India Morning Report: Nifty futures still above 6500

Infy is available at 3350 in case you are looking at gaps in your portfolio. The twin shock to Sun Pharms from the US FDA however, broke the proverbial Camel’s back, big sharp falls in both together taking ou t the bulls hopes ( as i n fact the bulls ar e in no particular hurry) Probably from the stock specificness of the new rally in both the Dow and the India Nifty, above old highs and resilient to most investor breakdowns a fair smattering of geo political uncertainty laying the groundwork for such tests of both indices in the last few weeks, that now the indices are called by a set of unrelated stocks, not part of any index necessarily and sector led predictions still valid independently as also to  a certain extent stock specific upsides.

Downsides and new buying levels are likely restricted to the bad news dozen, currently the set including just Sun Pharma, Infy, Maruti , L&T, even Hero and a couple of the last week’s  weak entrees like Tech Mahindra which would also put traders in a likely soup.  shorts do continue in infy but one wonders if anything more than 3200-50 levels on the low side are possible. It is probably also a reaction to unrly traders looking for a fllight to quality indepeendent traditional favorites losing a lot of times in this rally with the short traders

HDFC, HDFC Bank and ICICI Bank for example continue to nestle new levels and find no dearth of long investors. SBI could have more traders like me waiting to pounce on the fresh chance for shorts to below 1300 as its NPLs are not done. Bharti like others has been able to raise quick debt this week and IDFC with the Power NBFCs remain a good story , fresh longs waiting for the couple of bad ones to play out as they are pure trades on fundamentally strong ideas and potentially unlimited longs would not change their current levels ( unlimited institutional appetite ) unless the trade wanted a clear push and will likely compelete to 128-130 levels

Fixed Income Markets will likely find a day between today and Tuesday to factor in a little more good news of the CPI and IIP scores before responding to policy day’s volatile hopes with a strong top in rates under 9% as rate cuts are  ruled out. The MCX and NSEL slugfest continues in the background, as decorous solutions to the problem seem to leave some unsatisfied yet. FTIL and MCX promoter shareholding has been redenominated as Public and a rights issue is in the offing, the book building sentiment showing in these parrying moves. A deal to sell down that holding of FTIL and MCX is still a long way to go

The Astrazeneca delisting seems to have finally seen the right levels for the stock as the last rally in listed shares starts , heightened hopes marked by FIIs holding a big block of 15% in the stock. ITC seems to be a t the top of the range and a trade from 342 to 325 levels is likely. Despite today’s defensive buys investors should avoid Titan, ttk or Jubilant Foods or even aviation picks like Jet Airways. Bharti on the other hand will see buying at thhese levels of 300 itself and not recede much beyond 290 levels at worst

The market rally will likely continue if not this afternoon then on Monday afternoon with buys firmly holding on, with better than any other rally’s chances of retaining permanent levels as the market bottom has definitely moved up to an even 50900 – 6000 ruling out further cuts int he select stocks that have created and added fresh demand in this rally, markets having carefully shucked out PSU banks, construction and other leveraged plays with no fundamental performance locks on them. The Rupee can move back from the Friday’s 61.50 levels almost immediately

Crompton Greaves turns out to be headed for the chopping block, a potential sale likely to bring in a good uncertainty for investors in the stock. PE investors like Blackrock who is strong on issuing debt to promoters trying to tide over the bad economy are already providing fresh debt to the Avantha team

In other Unlisted business, we are a little fogged as we cannot determine what happened to the FIPB meeting on March 6, to discuss Braun and Destimoney among others. The sensitive handling of the Election Code issues had clearly seen there would be no controversy regarding this meeting despite impending elections

Commodity investors (HNWI) are unlikely to be able to return to longs with the slump in that sector heightened after a half hearted attempt by gold and Oil early this year.

