India Morning Report: Markets wait for fuzzy logic to come back as banks get ticked off

The Rupee has continued its climb but equities have taken a break even as Rupee survives end of the month selling for import payment obligations in a benign environment Oil heading below $103 (US Crude)

Bharti Airtel Lanka
Bharti Airtel Lanka (Photo credit: Wikipedia)

FDI Dollars will likely boost debt markets soon, the positive sentiment from that and the promise of removing extraordinary liquidity measures letting the markets 5 basis points off the 10-year bond yield to 8.73% . BofA ML in the mean time agreed that there was no doing anything in India till 2014 came and went so the rally is at a loss still from  a disgruntled bull frustration at this rush for beyond 6000.

Goldman Sachs put India in the same basket as Turkey and Brazil, rather on the heels of the City beating Manchester United and showing Goldman Sachs burnt in putting too many eggs in this basket too. However, we go agree on the Fragile three from Goldman Sachs which will really get stricken not just because of dollar dependence but because of domestic alchemic leadership that continues to drive a fiscal big bang attempt in those two domains as well as someone like South Africa. The Fragile Five however esp India do not exist as those with deep domestic markets cannot be clubbed with Emerging Markets

India’s Dollar dependence is much a factor of the Oil price, so that can’t happen without Syria, Iran and israel. No, India cannot choose to come out of the growth plateau overnight by dissing inaction and is not  sign of weak politics, just more federal than the smaller EMs can afford. Our deep markets still offer much more than even China in most asset classes and Financial market reform is not a steeplechase to be run, or a small sprint but a consistent marathon. Neither is the consumer credit habit overdone in India or hitting the falling Domestic savings except that real income has ben stagnant even negative as non agri GDP data shows us in 2013 ( a 0ve 0.5% growh in since April this year, i.e. Q1)

Reforms did break India’s markets stride yesterday again, as the SEBI panel freeeing Govt Bond investments frm quantitative restrictions has to merely posit the same to RBI at this juncture. RBI in the meantime is busy bringing down growth era economics by C Rangarajan and others who took his place after he remitted office for higher advisory office. The edgy action on 0 percent loans and the continuing waterboarding by banks on using MSF and overnight liquidity instead of interbank markets have got RBI in a fi x of its own and that has definitely been scuttlebutt fodder for the equities.

Those following the soliloquy of Ashwini Gujral however may do well to note that I think neither Maruti is making it higher in this week nor traders or investors are going to wean off Bharti Airtel in this series. Volatility is on a thin leash as October still rushes to 50 point premiums over the current Nifty levels even as barely three days before expiry premium in the current series has been completely blunted off by the trading blades used to bigger prizes in an Indian rally constructed/deconsructed at will

Markets could well bottom out especially if action is indeed seen in the infra sector and more is not thrown banking’s way allowing the sector to recover last week’s trading levels. Inflows from the NRI binge for example have been waned to Deposits apart from the continuing rush on Dollar payments home to the tune of $1 Bln from just three publi banks. SBI in fact is looking at its first woman Chairman in a few months

ITC and YES Bank, along with AXIS on hedgie trader desks, remain in limelight with incoming investors and most wait for a resurgence in Financials to confirm India’s superiority as an Asian investment destination though China remains bigger an d better after another shocking half year of underperformance 5600 does look like a tradeabl market bottom for India, surviving these levels in such economic doldrums

 

India Morning Report: The next sharp move in the Rupee is still nigh

The Oil wars are and with US Supplies stockpile engendering a highlighted war equation, the situation could turn grim. This Friday closing is thus not like the other weekly closes in terms of markets losing short positions and trades, and it may instead see profit booking in larger dollops. One assumes therefore the sharp increase in Open interest would remain with the likes of HDIL and Sun TV and the banks open interest would continue to rise much more slowly and the 5400 cap could in those trading terms alone, define the entire September series hitting the wall at 5300 in favor of short interest to pick up once the market dips from 5400 to those levels, which has started off on a clean plate, only longs rolling over.

