago and a catch up to the 10% mark as the LAF is now available at 7.25% only for 0.5% of each bank’s NDTL. Thus this shortfall may take a whole 6-8 weeks in unhiding itself in the business and a rate hike may yet be unlikely though the range of choices before the RBI Governor is still not large and banks wee on the verge of easing down loan rates when the dollar/oil trap worked them into a corner

 

What that means for equities is that they are largely naffected as liquidity from interbank schemes and pledges shares has already been minimised. Also foreign flows stay in and increase slowly while letting the Rupee fall. I may be well describing a limitation of this monetary outreach here but no one would play that card to corner India though unwittingly FX flows be unconcerned and pressure maintained on the currency as dollar starts its climb back I still dont think IT sector is going to capitalise on this leg of the continuing rupee depreciation stance but yes those basing their investments on continuing wage hikes factored in will bring in the kudos for the sector always singled out as the flip side of a depreciating currency while exports remain ata standstill falling 5% in June

 

Markets may not dip further from the 5990 levels Is ee in late morning trading on the screens and the Banknifty dip is probably still just a check on how things pan out and north is the way to bet from today late afternoon. Sun pharma going back into currency or more HUL will still not preclude positive investing in Bharti, ITC, Yes, IDFC and iCICI Bank

 

 

 

India Morning Report: IT’s the big short.(Inching towards that 6100 mark, to inch back to 6000~)

English: WCAM- 3 locomotive at Kurla . It is D...
English: WCAM- 3 locomotive at Kurla . It is Designed by Bharat Heavy Electricals Limited. (Photo credit: Wikipedia)

Inching towards that 6100 mark, to inch back to 6000~

Markets never had such a foggy idea of where they were going having just cut up all paths withs chances of an India recovery but yet fogged by the fact that there is hardly any other choice if you exit India as a Foreign investor. US markets in fact have much the same prognosis ahead of the QE withdrawal as most of the money staying in any markets would unlikely move between markets. In fact Indian debt is back in “currency” as a new auction for buying rights saw the permits from the Central Bank covered to $4.33 Bln (@60INR=1USD) However, exits for indian debt since the fateful announcement in May were a humongous $10 Bln and RBI auctions have been unattended last when they thought banks would respond to excess liquidity mop up initiated in response to the FX crisis

Yesterday’s measures go further, es the ingenious channeling of Gold imports, committing a fifth to exports and assigned to custom bonded warehouses. mports are allowed for Gold businesses only but should fairly benefit the Economy from here after the thud from the extreme shock in June that dd bring the trade deficit back 40% to $12 B for the month

Markets and commentators seem to be losing faith in Cap Goods “monopolies” in India like BHEL who are fairly regular in printing bad numbers every three- four quarters and as banks have bottomed out, the short trade would start from any such market reaction to bad results, good results already baked in. L&T’s results for example seem spectacularly bad for market sentiment despite the Capital Goods major stuck with the same pipeline for well on 9 quarters now as it has been highlighting frequently and deterioration was probably unfortunately still not baked in

The GST reform may not be done but as ET reports on the front page the Capital NCR state of Delhi is finally getting bar codes to track elusive alcohol revenues , an important arsenal of funding for States in the Indian Federal system. in the southern idyll of Karnatak, in fact alcohol lees and extra state duties on fuels ( esp Petrol) make more than 90% of the budget’s income streams

Mid Day update; IT sector seems to be set up for the big fall as markets drop the dollar factor and go back to business left in value from the big move to IT last month. The IT short could well start before the expiry as IT stocks are not big in derivative trades esp with TechM, KPIT and infoedge not getting th bg speculators who play in derivatives

Also Walmart, Carrefour and tesco ventures in India may finally be closer to expanding statewise as the policymakers write in a waiver to 30% local supplier clauses allowing them to go for their preferred favorite supplier strategies sheltering them for producing exclusively for them, much a good thing for the supply chain deficiencies in the country

