India Morning Report: Markets reach the 6300 mark, will it hold as the new bottom?

Knowledge market BW
Knowledge market BW (Photo credit: Wikipedia)

Eventually, 6300 may also hold as the bottom of the range and so armed with this knowledge market rangers on the Bull side may ordain the mark sooner this week and next but for now markets will trade it bullishly on Monday.  Pre Open saw a shard of pricing out in Bank of India again, sinking to a bottomless pit quote 30% down, bu tas of now the PSU banks remain the biggest risk on the downside ( esp if they catch our fancy as the markets go up, they would underline the lack of options in such a wide market with 3000 active quotes on NSE alone.

Deposits were finally ahead of loans in the report of week ended December 13, growing at 17% (INR 75 Tln) with Bank lending at 15%(INR 57 Tln). Non Food Credit stock is INR 56 Tln, making up most of the growth stock in lending (INR 320 bln out of INR 360 Bln)

As we mentioned at the cusp of the rally, infracos and IT remain sectors in which stocks have to be decided for the winners and losers , both right now moving in single file, IT moving together with a losing rupee and infra moving up together on good hope for policy day, like this week. However, IDFC for example has a much more bullish trade accumulation appealing to at least three class of investors including the passive institutionals and the active hedge traders in small infra hopes.

Traders continue to hope for the non obvious trades in each of their not so blue chip large trades which technically may no longer belong to the Midcap story either including Cairns, GMDC/NMDC, Hexaware/HCL Tech. Barclays did up the growth forecast of India Inc ahead of results season, but more on the lines of MSA’s war cry for an automatic upgrade to 6-7% growth for India Inc with positive Investment flows, because the deed is done, which sadly has still to unfold surprises with statistics belying the temporariness of this recovery without the requisite investment flows except the Net Exports as we wipe out the Current Deficit and markets cornered the shorts out again in December.

I could buy a few puts on HCL Tech just to wind them up and carry home some profits on the announcements as results start pouring in. That would be really the closest to a sure winner this quarter as the Ruee digs its heels in at 61-62 levels. Infy shorts will not bait the stock till 3600 probably and if you are bullish, the up move is unlikely at thse levels despite the oevrall atmosphere of continuing good news in the sector, and that will not extend the winning rallies of Mid Caps and Product companies like KPIT, Hexaware and Persistent either.

Glenmark and GAIL seem good additions for stock watching in 2014 to our already brilliant portfolio led by IDFC and YES Bank. Mining and Metals as also L&T are likely bad trades to start. Pharma remains the best sector for bulls in both Domestic and Exports stories despite the NPPA pricing policy implementation, a higher double digit CAGR growth assured in the domestic market, I’d say. Banks despite giving up the gains early on Monday, look like making up for the sobriety shown this quarter in 2014 too but stock selection has becom critically differentiating strategy between the sub par equals as well as the Private sector leaderboard.

India Morning Report: Rollovers underline a strong Thursday close, Merry Christmas India

English: Eugene Fama receiving the inaugural M...
English: Eugene Fama receiving the inaugural Morgan Stanley-American Finance Association Award from Rick Green (Photo credit: Wikipedia)

Inflows have been strong in second half of the Calendar year and Net Exports have been rising (nice, Manishi RayChoudhuri/TV18) . RGR was a brave face as he shot down the traders bamboozling him and the follow up interviews by the Guv on both CNBC India and ET NOW are great hits but without Investment to the real sectors and not real estate or Financial markets the return to 7% growth levels is a shard unwritten.