The advantages to shorts rolling over are the market pricing more finely in those conditions with the added liquidity(depth) to trades with the premium esp in the Indian market removing rational investor interest rather soon in the Futures and Options derivatives markets. Witness, even in the currency the only trades that made it were structured Double or Quits and higher multiples.. excluding even a lucrative CDS market in India Bonds and Sovereign. Oil swaps come with the caveat that payment problems exist to the same extent with International payment systems complying with bans es for Iran and one can assume Syria

Airtel Digital TV Review [Updated]
Airtel Digital TV Review [Updated] (Photo credit: code_martial)
One can assume also that after a 14% cut in FMCG in August, ITC’s ‘comeback’ would also bring back interest in brands like Bharti ‘Airtel’. Though GDP Q2 data would not be a trigger and long interest remain with such undervaluation

The 75 target for the currency is here from BofA ML and as I said below 68 the box is from 70 to 77-78 levels before the market interest outlasts any post analysis of the fll. Those thus aking this 68 level an occassion for post analysis would likely be lost even without any sizable crossfire in the battleground! Lets face it we actually need exports to grow a sizable bit in response to any depreciation for more than IT profits of the next quarter for India Inc

Watchmen: The End Is Nigh
Watchmen: The End Is Nigh (Photo credit: Wikipedia)

India Morning Report: Bring it on, said the citizens to the grizzled

The palaver of a broken market ready to tip off uncertain highs is catching strength this time but the bulls still have it having technically exchanged stock weights skilfully as new funds were available everyday. of course none of it makes sense if no one believes in the recovery. All liquidity infusions are a case in point, belief driving the US engine out of the morass again and again

However the Banknifty breakout confirms the bull run beyond 6100. We need to understand that PNB results yesterday with Net NPAs quite creditable at 2.37% for such a behemoth. The most glaring misunderstanding of the Indian market still comes from Bharath Iyer’s team at JP Morgan and others at Bank of America and Credit Suisse desks as they maintain SELL/underweight on this behemoth which though PSU has still managed to weather the big NPA electric storms and is now helping Industry ski with abandon. Unwittingly, CLSA loosely modeled on the same state friendly structure in France, had a desk here rooting for PNB after results yesterday as the only one upgrading PNB but PNB underlines what it promised last quarter that it will definitely show up with green shoots on its assets this quarter aiding the expected India Inc led recoevry. also notably missing the point is those missing the come back equating PNB rising as the same as PSUs rising previously, more than a decade ago an epithet accorded to SBI. The correction in bogey PSU banks unable to come back is due and should exclude the UBI, the Canaras and the Syndicate banks even OBC and perhaps Federal and SIB on the private sector have not done enough inorganically to merit positive attention when wwannabe banks are available

Production data today could be led by another jump in Consumer durables and a not so wild cut in mining as we get into the trenches for a q2 GDP rush on the global markets . Korea still struggles with the weak yen induced failures as Korea and Australia sign on rate cuts and Korea adds liquidity to get jobs back in another novel rendition of mint printed liquidity

Australia ofcourse is in a double bind with imported inflation and no regional relations except for its customers in mainland China who don’t care much for the goods right now. Good shorts on the India markets come from understanding markets at 6400 and that underwrites that these last 300 points top off the nifty’s run for right now. Again, if the market remains slow and mostly steady from here, we have not heard the last from the bulls and it is definitely not a weakness as now markets are stable at higher volatility levels showing inherent confidence in the recovery.

 

A reality check that augurs well for those willing to stop and take a breather | Earnings Insight

Earnings Mid Terms crash on All nighters..in India and US

Mid Cap IT and Infy looking for avenging the transfromation space with Indian business providers were again usurped by larger BPO deals and a good showing from unhedged HCL Technologies and one hopes also TCS leaving one critical movement in currency which is good for the larger economy as the ones hanging for dear life.