Investors should continue to pile into longs in their choiceportfolio including scrips like CESC, Arvind Mills and Jubilant Life ( Looks like a quick trade can get buyers Arvind at 135 -140 levels)

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: 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: Markets listless orphaned by a Superbowl

Superbowl sold tickets for cheap in the snow

Asian Markets are closed today and lack of Foreign investor interest on Monday Morning leaves an India open totally listless at 6100 levels and falling again, struggling after a brief respite at 6050 last week. IDFC results were inconsequential along expected lines with no fresh disbursements in this financial year but the stock has only upside left at 93 levels where it closed last week post results as it remains the only empowered player not dependent on infra approvals and a fresh book of loans in the pipe likely. Loans continued to make a better ratio of all NII at the Bank as spreads showed up resilient despite a bad interest rate environment in the nine month period reported.  Retail interest aside, the stock will remain on Institutional buy lists for time to come. It’s large provisions also make it a great equity investment with the Provisions unlikely to be called and can always be reduced prudently. Non interest income remains slave to PE principal and proprietary trading business

The Rupee starts the weak on such rumors where the deciding NDF market actually feeding on the panic mindset in low trading volumes and the onshore markets trade down but only for the morning after as the Superbowl even that draws a 200 mln audience in the US and around the world has ended minutes ago and investors will be back to a market fairly under priced by the recent pitai (hustle-bustle/buffeting not to be confused with the sage of Omaha’s investing interest)  Bank Rate will remain higher for the majority of 2014 , the prospect of rate cuts being pushed back and there being no prospects of improved transmission of monetary policy with yields pushing for higher dollar depreciation despite the RBI efforts to clamp liquidity which has time and again proved more amenable to intuitive policy than a counter intuitive rate hike move to tackle measures outside Central Bank policy. However corporates borrowing in ECB might actually be able to break the ice in terms of getting older level low rates and break the impasse eventually with increased investments (starting to flow in consumption sectors) and RBI , maintaining a new inflation hawk stance would likely have to hike rats further after the 200 Marginal channel cation and announce a veritable change in stance on rates first.

REC had started up Friday and Powergrid should join in after mi d-day if the sentiment indeed looks up. The Equity rally in the Global Markets hit a big snag in January and that is holding markets back awaiting  a confirmation of investor interest with FDI having exited Emerging markets like Turkey, Mexico, Argentina and Indonesia in a hurry with Turkey coming in midweek last to raise rates by 4% to near 12%. Goldman Sachs is in trouble again having started their own EM investments in losses having chosen MINT’s obfuscated markets and a deep and dead in the water China over India’s liquidity given the cross winds. The Rand(South Africa)  also closed above 11 to the Dollar for the first time in January.

However Emerging markets sentiment is likely to get into it in a couple of quarters from here and India will remain one of the best performing destinations having been unaffected in the post taper trade in January if it maintains 6100 levels or at least stays above 6000 levels

PNB scored great results having come in counter cyclically on raising provisions in a known strategy and NPAs under control in a rapidly deteriorating market sentiment for Banks shoring up investors to its ferry/rafters and trades 10% higher at 550 levels still a strong buy. Banknifty starts the week near a low at 10150 and is good for the trade up but one should be watchful with ugly quotes (in both the 10000 and 10500 series) in the bid auction market still holding an initiating trader to ransom with option writers playing ultra safe.

IT stocks are still overbought and Infy should retrace 3600 levels and even TCS should come down to realistic levels (but already at 2200 levels) as the IT/Outsourcing axis is not coming out as the GDP’s saviour this time either. Volatility levels are hardly material at 16 in the current rally agains 14 in the previous segment in December ’13