I hope he can stay off some future rate hikes too even as the auto sector underlines that the recovery has not happened tomorrow or this month(January) either. Fixed income yields still have a chance to return to 8.5% but then thats me hoping in counter balance to markets hoping for free money on a tree, any tree! (lolz)

New Open Interest at the start of this week even makes a 6500 close to the series possible but probably we will stay at around 6350, no less. HDFC Fund”s INR 150 mln-200 mln purchase of the Morgan Stanley funds is like showing up how tough it is and will be ,  while hiding the almost nationalisation part of the transaction, allowing a stuck Foreign fund an exit from an incalcitrant (Recalcitrant plus contumacious plus that commission factor?) market it is unable to grow not unlike Fidelity as entry loads bring bak the downselling to th slow growing asset markets that have still grown from INR 5.5 Tln before the crisis to almost INR 8 Tln today, the indexes barely having moved on the round trips in between. HDFC Fund’ last big buyout was when it got the top performing Zurich funds and till now has been masticating these previous transactions without any growth and is unlikely to start growing from here despite the 400,000 new customer accounts left high and dry. Market sentiment is indeed positive and getting better and may the DIIs forever looking for a bargain keep cash and money markets running to good demand for Indian paper.

Back in equities, the markets are busy rolling over their bullish positions on the penultimate day of trading in the series and the shorts have to probably fall out except for the 6500-6800 Calls on the Nifty which can be written with certainty till expiry, now predominantly in the January series, given the markets are eager because of the safeplaying, to turn boring January into a contest of Fireworks from both bulls and bears but probably with a 6300 bottom till some big negative news plays out not counting out inflation as Rural CPI may still sike and Vegetable inflation may still fall behind the news of prices going down last month

YES is a great buy even without a new IFC contract signing, IFC’s co lending probably its most profitable program in the subcontinent and its return augurs well in the last decade and more in jumping up Investment in India but with intthe currency hanging it will probably take a few more Dollars from them to move the trend to the Indian waters this time around. Hopefully, EXIM Bank does not need allocations from the Government in this quarter either to move export credit and keep double digit growth in Exports on track even as the gains from a gold clampdown disappear

Individual stocks

The sells on Jubilant Foods may not be needed for substitution of ITC into buy portfolios betting on the recovery nor do straddles get anything in the 6300-6500 range in January ( Ashwini still out of depth a little like the DIIs without a correction, though there  has never been any benefit to markets in acceding o their demand for lower levels , tabs , whatever. Interesting downtick in Volatility this week, One thought/heard positive volatility had disappeared totally. The only remaining downside risk to the market now building up is the jump in Canar Bank stock and such investors and advisors now again rooting for select PSU bank stocks.

Update price not disclosed, the MF purchase cost HDFC Funds upward of 4% of Debt fund AUM

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

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

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

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

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

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

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

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

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

 

India Morning Report: The Rupee now counting 63..62..61 , the Nifty counting 5900..6000 ..then?

The PCRs are already hanging by athread. But the long seen unloading in IDFC seems to be at an end with FT announcing investibility changes in IDFC and HDFC for the rebalancing from Sept 22. IDFC investibility is down to 54% from 74% and HDFC likely to see $208 mln inflows (JPM) from investibility rating increase from 74% to 100%. IDFC is also up 7% on the far end to the big story and is likely to move up with its close association with infra debt like at JP Assoc also relieved by Manoj Gaur’s latest sale of a 4.8MTPA Gujarat plant to a now 59 MTPA Ultratech under the Birlas (KM)

Meanwhile the index comfortably opened the sultry day proceedings at above 5900 and the Rupee almost tore into 62 levels before retreating towards yesterday’s day end levels. Friday’s 6000 level run  is thus still a given though the markets are not seeng serious buying right now and is not yet under the bullish impact of such salubrius India winning strategies as Import substitution. The $10.9 Bln deficit, a very respectable low given recent scores since 2009 is however still near the Post reform highs than the average rate as could be assumed by India Investors and the $75 -80 Bln trade deficit targeted may well be just par for the course if India Inc does achieve it, with Gold imports already under 1 MT in August (650kg)

English: Panorama of Sachivalay (Gujarat Legis...
English: Panorama of Sachivalay (Gujarat Legistative Assembly) at Gandhinagar (Photo credit: Wikipedia)

New layers of investors returning to the markts however muddy the prospective recovery levels of the recovery, some like Kotak expectng the Rupee to top off the move at 63 itslf. However with the 5th day of rally past ysterday with just minor scratches, today’s close may also be positive and selling 5900 calls are likely to be beaten before day end even though the markets are in an extended short covering phase through this week. IT stocks are nearing fatigue levels, cntriuting to India’s bullishness in ameasured move avoiding days of Rupee depreciation as they target longer term portfolios again, and markets now actually prefer Auto and other performing Economy stocks that are in cycle and not tagged defensives. Before the news of war in Syria died down $151 Bln was already the bill for Indian Oil imports in four months and that turnaround with lower Oil levels could see substantially much more sustainable interest in energy stocks

High CPI and negative IIP reports due today should worry no one as markets resume to wieh in on the fact that Foreign investors will likely keep India in th center of their Global portfolios. No there is virtually no risk of India aplying for sovereign debt default in the coming days.