In stocks, you should have been long banks and you could hold from here. You can also keep longs in ITC, Bharti, Bajaj Auto and IDFC irrespective of current levels. At 6100 , the markets will head south for having run out of reasons to stay up and make room for a few margin trades on the short but expiry may well happen above 6000 levels as the ‘comeback’ trade (sic!) would just try and get a fai trade for shorts before closing up again with select stocks and sectors really sparse in this deep and big market, making impact opportunities a likely opportunity for those with 1005 data access. if you are game, you should look for changes in liquidity impact of the NSE 500 stocks and probably a dozen will show up interesting changes in trend to pounce upon. Those stocks toking up and ready to go downhill may also be camouflaged especially if you see large volumes in trades as prices go down on sustained basis(more than 2-3 days of this week )

Sorry Ashwini(ETNOW), going short ain’t so easy if you are betting on India, much like its hindu rate of growth, the nations stocks are probably stuck at these levels unable to channelise a trend

India Morning Report: Markets watching the airlocks at 1.30 PCR

Русский: Дорожный знак 1.30 "Низколетящие...
Русский: Дорожный знак 1.30 “Низколетящие самолёты”. (Photo credit: Wikipedia)

The Put Call Ratio, never an independent trend saturation indicator per se is nevertheless impeding most new buying in the Indian Markets as a higher PCR indicates the highest levels of puts sold and comparatively a negligible strength of written calls to initiate a downtrend. Given that the banks have recovered the sentiment to 11200 levels though, the unique topped up situation will continue to walk a steady tightrope for the markets at this point because unfortunately  traders are sunk for short ideas except for targeting the private banks again even as the perfectly engineered ride up to the market has left value in most rivate banks and in most blue chips.

Bajaj Auto at 1870 is hardly compensated for its Margins of 18.65 and Hero Honda is no longer overvalued. Reliance is again hardly left with any steam on the upside but with investment eigenvalues in India rarified Himalayan peaks, such stories are hard to come by for India and will unlikely get short interest even on their Q2 results day when they report barely coming back to /staying at normal profitability levels ina challenged environment. The INR 44 Bln sales at Bajaj are only bolstered by the new rupee and so also for petroleum cycle bled Reliance as oil starts going up after a barely 6 month breather to importers like India

Manmohan Singh did a great job holding 8 channels to task while inaugurating the ASSOCHAM session today morning, taking of true reform ably effected in  energy and the rupee levels helping export volumes 9 again, without discovering that direct relation to be not more than a fond hope anymore) as commodities continue to sink globally except for Oil, led by Indian exports of Cotton and copper also losing value and market like its exports of Tea Coffee and anything else non Gold as the quality is exactly what the buyer did not order, good or bad

English: A rectangle 270x180 pixels which has ...
English: A rectangle 270×180 pixels which has an aspect ratio of 3:2. (Photo credit: Wikipedia)

Me, I was even thinking it s saturday all morning and the markets are virtually closed..ET’s report on July currency trades this Monday..

The data shows that average daily volumes for currency options have fallen by as much as 79 per cent for one of the exchanges so far in July, but another bourse have witnessed a hefty drop of only 35 per cent.

Meanwhile Raymond and Indian Hotels are not going to be traded derivatives from the Octoebr series

India Morning Report: Markets steady, India facing uphill task

Bajaj
Bajaj (Photo credit: Chandra Marsono)

 

The Indices opened barely in the red after a dull week of Economic data . Trade deficit reported under a $10 Bln for June as Gold imports were blocked out but Inflation on CPI climbed back to 10% in a precursor to fuel inflation expected now to climb back from a barely settled in period of less than 6 months as the drop in Oil is destroyed by the 12% depreciation in the currency. The depleted Forex reserves are already a qustion for the Rupee and the negative IIP for the month is unfortunately unlikely to give confidence in the comeback. Consumption being defeated, one is not sure of the reasons for continuing retail inflation with foo inflation at 12% leading the charge currently.

 

IIP showed a more than 10% contraction in durables Production index and negative growth year/year for non durables as well. WPI for June has also come in below 5% again And while monetary policy will be challenged by the prospects of inflation and depreciation , consumption is actually flling making infation an easy target to even prospects of deflation in terms of sentiment continuing negative in the economy. Investment is yet to come back to the Economy has become a challeneg desite a Forward FDI policy esp for Defence and Telecom on the cards.