Energy stocks should start the climb back as and when markets stabilise, GAIL having  started the year smartly. Glenmark and Cipla/Lupin lead the Pharma rally that continues despite an ugly breakdown in Ranbaxy and Sun Pharma. We still do not believe in a robust Arvind Ltd comeback on USPA and other new limited franchises inroduced by the team since 2011. Tata Global Beverages remains a hold but the magic is still in 100% go it alone investments in India ( which are still a far cry from the carte blanche leading to exchange rate breakdowns in LatAm and SE Asia in recent EM history) Aurobindo Pharma on results and Lupin on announcements today provide good portolio picks along with Glenmark which has only $500 mln in overseas debt and among companies tapping a continuing generic opportunity in 2014 with a new pipeline

Interest in the IPL in the meantime continues strong esp evincing interest from global players in the playing XI and a fresh re-auction for all the 8 franchises picking up steam soon after the spectrum auction closes. ING and OBC related good Q3 tales as were also employing covering strategies but have not started lending/stopped losing on NPAs. Yes Bank may not fall back to 280 levels and accumulation is advised at current 300 levels. The BOI /BOB story broke down in January itself as we foretold with both banks still addding NPAs in droves. ICICI Bank’s INR 45 Bln ( including INR 30 Bln pie in restructuring) included the bank can survive the pressures with relative ease having also been proactive on definitions than the PSU penchant for playing it by the ear and losing continuously losing investor confidence and investor money as far as its favorite proprietary traders are concerned who lose another constituency in an unplanned bull attack with construction stocks Dlf and unitech still in a free fall after the ill advised run

Energy Markets react positively Midday

Gas stocks reacted positively as Petronet LNG produce became free to sell to industrial users and IGL and other domestic distributors esp IGL getting commitments to cheaper Domestic LNG in the new pricing regime. This also means domestic CNG in all markets including Mumbai where already 100% domestic gas was supplied prices of CNG and PNG were reduced by 30% and 20% while increasing IGL margins. Petronet imports LNG and will no longer be getting custom from IGL which Delhi used upto 33% imported gas

The move was a n expected one with a new Minister coming back (Moily ) in a sensitive election year . Moily is also expected to facilitate large project clearances with changes at th e Ministry of Environment (EPA Act bottlenecks)

GAIL shares the good news as renewed pressures on its subsidy costs will likely subside as it supplies to city gas companies and others at new revised rates and the policy is deemed stable after LPG quotas to residences have increased to 12 cylinders per year and gas TX likely to increase volumes with good results reported Thursday

India Morning Report: Is SBI adequately capitalised after the $1.2 B QIP

Of course on paper 12.8% Tier I is nothing to scoff at, however the bank’s larger book of advances makes its likely that it would need additional funding soon and now would wait for the government to fill up the tank on Capital. PNB on the other hand is a value play at 520 and Bank of India at 140-50 levels could be offering value for incoming investors ‘cept for the NPA monologues, not in play at PNB in this FY(FY14) where SBI and BOI would lose further stock with analysts

Meanwhile, the weekly closing will be positive, and the new series will see a build u of positive trades. Apparently Nifty and the Blue chis all fell 10-15% in the January series. The currency saga is also over with the post taper trade turning out a whimper and US equities smartly rallying in Thursday trades. While Asian markets may enjoy a bigger uptick on that rebound in Morning trades, Indian markets will decide as they go along with all stock specific trades holding

Havell’s has been a great story this year and will see 2014 exceptionally favorably. Powergrid and REC anyone? The trade wis ripe alongwith IDFC as Mumbai’s Monorail comes online in a late reprieve for the Mukesh Ambani group. Yesterday’s trades saw a sharp recovery at close to 6080 levels again because there were no trades at the lower levels, markets just waiting out the post taper reprise and increasing transaction costs for those creating shorts or withdrawing from their overweight Indian  portfolios, which saw no takers.

ING and OBC both report today consolidating the story of improving NIMs and a lrage profitable Asian market still delivering growth to incoming banks. A couple of measures deepening our presence in the Global Fixed income markets would do the Trick, if I were governor. Currency markets are back at under 62.50 levels for the Dollar.