Similarly consumer plays like Coke paid 11% in Currency headwinds against a  strengthening dollar in the first two months of the quarter as global corporations report the halting recovery in the US. Intel is down and the world as we know it unchanged thrashing ahead for those not playing in such currency movements , not necessarily wanting to be shackled with Nationalist interest. However even as IBM looks at an inevitable yet steeper falling hardware sales and the ones that missed the housing recovery at Citi look at a continuing salvage operation, the world has moved on whether it desired to or not. The gap between the peers that have performed in this quarter and the rest is likely to keep growing and one must recognise those that have failed in this perfectly competitive quarter as having strategically misaligned themselves and needing a relook at their global and domestic business strategy. Globally this will soon include BofA by today evening when they report before US markets open but the winners may not necessarily include McDonalds’ , Starbucks and the resurgent Wells Fargo. What has probably happened is that those running with a perfectly operational strategy and anticipated free fall in this quarter have been singled out by us and we stand by our observation as we see the various forces of human endeavour trying to come out of the ever elongating crisis and note that no one has caught the envisioning of this new normal whether those still prognosticating a recession or those just hoping to ride on more growth allowances to make a comeback.

The changes at macroeconomic level mean that older ties between economies in critical businesses including banking and auto have probably been running on the saame tenets as the nineties yet and that they have changed only no as have been expected since 2008/9. Investors thus would have more hiccups ahead and would likely need to pull back from equities and reassess the situation and a second round of deleveraging will now likely hit global economies only later as European banks re-enter the arena.

However, this article does not have the answers we need to ‘move on” productively, except that even without regulators’ forcing it banks and global companies would do well to be more careful and are likely to be weaker to future economic crises or as observers noted, black swans could be a more often occurring event in the coming days. The growth of consumption as variously noted by Intel, Fedex, Starbucks, McDonalds’, Coke ( incl New York’s ban on supersized drinks) GM, Facebook, Dominos and Pizza Hut is not the same as it was a decade ago into which you added a health fad and a mobile. The Euro will survive but European corporates are still not ready to come out with performances worthy of a standing ovation including growing Healthcare plays like Roche, Novo Nordisk and US based Sanofi and JNJ

The going is going to be tough and the tough better get going!

Why liquidity should not be banks’ poison (alone)!

Central Banks worldwide, our RBI included are busy providing Reserve Requirement cuts and Emergency liquidity mop ups to ensure inter bank market fluidity and avoid a situation like for Italy and Belgium, Spain and others last November in Europe.

The ongoing Euro crisis is not just the cause of this drying up, but in fact few would probably bother to

English: The logo of Deutsche Bank AG without ...
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remember that 2008 was a result of this extreme loss of liquidity. why that happened and why banks are wrongly considering themselves only for the liquidity charter or seedings is that inordinate rush to fund the entire banking assets with inter bank overnighters. RBS included 70% of Capital from short term sources when it went down in 2007, Lehman did not get a Fed licence to add liquidity as Capital for its next balance sheet when it ran out of collateral in September 2008.

Deutsche Bank and BofA are still selling assets to add capital back not because the bar was raised by the governments to Tier I capital but in these cases just because they relied entirely on overnight markets ( BofA means the investment bank with a banking licence in Merrill Lynch too) and after sales of $50 bln in assets, the bank still needs another equal amount from non available Capital to survive.

Deleveraging thus is as much a response to clampdowns on use of inter bank notes as long term capital for Basel 3 requirements as anything else. Above all behind a well regulated bank, pointed out by Menaka here, is the new realisation that you can’t leave on the neighbour’s bread all year and need to absolve yourself of the charter to provide continuous liquidity to markets. Banks should focus on long term lending and matching sources of funding to the tenure of the funding they do than just sit on liquidity windows pressuring themselves and the banking system.

Also as we mentioned in our popular series in October and by Simon on WSJ

 Banks currently hold capital well in excess of regulatory standards, but that is due to pressure from markets, not regulators, who gave banks until 2019 to meet the new Basel III rules. There isn’t much point in regulators extending this deadline, and it would probably undermine confidence if they did. Reducing capital weights on business lending might help but is currently illegal under European law.