 

Auto Sales are down almost 10% on year at 139000 cars and 55 lower for two whelers and though markets continue to treat Bajaj and Hero equally one can see performance for Hero worsening in the war with erstwhile partner Honda in the market and Bajaj has maintained euanimity in shares and market segments nonetheless.

 

Unfortunately apart from the results of this quarter one also does not see further uptick in Exports immediately. Banks despite the low 13.7% growth in Credit for the month of May/June remain fairly healthy in the selected layer as we have pointed out here and Bank  Nifty remains a great pick at 11600 levels markets keeping value priced in line with the economic sentiment

 

Last week, the India Morning Report could not be posted and the same may not be available from Tuesday or Wednesday till the end of the market week on Friday when the trade data and CPI was posted. For JP Morgan and Wells Fargo results refer to advantages.us. Indian Banks report this week and we will be covering Indusind’s results of last week later with YES Bank performance

 

 

 

India Morning Report: India regains investment preference in Asia, builds on 5900

English: This picture has been taken at the Sa...
English: This picture has been taken at the Satya Bharti School. It shows the education system and children’s life at the school. (Photo credit: Wikipedia)

Markets had a choppy week early on in India but with selling having refused to resume and Asian markets keeping a comeback worked into the numbers meant the Dollar indices poised to jump at 83 going into the next week. In thus phase however Dollar may again lose the tight negative correlation to Asian equities especially again in India which has managed to climb down the volatility beanstalk while steadily gaining 50 points yesterday and another 50 points at open today.

Many out of favour scrips from Metals to the yet to be prioritised realty are now at their technical support levels meaning they will mostly support positive moves ad may even lead one out of 5 days in the positive next week. .The jobs report in the US morning will of course propel the Dollar but the likelihood of that momentum taking down Asian markets has receded with the yen keeping counsel near 100 and Asian automakers not seeing tariff barriers in the US traded away

Oil prices are unlikely to continue north despite demand led reductions in inventory in the US as refineries remain underfed and the Egypt tensions are resolved
Banks are poised comfortably at 11250 levels and the Banknifty straddle has worked wonders in localising discounting for bad debt PSUs to SBI and BOB among the still expected to perform members of the Index . Thus further PSU bank attrition of business and bad debt spirals will unlikely stop the rally from taking root in banks next week and ths leading the Indian Nifty 50 back to 6000 levels albeit for a trading largesse. Pharma sector picks like cipla and Lupin continue to have much to offer and trading down in Sun Pharma may ot have large index effects ( expected as exports are succeeding at competition) iT scrips are much in a bind of low profitability even as immigration reform fades away and 12% in Rupee depreciation fails to make earnings forecasts positive ahead of next week.
Bajaj Auto, IDFC and Powergrid could be good picks at current levels though RBI signals have already discounted PSU applicants for bank licenses including PFC. PTC is also dong well without a banking license to its name and REC may trade to lower 190 levels but is likely a good pick at these levels all on their standalone performance and undiluted by the market added momentum in June for Banking preference. YES Bank is a great pick at these levels and supernary promoter interests are unlikely to be material to the bank’s professional management as is the prospect of 100% FDI in leading lights in the sector. Telcos will probably get 100% FDI approval sooner than later and Aviation’s experience with Jet Etihad is likely to remain positive and accretive to value ton the whole. Lupin’s pipeline of 100= drugs continues to underline the block profits in generics witha low barrier definition of blockbusters and no big stories in the us market nonetheless and similarily with Cadilla, Orchid and Stride Arcolabs.
More importantly consumption winners heading for no man’s land ( Trading at lifetime highs seen mathematically breaking new ground with positive momentum trading) with ITC, United Spirits and eve HUL and Bharti likely to head off the “no investment” led dull prospects at India in story, expected still to be worth much more 6 months down the line. While HUL has shown already that shorts were wrong, once results expectations are correctly warded off by Telco promoters sunil mittal and co, Bharti may also be seen in the light of its quasi global brand and investment expectations and thus gain from reducing debt on new investment rules in fDI and in required infrastructure debt accounting

The Rupee thus is free to depreciate but in a small range around the 60 mark.