Dr Reddy’s looks overpriced at these levels . HEro may also be ready to complete the black candle and get a big red score to end the week. Bajaj Auto will hold levels. Buy and Accumulate IDFC, Yes Bank, ICICI Bank and HDFC Bank at current levels. Stay away fro m construction cos. back on a dead cat bounce. Bharti, already up 2% yesterday can move up to 330-340 levels before next week closes. The Maruti short is about ready but will probably wait till Monday. Going in first precludes market operators from creating that position as hey are anyway prop. holders of the stok and are not using it for short collateral

BOI NII growth was stolid and the PAT hit should not hurt the stock sentiment desite the almost immediate post earnings reaction as the stock has been discounting its NPA woes a good six months of the rally that ensued in July 2013. IDFC results should se a muted reaction as its diversified businesses hold up and get ready for an aggressive 2014 ( The last three years have been bigger growth in the loan portfolios already) the stock offering great value at 90-91/-

Ashwini and Angel Broking are again fishing in troubled waters and most shorts should be avoided esp at 320 level son YES Bank

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: Markets digest a rate hike and the new Maruti equation

India Auto ExpoYou heard it in 2009, Suzuki may go it alone:

The 7th Maruti Suzuki plant in Gujarat adding capacities to its 1.75 mln cars from Gurgaon and Manesar which has already seen union troubles in the North, will actually belong to Suzuki in a new Wholly owned subsidiary and as royalty terms have not changed the new production available from Gujarat in 2015 will improve MSIL’s margins. MSIL already is the dominant component of Suzuki’s global sales. The markets are however punishing Maruti for the loss of faith , the automaker springing the surprise from its ranks mid afternoon yesterday. Today’s morning quotes will be 20% lower and likely fall a further 5% tomorrow though 1200 is improbable. A Suzuki coming into India alone means it may be planning exiting its Maruti investment except for its commitments to successive Indian governments over the years. Maruti trade is being closed within this series as speculators likely get ready for a short trade in the new series after having been farmed in the construction sector. The Gujarat plant will supply only to Maruti production

Biocon is back in Volume breakouts from the switchout in cash

Rate Hike

Markets will likely digest the rate hike given good liquidity, as mentioned in Bank Policy Tuesday yesterday however the 8.5% and lower yields will now wait till end 2014 and at least one quarter of good growth with strong positive investments. The higher rate environment may not translate into higher retail rates and credit expansion may also not be threatened, but was it required? Yields did move separately from Currency markets before policy and thus Policy rate hikes squeezed the exchange rate back to 62.50 levels

Airtel again, Idea bhi

Airtel is definitely back in the mix, changes at the top likely positive even for Manoj Kohli who finally moves to the new businesses invested from the Telecom win for the Mittals over the years. Idea’s ARPU gains despite revenue per minute dying means both Idea and RCOM are also likely to see long trades and Bharti remains the back bone of he market as IT and Pharma break down. Tomorrow would probably be ITC again and the day after that Bharti

Bharti PAT is up 20% on quarter and ARPUs to 195 frm 192 spectrum auctions stamp their market print on Feb 03 and Feb04(post announcements). Africa ARPUs are up 10c to $5.80 or INR 360.

Sell 6100 Puts

If you are finally tired of shorting the market and Ashwini baiting from your camp you may join in too but ahead of expiry, 6100 uts are likely to look tempting and markets will close 6100 with such a huge magnitude of newsflow  getting hope trades shucked off by early market moves last week and shorts on DLF , Unitech and HDIL would likely be the biggest winners of the series. The days trading would likely see a similar mood sneaking into 6200 uts , which however is a function of the other market forces discussed with a 40 point increase in NIFTY being par and leaves tthe markets at 6160 and markets may not want to control further BEAR GREED till todays close whence the 6200 trade still rewards that additional risk

Banks are a big buy

10,600 seems to have done it for the Banknifty and investors are likely to stay glued to ICICI and HDFC Bank on the rise. Axis Bank fell 3% yesterday at the fag end of the correction ( on markets breakdown post Maruti announcements) ICICI Bank reports with India Starbucks (Tata Global) . Starbucks ma also prefer a new 100% investment in India after 25 stores have opened with Tatas.