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 Trade Report (Flash October 2012) : Deficit Climbs

Trade and Monthly IIP. international Trade is currently 1/5 of India GDP

The October monthly deficit climbed to a $20.96B in India even as larger trade behemoths with monthly export volumes of $160-180 B in China and US returned higher surpluses ($32.5B) and lower deficits ($41.9B) spurred by jumps in Exports.

Indian data is ofcourse skewed by both the rush for Oil purchases and a downtick in imports not just in Europe but in US and most other India customers. While the European contraction is worrisome on an aggregate basis most global trade volume has been replaced by other categories for other customers. However Capital Goods trade remains one of the most severely affected led by downtick in such Exports from Europe (Germany) and Japan

Indian Imports rose $7.5 B for the month and the Rupee as expected inched towards the 55 levels. Indian IIP has been trending at lower levesl since the Global trade contraction picked up force in mid 2011

India Trade and Revenue Deficit Data – May 2012

Exports continue to consolidate at May figures above $25.5 B. imports are consistent with this year’s degrowth at $ 41.9B and the trade deficit at $16B may mean more weakness for the rupee though policy measures are in place

Jewelery exports are hardly down 9%, ready made garments hit by lack of demand in Europe, and petroleum products 26% apart from the known lack of traction in engineering goods. However imports are down too and the $16.9 B deficit is a relief.

Indirect Tax collections were up 16% till April with Service tax collections for the month up 45% on the year to the new target of 1T

2012 India Economic Survey

Inflation 6.5-7 % by March

Recommends Fixed rate of Diesel subsidy /Litre

FY12 Growth at 6.9% ( as per Advance Estimates , GDP to INR 52.5Tln )

Survey projects 7.6% +/- 0.25% for FY2013

FY14 Growth seen at 8.6%

Inflation may fall even below 6.5% in FY13 but Monetary policy needs to adjust to fluctuationsin Oil and adjust prices regularly

Again in repeat from last year, Petrol pricing neds to be based on a transparent formula.

India needs fiscal consolidation and spending curbs in 2013 >> ..and inflation may tick down further does not match again and no investment in the Economy right now

Sustained high rates may hurt reality,and services sector

Inflationary forecasts at elevated levels building on the reverse base effect probably from FY12 to FY13 but that is slower demand led lower tack for inflation at its worst

Trade Deficit of 8% a matter of concern and FDI in retail important ( Multi Brand without local sourcing restrictions – Our additions in bold/italics)

Bravo: We are moving forward on Direct transfers of Subsidies for Food and kerosene (sorry AAdhar)

Land Acquisition Issues vital

Infra Finance a key concern

Need Aggressive stand to check rupee volatiliy but constrained by size of reserves

Deficit expansion due to lower Revenues not just subsidies

Recommend Customers pay for Higher crude prices – Sure!

We doubt though employment conditions have improved (monsterindia_ ) and depression in growth may jump the savings cables but the survey expects: Savings and Capital Formation expected to rise!

See slippage in FY12 Fiscal Deficit Target –

WHILE Proceed without MidTerm

DO 

Murder;

Mayhem;

Fiscal Profligacy

REPEAT 

Fiscal + Fiscal +1

UNTIL DEficit = 8% and Mamta = Laloo = Nitish/50 (2%) – NAMO*3/2 

(***FOR NEW TARGET OF FISC = 4%***)


Verdict: Why is growth back when we are in fiscal profligacy without investment

more special duties and fine tweaking of excise rates tomorrow instead of tackling reform in budget yet striving for stretched revenues

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