 

India Morning Report: Sharp cuts ensure quick bottom in India around 5650

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)

A more than expected negative reaction in  the Indian markets yesterday may have subdued analysts into a negative whirl as they were waiting for the same, but post the subdued slightly positive open in global markets, it increasingly looks like today’s move in the Indian markets is more a positive search for value than just a reaction to yesterday’s sharp negative move.

Though your favorite superanalysts may be recommending shorts at 5650-5700 levels on the markets , I would invite you to use this rare opportunity to further sign in to Indian markets in scrips of value except that though banks refer the most value potential they are not ready for a move up yet. ONGC and Tata Motors are good shorts too, and apart from the index shorts one can see the visible analyst reaction actually picking out rare weaknesses for shorts as Ashwini Gujral recommended in Option spreads shorting Tata Motors and ONGC . Telcos haev nearly recovered the positive sentiment almost immediately and exporters are mobing in the positive zone including Bajaj Auto and Sun Pharma

The heavily discounted PER multiples in the Indian indices also ensure further ETF outflows do not negatively impact Indian allocations and one expects debt market outflows to stabilise soon as well as the yields in the Fixed Income Market spiked n small volumes itself yesterday and there are only higher opportunity losses for further exits The Rupee can obviously not last at these levels having failed to establish any zones in the three breaches in last two weeks but as the “correlation backward catch up play has lasted almost all week, the rest of the markets are unlikely to oblige Rupee’s bottom making move in the next few weeks and is likely to be ignored in equity and debt///government bond markets

Shorts on UCO, Karnataka Bank  and Vijaya Bank will work singly and can be tried as pair with buy in Banknifty once BOB and SBI bottom out as the big movers in this move. A Direct air with pvt sector ICICI bank and HDFC Bank would be riskier. Nifty short strangles with the Nifty bottom at 5600 is recommended y IiFL which would be their first positive trade in the quarter (joking!) but a great one Short 1 put at 5600 and use to buy puts/sell calls at 5800 . Selling 5500 put would not be bullish for this market nor very remunerative.

 

India Morning Report: As we said it, so did the market bid it

The Rupee found no buyers again at 57.70 and had no problem taking the bottom end of the new range at 58.75 today in the open stymieing buyers fromcoming back into equities. The run on bonds has added another $2 B odd in the week since as Bernanke’s announcement widely expected to bring in concrete plans pivots the markets worldwide, especially those already recognised as an island of value and ready for the QE withdrawals like in India.

 

As we said the lower volatility of Indian Fixed income markets especially after better liquidity in the month of may ensures that India markets are the first to be exit in debt but the investment stock for the country would only grow.

 

Equities maintain poise but idle lower after the weak Rupee triggers minor exits. The due noise on changing FDI laws however is unlikely to materialise before the General elections and any consequent optimism must also wait for tier 2 and detailed surveys bringing back the incumbent government’s chances of making it to UPA 3 though it is almost certain that Modi will get extra votes for BJP for being an able governor.

 

The stable range and the ready ‘stock’ of short positions on the indices and banks enables a stable return in this series  despite global volatility receding. Trades on Infy as mentioned on CNBC18 are pretty safe with puts of 2300 (till expiry) and maybe 2400 ( for a week) But I would say sold calls on 5800 are ready to be taken out and should recede back immediately by end of day short calls on 5900 are already the ceiling of good straddles in the series. 595 should also get more positions and risk/greed might also make a run on the 5850 calls possible instead of a complete exit from 5800 series. Afternoon turns are usually a great read with Aptart India on both CNBC18 and ETNow and Mitesh Thakkar and CK (ET Now)

 

Value of Indian rupee as per dollar & pound (1...
Value of Indian rupee as per dollar & pound (1980-2005) (Photo credit: Wikipedia)

 

Angel broking like SS (CnBC 18 )  continues to show signs of smaller capitalised players’ frustration with Bulls’ holding the markets bu t there are enough players to not make this a local vs FII bokerage war as at this rally cusp DIIs have started buying. SS in the meantime has moved on to better trades this week with bullish picks back in a majority opinion reducing rsk for small traders. IDFC had  anice breakout on rumors of its banking application and outside banks Bharti, ITC and the banks remain strong. Mitesh Thakkar’s strong rush for Bajaj Auto is something that jibes well with us as well after M&M. Late chores made this report a ittle delayed to remember the other interesting morning pre open and 8 am jabber. Also the OMC moves completely sdestepped us and we would still think they are great buys at new prices. And the

 

 

 

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.