After ICICI Bank’s clean sweep today, tomorrow will see earnings from Hero sandwiched by Bank of India and SBT and after the Adani and IDFC reports on Friday we close out earnings season with a fairly robust performance, near 20% profit growth still standard fare for the biggies.

Other Results

REC, M&M and Cox & Kings report on the 14th of Feb, ILFS Transpo, Page (and Lovable?) and Finolex Cable on 12th and Bombay Dyeing on the 13th. Lovable is doing well in the trade prioritiising for the New FMCG adds in 2010 IPOs

India Morning Report: Predictably rational in the face of regional panic

Coulda’ Woulda’ Arvind Mayaram FDI, Note extinguishing before 2005 (25%) and others

While Goldman Sachs may have repeatedly missed good calls for the search for a political establishment in India, India per se knows better, discounting global EM troubles with considerable ease even as the Rupee inched up to 63. India should also probably try and make a bottom for the markets around 6200 itself, correcting SGX Nifty in those regular moves every year as EM withdrawals again translate into a wonderful opportunity for the second half of the year and India leading the hopefuls in market performance with fund investors probably again going to China and other markets just for rueing the missed opportunity? However that may eventually turn out, the Rupee faces considerable pressure and the RBI policy , a non event as expected, would not definitely reduce the pressure on the Currency. The worst culprit would be the deficit ridden Yen, apparently stimulus itself having lost momentum after month 1 last year having never come back. The second month of a huge trading deficit would imply that BOJ’s encouraging monthly perusal of the Economy just encouraged bond investors into JGBs and they are going strong for now.

There are not really ready funds/positions that can be withdrawn in this rally in India that apparently not just broke stride but flattened all kinks in the new year. Seriously for those feeding the panic though, Ranbaxy? buy trades? honesty now..Similarily failing countries facing high risk of default only count Turkey, Ukraine and Argentina, Venezuela and before that Brazil and Russia having recently faded from trading memories , dataless on India without trading in its bonds counting to CDS data yet, Korea similarily trading a very liquid 70 bp

Sensex is safe at 20800 levels and the Nifty safer at 6100 levels but that is almost totally out of the ball park if and only if markets are actually waiting for Foreign investors to reward India immediately for behaving stoically, which hoefully will not be the case when we close the week on Friday. Global market commentary should see those countin gHousehold debt abd Card spending in sovereign leverage counts receding again in 2014 but Student Loa mounds remain avalable high peak panic buttons back in the US.

Meanwhile Indian cash equities should continue to see accumulation, we still continuing in IDFC, Yes, ICICI Bank and ITC, Bajaj Auto and Bharti. GMR and infracos continue to deleverage and the rising valuations may not be able to bail them out before they complete that deleveraging extending the government’s troubles in looking at Public Private options for financing infrastructure, ever falling behind. The fiscal is already expected to come at 5.4% and is likely to improve from there, that unfed hope being snuffed out in this move on the Rupee( as expected , Turkey and some other currencies have already followed double digit losses after the yen refused to go back below 105 ( to 110)

Tickker updates before 9:30 am include Glenmark not revising guidance (debt at $500mln) and launching Crofelemer and all of Goldman’s merrymen could muster in their five years of India sponsored India bashing was to shuck out one Opto circuits from te ile, having bought 26% stake in the same.