Why liquidity should not be banks’ poison (alone)!

Central Banks worldwide, our RBI included are busy providing Reserve Requirement cuts and Emergency liquidity mop ups to ensure inter bank market fluidity and avoid a situation like for Italy and Belgium, Spain and others last November in Europe. 

The ongoing Euro crisis is not just the cause of this drying up, but in fact few would probably bother to remember that 2008 was a result of this extreme loss of liquidity. why that happened and why banks are wrongly considering themselves only for the liquidity charter or seedings is that inordinate rush to fund the entire banking assets with inter bank overnighters. RBs included 70% of Capital from short term sources when it went down in 2007, Lehman did not get a Fed licence to add liquidity as Capital for its next balance sheet when it ran out of collateral in September 2008.

Deutsche Bank and BofA are still selling assets to add capital back not because the bar wad raised by the governments to Tier I capital but in these cases just because they relied entirely on overnight markets ( BofA means the investment bank with a banking licence in Merrill Lynch too) and after sales of $50 bln in assets, the bank still needs another equal amount from non available Capital to survive.

Deleveraging thus is as much a response to clampdowns on use of inter bank notes as long term capital for Bassel 3 requirements as anything else. Above all behind a well regulated bank, pointed out by Menaka here, is the new realisation that you can’t leave on the neighbour’s bread all year and need to absolve yourself of the charter to provide continuous liquidity to markets. Banks should focus on long term lenbding and matching sources of funding to the tenure of the funding they do than just sit on liquidity windows pressuring themselves and the banking system

Happy Thursdays! Another week, Another crash

Bank of America on the other side and lately some banks here have started looking happier only on days when the market has crashed beyond expectations, making these a regular weekly feature of the market. Though Bank of america has been outwitted by the Euro and will bleed for more time, the india markets and its new found drerivatives losses will bottom out in the next 200 Nifty points as new suspicions emerge on prop trading desks at the end of the local’s route in Mumbai.

Food inflation plopped to below 2% this week and I suspect more higher numbers are stillleft in urban consumption items like fruits and vegetables in that even as the food subsidy bill gets closer to becoming a law. RBI’s FSR was also lined by ratatouille chameli and tom cruise bacchchan as having brought lasting relief in real estate seen by a three hour long rally in DLF, Unitech and HDIL among other strange asteroid fragments in the troposphere currently.

The Air train between Delhi and Mumbai saw Cyrus Mistry in industrial grade discuss throwing with our own MOFCOM with Ratan Tata fadng away in another 12 months, discussions on VSNL land patying up taxes becoming more insistent ( oops, its Tata comm now)

The end ( of the bear rally) is near in India’s case (please do no tbuy before 4400 is broken to a new low)  and my portfolio of trading plus investing is usually a good leading indicator ( from lounging on the sofa awaiting employment)

Our post on the bond Report will show banks using the MSF and yields staying down as the last experts get entrapped into thinking the Bear has finally come to India, Asia being the land of the eternal Bull panda.

Foreign Banks in India: Looking cheerful again

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

BankAm – Bank of Opportunity?

zyakaira notes: BofA earlier in Feb launched this campaign to reestablish its unique Trust along with a campaign from its wealth unit at US Trust. However, BofA needs to refocus based on  market realities ( see BofA: We need a plan ) and needs to increase visibility of this campaign. The first videos of the ad campaign included an African American family enjoying shopping for winter gear in a retail sore, not so boring – you have to see it to believe it. It’s large online campaign at Yahoo was also featured in Yahoo’s results but that is obviously not working!
There is a small start for the rebranding of the combined corporate business of Bank of America Merrill Lynch designed by The Brand Union(WPP). And the bull may not be out of sight for long. BofA officials, shortly after the merger,announced the bull will still be used in marketing efforts for the domestic wealth management and brokerage business, to be called Merrill Lynch Wealth Management. 