 

 

India Morning Report: Chidambaram kicks off mmtc 9.33% divestment

Banking District
Banking District (Photo credit: bsterling)

MMTC might be a success but the market is not putting much score by the Fin Min /CEA appearance in the media today while Banks have finally given way after a 45 day wait. One notes the posit by market makers that value retention by the select scrips already counted as good is not doing much for wider portfolios as most had treated this climb as the milestone before the rally and not the rally itself and does no in any way would have resulted in  a bubble.

Also the Rupee being stronger yesterday, the overall month long move across currency and equities seems to be trying to compensate the news view that India has survived the move in Asia as was the norm in the oughts or the reform rich period before that and has somehow become a threshold for Emerging markets portfolios as and when dictated by the once a year or fewer occasions of a rupee correction and is unlikely to again preclude the fact or erase the sustenance shown by Indian equities as a class because of the depth of our markets even as Nikkei, Hangseng and Korean markets lose heavily on each currency move because of the less than dozen companies going around for Korea at least and the richness of fixed income portfolios one can safely assume in the bigger markets in Nikkei and Hongkong

The Stanchart reference to inflation risk however remains misplaced as Oil prices are still very unlikely to trend up again

However, staying on the mundane market data for the daily report, Indian equities are losing all expectations of political stability and any positive rally till september as the year’s second half will offer first hope of growth or economic performanceThe import limitation on Gold in the meantime does not impact MMTC plans in Gold and thus strengthens the public channels for Gold trade in India ahead of its disinvestment exercise

Meanwhile FDI flows in China, India and Brazil have been more robust than any other class for all global investors even as Russia scraped the bottom of the barrel bringing the BRIC average growth below 0 for the year. Markets in Asia will continue to lead exits but as the speculative portion from India has been wished away almost immediately, not much move south in bonds or in equities remains and as can be seen in any current charts, Indian yields are down in the same 5 week period and will continue to trend down for the year. Banks, ITC and IDFC remain good investments as also Bajaj Auto, all mentioned except ITC having lost their share of speculative investors / price premiums already.

Shorts on Adani Enterprises are well placed while Gujral again has mentioned buys on Lupin and Cipla / Lupin are real return stories of 2013 from here as Sun Pharma finally pays out 805 of its cash for the settlement with Pfizer/Takeda

India Morning Report: Bank shine again yields to Yes Bank and ICICI Bank, IDFC and quality promoters in

It gives you the feeling of “every thing is right with the world again”. It is not deja vu. It is the latest round of banking licences and yesterday’s guidelines with a lot of fine print was given the green signal by the government,. The reason it is why everything is alright with the world again? A corny one as i fettered in between remunerative careers and higher education can see the trees off the woods. The trees claiming India’s recovery has broken down. And the trees are too close for comfort. This 2012-13 boost of liquidity in the markets is on the bink of withdrawal, India despite being a sticky destination , likely to e among the first to lose money once the Fed ntention is firmed up because of its ow weightage among the Asian markets. Others have different barriers to High frequency trading and other Hedge fund and global bank strategies also and asia is likely left with root long term investing stock by Q1 2014. The long term trading caital stock however favors India continuingly and the new banks with 10 year promoter track record and financial businesses consoidated under a single NOHFC may shorten the wait and watch period by having established promoters spend 18 onths after aprovl to get into the thick of things and thus sustain investment interest from the get go. Yes Bank and ICICI Bank remain more transparent exapls of a growing banking business which have more or less stuck by the new regime and along with HDFC Bank and HDFC represent the growing size of Indian resurgence as global participation by the big banks is negated by the requirements of new Capital for india ringfencing it as it must in line with other non US/European operations for the same banks

 