We regret Karl Slym’s death as reported in the Morning headlines. Stay away from F&O baniding of the index and the 6000/6100 puts are no where being fully priced to write/sell safely

Bank Policy Tuesday would likely show india flows an economic condition stabilising with a health Liquidity position and no threats to the CAD with WI likely to fall again post policy on ag gained from the Vegetable price drop in November

Glenmark’s up 4% on 10 am trades (featured EarningsTalk/cxotalk on ET Now)

India Morning Report: Building up that range between 6300 and 6500, Energy Cos let fly

Call buying in the new year has resumed in 6500 and 6600 strikes underlining market confidence in making the upside while 6300 Puts define the bottom of the range (Sold puts always in a bull ‘candle’)

Also non food credit growth signifies Banknifty has less pressure on it to buy up its PSU components before the secular recovery takes hold in India Inc., right now recovery prospects led by better performing banks and corporates, even select Mid caps. BOI and All Bank seem to be in the buy rush but buyer beware doctrine applies nd we remain happy with PNB as March shows the having accounted for the bad losses and survived with better provisioning.

The Energy Cos are way ahead in the New Year esp if you include the rally on 30/31 as the pace of increases in Diesel prices and the increase in Non subsidized LPG confirm better prospects and however also confirm that the battle against the Fisc will last a long time unlike the chutbhiyas fighting it out for an ex Infy startup tickets in Bangalore (AAP gets a dirty linen in the streets fight with Pai and Bala joining against Nilekani)

Infy did start back at 3500 but there is a further downside risk from the fracas probably enthusing electorates and markets in its incipient hour tonight. HCL Tech is a great short right now to save your Bull Dollars. Cadilla and Glenmark remain the important buys with IDFC, YES and Bharti and ITC leading the Bull charge. Bharti tops its trading range around 345 and the ITC breakout is still long way to go in January.

Maruti sales hit rockbottom in December, so  I would have waited two weeks to confirm the trend for January before including them in the Volume breakouts. Sales at Toyota were down to 12k and Maruti a paltry 90k, this trend much like our Maid in Manhattan and her UN immunity spawned employer Devi Khobragade a little too ahead to go with real recovery trends, even belying equally bad sales in January too perhaps?

IIP ticks up again for December as and when data is processed but bank credit jump is part of the lag with no new projects expected in December – March and WPI will remain stressed near 7 levels and higher even without the customary poll sops in this season Indusind is not a good buy and that with the lack of buyers as volumes return this week means the bull ticks will be slow except for Power and Oilcos

India Morning Report: Markets slip as PSU bank investors stay away

Is Inflation the Real Problem?
Is Inflation the Real Problem? (Photo credit: Wikipedia)

Active index and Banknifty balancing in a stable India economy above 6% growth involved the usual confidence investing in PSU banks a two thirds of the Banknifty to and or xis, HUL and a select set of defensives , that have disappeared as markets fall thru additional support levels. Apart from the loss to Ashwini Gujrl’s set of picks seen over two – three weeks post ‘shucking’, any other impact on the markets is lacking. One feels the confidence shown in non leveraged High Operating Leverage businesses in small and mid cap sector is also misplaced. Such High Operating Leverage Businesses with more than even 75% Op Margin in cases have time and again shown that less than 1 in 20 such businesses , even with deep pockets like Jyothi Labs, convert into a brand and a business like Bharti.

Bharti and ITC lead markets back and Lupin has a lot of strength left in it. Expectation have come back to a 360 Cipla to kick off the game for this rally segment and ICICI Bank and Axis are also losing ground from a probable low yesterday as the Banknifty sinks into 11,500 levels. However, the end (of the shorts) is nigh. This observed bear extension on Thursday is a direct concomitant of a stable PCR near 1 levels leaving writers hungry for more and writing calls is always easier than underwriting puts at new market levels

Tulsian’s faith in the ‘shadow stockings’ ahead of Christmas is also back, but we don’t think  UB Ltd will be compensated fr not rushing returns in the merger and bankruptcy melees of the crisis Olympics. However, it would be  good idea to sink into HDFC and Siemens.