In Feb, Bank of America announced “Bank of Opportunity,” the theme of its new brand positioning. Supported by the bank’s largest advertising campaign to date, which will debut during ABC’s telecast of the 79th Academy Awards(R), the new brand positioning reflects Bank of America’s unique role in helping individuals, businesses and communities around the world realize opportunities to achieve their goals.

“We see the opportunities that our customers see, and our ability to help them realize those opportunities defines our success,” said Kenneth D. Lewis, chairman and chief executive officer, Bank of America. “Bank of Opportunity articulates a powerful value proposition that acknowledges our unique ability to understand and anticipate customer needs, to develop products and services that meet those needs and then to deliver for the customer better than any other financial institution in the country.”

Providing Opportunity to All Customers

The new brand positioning reflects Bank of America’s business strengths and global presence, highlighting the company’s unmatched ability for enabling all its customers to achieve their goals – from buying a first home to planning for retirement, from starting a business to expanding into new markets.

For the more than 55 million consumers and small businesses it serves, Bank of America continues to develop new customer-inspired solutions such as the Keep the Change(TM) savings program (http://newsroom.bankofamerica.com/index.php?s=press_kit&item=16), the Business 24/7(TM) (http://newsroom.bankofamerica.com/index.php?s=press_releases&item=7442) portfolio for small businesses and the free ($0) online equity trade offering (http://newsroom.bankofamerica.com/index.php?s=press_kit&item=62).

For corporate clients, Bank of America plays a leading role in many of the world’s largest transactions – including the two largest leveraged buyouts in history – reflecting world-class corporate banking resources and expertise that help businesses grow and prosper.

As a leading community partner, Bank of America’s 10-year $750 billion community lending and investment goal (here) and $1.5 billion philanthropic commitment inspire new economic opportunities that help communities nationwide grow stronger and more vibrant.

“‘Bank of Opportunity’ is the natural progression of our brand, and reflects how our heritage and our strong competitive position drive what we do today,” said Anne M. Finucane, chief marketing officer, Bank of America. 

U.S. Trust, Bank of America Private Wealth Management today announced the launch of its national advertising campaign, which spotlights the changing profile of today’s wealthy individuals and families. The $25 million campaign marks the first major advertising initiative for U.S. Trust since its acquisition by Bank of America Corporation earlier this year.

The brand-building effort represents the most extensive private wealth management advertising campaign that either legacy organization has ever undertaken. National and local print and broadcast advertisements will debut across the nation beginning on October 8.

“As one of the leading private wealth management providers in the U.S., Bank of America recognizes that an increasing share of our nation’s wealth is self-made,” said Brian Moynihan, president of Bank of America Global Wealth & Investment Management. “In launching a brand visibility campaign of significant magnitude, U.S.
Trust seeks to convey to clients, prospects and the broader marketplace that it understands – and is uniquely qualified to address — the needs, motivations and values associated with this new face of wealth.”

“The company’s research-driven campaign illustrates how U.S. Trust maximizes opportunities that its clients, the architects of their own success, create for themselves, their families, their businesses and their legacies,” said Anne Finucane, Bank of America chief marketing officer. Acknowledging the increasing number of high net worth clients who have earned their wealth through their own careers, Finucane added, “the advertising creates a connection with clients by demonstrating an understanding of their values.”

Supporting the company’s overall ‘Bank of Opportunity’ positioning, the U.S. Trust marketing campaign was developed after extensive discussions with clients and U.S. Trust wealth advisors, as well as external sources that shared a range of perspectives on today’s changing wealth landscape.

Launching the Campaign

U.S. Trust will support its brand positioning through an integrated marketing campaign, which includes a mix of national and local print, television, and radio advertising. The U.S. Trust campaign is expected to run in nearly 50 markets across the country. Boston-based Hill Holliday worked with Bank of America to develop the brand positioning and advertising campaign.

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