BofA ML’s revision of India’s GDP growth to 6% and 6.8% in fy14 and 15 will likely pass away unnoticed as RBI already has pared forecasts of FY14 to 5.7% and no autos are not turning around in june or september quarters. Especially of concern is the continuing accumulation of volatile interest around Hero moto as just OTM options at 1700 strike have barey pared premium to 40 despite the stock’s hitting 1670 at closing yesterday and that is what sets off the infinite loop of disinterested traders willing to exit India markets again and again, which on must guard. however able the stock may be in terms of blocking out shorts, the markets have no other mechanism to furrow out that excess premium in the 1700 strike and that ungainly thought is what makes it a tiring build for India Inc. One must recognise that waiting fast and furious for the auto sales to come back is not the deal and “another massive upsurge” is not just around the corner.

 

Yes Bank
Yes Bank (Photo credit: Wikipedia)

 

Unfortunately while such corners of FNO interest fail to hit other bellwethers like ITC, certain speculative favorites that have repeatedly created a phantom Bombay Club of Tier 2 Indian promoters continue to get to block entire trading series in whichever front month is appied in this case the June series. Bajaj Auto has shown better resilience in performance and similarily there are others like the banks and candidates mmentioned above that  an sustain higher series interest Changes in preference to Diesel ad other such changes in the structure of the markets may not allow customers to respond to falling oil prices and a market still not accepting ford and chevy produce or even japanese cars except toyota after a short honeymoon with hyundai in the last two decades unable to afford quick model changes while xports may pick up for all players incl nissan. VW’s probably happy enogh playing at the premium end making this large consumer market a “niche” structurally

 

Deal canvas was also extremely pretty in India with Axiata getting a play in Idea as Idea looks to divest the Tower business to its partner. Birla’s interest in a bank is also sustained despite the refusal of RBI to allow JVs with other promoters for a bank NoFHC. Sun TV results make it extremely likely that the DTH/TV software sectors finally rise in scale to cater to the highly lucratve fast growing market in India but they ar einstead likely to scurry around for a bank which RBI can handle . Bajaj finserv and Bajaj Finance are perhas close to a NOFHC structure already and can jump right in with the branch structure of the Fincos as with M&M. REC and LICHFL may likely not be allowed by RBI. In Deals, nyse Euronext has exited MCX as well. Concerns around Orchid’s 2010 sale to Hospira in Chennai may dissipate allowing it to pursue the other unit sales in due course. PFC is in the meantime picking up stakes in NCC for some infra projects in power and highways which must help NCC. LB holdings and WIpro are others in what seems to be the new gold rush circa 2013-14,th one day//week/month when all deal announcements almost com close to complete the years takings for the banks as the recovery is well close to drying up. Axis bank seems to have lost the deal truck to SCB and even Citi this year in India as even HSBC is not getting its share of deal cash in the medium sized QIP rush and a flurry of infra debt reduction. S&P/McGraw Hill’s interest in crisil to 75% is heartening to note but one though unwillingly must raise the specter of a going private transaction for the increasingly clouded suture view of the global rating agency

 

The Rupee is yet not done its move down likely to 57 and beyond though most of the move has played out.

 

 

 

India Morning Report: Here the bounceback, there the banks and airlines

Anjum Bharti - 01
Anjum Bharti – 01 (Photo credit: Adarsh Upadhyay)

A short and quick stab on Monday will show that efforts continue to keep India Inc juiced as Q2 will likely return a broader cohort of companies that increase their bottomline based on continuing decrease in non food core inflation, and a small measurable uptick in production.

Most of the market business still returns to banks at their low point of the cycle and struggle is on for a better run rate for deposits on the growth. The only negative skew to this cycle being that banks cannot cut any rates of lending as they maintain interest bearing deposits to an edge to market investments or hope for better borrowing rates for themselves despite the professed rate cut forced on the Central Bank

Taxation changes to mutual funds that till now paid Capital Gains have leveled the playing field somewhat  the in the new budget but the banks cannot make up for the loss of money market deposits placed by large corporates earlier so quickly. Retail unbinding of savings rates have already scarred the proposition for mainstays like ICICI Bank and HDFC Bank as new business is the most important of all business segments in any industry and esp so in retail banking. Short term Mutual Fund investments now bear 24% tax.