Also Barclays Capital, as we have been following got in  5 out of 7 the same selection of 2014 picks. We already made it clear Tata Motors is a big sell on 2014, probably bigger than the Jindal Steel breakdown which will stop out of the ‘bear cartel’ push at 225 levels The Energy trade should be pushed but the Fisc is already distressing and the release of Fert subsidies at INR 50 Bln  was already a razor edge detail for the Corps watching India’s clawback on global fortunes. Assuming NTPC would not be ready to immediately step up on reform gear and leverage growing efficiency, we would disagree with buys on NTPC.  GMR is back in the big bids and the big bullish candle moving GMR, RelInfra and IDFC together with JP Associates should land on the next bevy of drones.(any independent rally segment up or down can be ascribed to a virtual set of drones picking the right calls). Bank of America, the other who nailed the Economy without attention to thoughts of a wavering Rupee (more than required) will also be worth tallying scores in 2014

The 15% Food inflation and the 12% contraction in Consumer Durables (read our earlier monthly commentary on PMI/Inflation) put paid to any thoughts of a recovery improving despite news of a Q3 debacle already factored/expected for October 2013 and probably till December 2013 s this includes our festival time data. November Auto sales disappointed for all though retail inflation has been strong (good demand indicator) in Consumer durables items on existing stocks as production has been subdued for more than 6 months now

Again, despite the policy tightening, banks are unlikely to need rate hikes as they have weaned off MSF rates. Also retail inflation will continue fueled by higher Food inflation , in double digits due to supply and other economic concerns for small and rural businesses. onion rices have corrected sharply in the meantime and Food inflation data for the month was likely overstating facts, returning to lower double digit levels in the remaining 5 months of the Fiscal.

Oh yeah, we may have forgotten, in the search for Economic employment, the Global recovery of 2014, is not happening except in US Equities as Europe proves its a dead continent and a usurius currency. China thus also fails despite a better share of its own currency in exports again and that leaves US and India and the ROW without business ends to close deals beyond a hygienic rise in Trade led growth. US is also stuck at 3% levels despite the mentored lower trajectory for Currency and rates which a good motivator but the currency is unlikely to be allowed to get eweaker at least from the current Dollar Index levels, probably never below 78 in all of 2014 even as Oil imports stop for the Superpower of the 20th century. And that, is despite the taper.

India Morning Report: Another US FDA bird hit, US GDP caught with high inventories, Markets broadening base

World map showing GDP real growth rates for 20...
World map showing GDP real growth rates for 2010. CIA world factbook estimateshttps://www.cia.gov/library/publications/the-world-factbook/rankorder/2003rank.html as of Januay 2011. (Photo credit: Wikipedia)

 

Jubilant Life got another US FDA warning taking it closer to the brink though the numbers in the same year (two) may not suggest deepening of in its case a contract manufacturing problem and the plant is located in the USA

 

In the meantime a flat market keeps its promises to the India VIX after a big ‘corrective’ rally yesterday bringing the bull trend forth to another dead in the water lay up at 6250. The US GDP report yesterday was the second successive sub 2% score with inventories taking it to 2.4% in September(for June 2013)  with a 0.4% contribution and 3.6% in December estimates counting 1.8% from inventories in the September quarter. More on the US markets impact ahead of the all important Jobs report at advantages.us

 

Asia and US trends will be the next to break correlation with the India equities, that have corrected most other vulnerabilities with continuing inflows and a 100% vote on chances of a recovery from here. Rate hikes also are behind insular shield for this market as are even coalition credentials despite the markets correlating this BJP win with a bullish market’s highest scores. 6000 levels offer almost single digit index PE within the year and Energy and Metals are ready to support a bigger sustained rally momentum while Bank Nifty seems to be discriminating between the riht banks and the wrong banks without the markets showing strains of very few good stocks as FMCG and Pharma also continue to have backers and brownfield FDI regulations have been recently firmed up while Pfizer and Wyeth merger in India puts more domestic competition on the cards. The first good sized shorts on HCL have appeared even as the Rupee remains ranged at 61-62 levels unnerved by the non story of steps for a fiscal deficit bridge, which from Reagan’s days seems to be again left to the market performance to cover, all expenses being important and budget cuts or clampdowns signs of ceding to another government