Bulls remain in Auto (Bajaj Auto not Hero moto, Maruti and M&M but Tata Motors too) , ITC, Bharti and IDFC and may not exit healthcare or enter infotech for longer than intraday business

Allowing competition in International flying with a fleet of 10 is good news and low fares have been promising in the off season too. Rupee remains strong and will likely climb outside the 52 range too if foreign investment portfolio flows indeed do not ebb as March seems to promise. Again a caveat to Domestic institutions to keep cash for such rallies and not miss the bus or their overall performance base will erode faster than they have the opportunity to ride another big multiple growth wave that last ended in 2006-7

India Morning Report: Here it is, the day of the bounce back

Of course, we are still correcting to a lower range and I would even think the market could now top out at 5850 which would be dangerous as that would probably break the market uptrend for good.

While some of the unsure network analysts playing safe including Mitesh Thakkar on ET have opted for upticks in Wipro and Lupin, I would rather the markets are indicating secular break from the vote down mid week and banking and autos would lead the comebacks.

English: To Munsiyari on a Maruti, Uttarakhand.
English: To Munsiyari on a Maruti, Uttarakhand. (Photo credit: Wikipedia)

For the markets to sustain on its strengths now that India inc has discounted the political storms as no more than the morning cuppa, it should retrace higher than 5950 and thus the afternoon session or midweek next week could again see this morning session being negated to start from a better ground but around the 5600 mark only.

The bull picks in M&M, Bajaj Auto (Sukhani, TV18) and Maruti would be the big winners and ITC IDFC and ICICI Bank continue as bedrocks of the long portfolio. HDFC Bank seems to be still battling issues of Foreign limit being exhausted but is up in this mini trend while the short on DLF (Sukhani, TV18) is a great pick as the markets finally do not want to take a directional trend in the remaining series and battle overvaluation in the remaining scrips.

There is no solution for India’s daily challenges but it is to a degree, the sustainability that comes from middle class and bureaucratic institutions and cultural mores that keep it going and keep business and pleasure immune from political and social pain.

Financially, forcing RBI to cut rates would only keep the fixed income markets moving higher on yield especially as there is a fracture between the higher floating yield curve’s tough love and the macroeconomic indicators actually pointing to growth that remain bereft of real investment support while neighbours and not so young markets like Thailand and Turkey stay with carefully worked out long only bets sweetening the long only trajectory of economic perspicuity that was associated with India for some time.

The short bets in the March series should have been closed in yesterdays pre closing session and no new shorts in options could yield much as the time value of decay takes prominence this week. However, though it is non intuitive, a sell in 5600 puts is likely to be the strategy gaining coin the rest of today and Monday, esp if you are willing to wait out expiry on March 28. Selling calls would build up above 5750 only.

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: The meandering world’s progress condensed in a fete of ‘immediate payoffs’

The Seal of Salt Lake City depicts the building
The Seal of Salt Lake City depicts the building (Photo credit: Wikipedia)

With Goldman Sachs moving its next meeting of shareholders to its other back office in Salt Lake City, Utah, India’s sloth in an optimistic IIP growth of 2% and FY 14 downgrades to 6% by a couple of foreign brokerages it was all but sure that Monday’s bad openings would be followed by a tirade to the finish line with Network analysts from Ashwini to SS and Udayan Bose (TV18)  pining for the 5500 mark to make the uncertainty go away. Of course that also unleashed the India outsourcing Bull with IT companies a safe bet and TCS the largest Market Cap company ahead of Reliance Industries.

However, sanity has returned to the market since with interest and eyes returning to Indian equities and the Dollar index having recovered its paces since the Yen correction at the start of the series without the Yen losing any of its pressure to cross parity to the Dollar and the Euro denizen of Germany proving that it is unlikely to feed its south neighbours including France (conceptually) anything other than Target liabilities for the growth spend everyone was sure Germany has keeled over for. Germany preponed its budget exercise to reaffirm its primacy of fiscal discipline as the Euro recovered last week’s blues since and the EU summit failed to move on any of the agenda items. The European economy still needs to work out a longer timeline for its recovery.

Trade deficit data however points to a tight cap on US GDP growth for 2013 and similar warning bells toll for Exporting countries like India and China though EU and Japan look at the small recovery in both Capital Goods exports and imports numbers for US in February Capital Goods trade up by a net $1.1 Bln in the ever increasing Trade deficit and a bleak month for the US in terms of the shored up Fiscal surplus breaking down along expected lines in February’s big Fiscal deficit.

India too therefore looks at a larger trade deficit even as Oil prices come down by over $10 in the last 30 days with Exports barely maintaining the newer levels it managed in the last throes of 2008-2010 and February’s deficit of $14 B is likely just an aberration after January’s $20 B hit.

Markets look better in equities from banks climbing despite the fourth estate coup against the top 3 private banks looking to make a mark in wealth as brokerages rang the bell for State Bank and the stock climbed up 3% in Banknifty’s climb back above 12000. The attention on ITC which was almost a giveaway for the lack of short interest in the broader market also encouragingly continues and the picks on Bajaj Auto should also bear long again than continuing south or short as last week. NALCO and RCF Offers for Sale also look lined up to complete successfully with LIC’s participation in the OFS taking its stake to 6% in RCF. The residual stake sale in Vedanta’s BALCO and HZL investments could really brighten up India Inc’s balance sheet in the current fiscal itself but one cannot gauge the impact of continued market confidence to the T given the fourth estate’s penchant for equating accountability for the government with all lack of information and analysis on any story /subject

India Morning Report: A flurry of good results in Week 2 but markets wait more Budget news for FY 2014

Even as Novak Djokovic made it thru another Marathon qualifying round with Warinka this year in the Aussie Open, markets wait nary a move on results from the likes of Hindustan Unilever and Kotak Mahindra Bank even as leading lights from both the non-discretionary staples sector and banking have already been awarded in market terms to Yes Bank ( and HDFC Bank & Indusind Bank) as well as ITC.

 

While Bharti and ICICI Bank follow in the wake of these results that come in today, after the Auto (2-wheelers) war of market which Bajaj Auto scored over Hero motocorp, it is but a residual interest from major institutions that brokerages wait on stocks matured and still having signifact float as well as share of their respective product markets. In more simple terms, no one is really interested in HUL anymore or even Kotak except for their most hardened followers.

 

Kotak Securities logo
Kotak Securities logo (Photo credit: Wikipedia)

 

Even ICICI Bank may be called matured in similar terms but  closer look reveals that stock to be more response and volatility hungry than these annabes that have managed to be the lead stories of India Inc for a long time. Yet, they still produce growth and in case they are truly able to break thru

 

 

the barriers that stop all indian consumer and growth stories to $1 bln a brand, they both might yet throw a good surprise.

 

Change in regulations on road highways allowing projects to proceed are a good sign for those waiting for the infrastructure juggernaut. Also great were stories of Spicejet’s success in growing realisations more than 30% to INR 4400 per passenger and operating profits up nearly 40% this quarter even as investors wait for Emirates and Etihad to finalise their India deal, the Dreamliner stand down having also meant better revenues for global airlines and to a limited extent those stranded by Air India in India. Jet Airways continues to show good competitive spirit with Spicejet and with the market yet not tapped much more than the surface , even Koingfisher’s dud mismanagemnt continues to be ignored in hope of FDI.

 

China’s dynamics are changing slowly but its revival is no t history. The current lull in commodity prices was however expected as it has happened in other cycles that China really does not need to start buying metals cottons and even its other Export industry raw materials like for Silicon Cells (Photo voltaic) at higher prices and so the commodities are going thru a natural correction.

 

The Fixed income markets have apparently overshot the 7.9% mark, making the 7.9% mark a support on the way back but a rate cut of 50 bps or 25 bps apart the market might yet come back to above 8% as RBI does not have many choices when Policy is announced on Jan 29.

 

Duties on Platinum and Gold apart ( from 4% to 6%) the precious metals remain dull and Silver a good trade from 58000 to 64000 and from 63000 to 58000 whene evr you get the time and the patience

 

Novak Djokovic during the 2008 Tennis Masters ...
Novak Djokovic during the 2008 Tennis Masters Cup final against Nikolay Davydenko (Photo credit: Wikipedia)

 

 

 

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