 

CLSA remains on the losing side with a seat on the fence and to us a tell-tale indicator is preferring Hero over Bajaj in these market conditions, most such investors and commentators that still prefer the Hero stock preferring to see themselves as waiting it out

 

Powergrid remains open for a great investment opportunity for retail. Just Dial ‘s great success will definitely rejuvenate stories like Prestige, Jubilant (Dominos’ India being its second largest market globally beating the UK) , Talwalkars and even Prestige which remained in most buy lists during the period when Jubliant was still seen as over valued

 

The Power NBFCs remain another isle of prosperity in the compromise between various market factions (opinions, nothing sinister) and with Bank lending revival meaning better traction for NBFCs and banks with distribution power, the banking and financial services sector may offer investors willing to jump in without waiting for decisions like New Bank Licences or overtly waylaid by the habitual topping up of PSU coffers by the government admittedly on time despite H2 pressures on the Expenditure side as it revises its divestment targets upward. India’s GDP reports had good signs with Electricity and GAs picking up 8% in Q2

 

PFC, REC, ITC, Bharti, IDFC and LIC (Housing) remain thus the favorite weekly and positional trade picks.  As mentioned sometimes earlier, Traders on the networks (Network analysts) have cornered on trader specfic plays that seem to be any good company will do kind of trades powered by ‘old hands’ but we do not have expectations from trades in USL, TVS, ttk , Wipro, L&T or BHEL at these levels. We would also prefer SBI get derated before it damages market expectations in sweeping strokes with its abysmal performance bells ahead in the next two quarters or even more. Adani is back in play with all the Adani stocks including ADANIENT, Adani Power and other

 

JP associates is a little silent as has become customary after the first lead of any new trend rally since 2008 but infracos look like getting back in the game hopefully enough for leveraged promoters to exit at fair value else the same can truly damage the markets later. I am not sure if trades in Siemens and HDFC (not the bank) are ready to dial in but Tech Mahindra would be a conviction SELL and i would not touch KPIT and Persistent but they seem to be ready for a big swing up

 

Oil prices will follow Gold’s euphoric comeback into the upper sphere where it starts hurting the Indi story soon, but may again remain weak because of the overall commodities cycle as Europe leads the way down and the Chinese recovery may yet again be short-lived without export markets, which also caps Indian exports in Copper Silver and non-agri commodities.

 

Cipla and Lupin would be good trades on the long side.

 

Futures and Options continue to see volatility trades in straddles ( Buy Put and Call on the same strikes ) but the Nifty seems to be giving strangles ( not Vol sells traditionally but profitable in a flat market) an equal premium so those not in the inner ring or actively monitoring terminals should  wait for better levels in the Banknifty series before jumping or sell Puts at 6100-6200 levels on the Nifty

 

 

 

India Morning Report: What a 7000 index(Nifty) means for India Inc!

Gold Bar and Investment Jewelry
Gold Bar and Investment Jewelry (Photo credit: epSos.de)

As Neelkanth Misra mentions very credibly on TV18 and CNN IBN, coalitions v. stable governments were never a questions for India Inc and as we have avered since 2007 on these forums, India has been a story run despite politicos in power , as much by the burueaucratic mandate of the time as the populist opinion of what the market economy will and can do.

The latter of course is more uneasy on the shoulders of a government but as a democracy we are habituated to arguing out our investment and business decisions deciding the underlying philosophy for example, the extent of WTO requirements or the Tax regime in the current milieu which are longstanding items awaiting a market verdict even if a fractured government or a single largest party wants to decide. That also means the young ones are communal / secular agnostic probably.

A schematic map of the Indian Railway network
A schematic map of the Indian Railway network (Photo credit: Wikipedia)

The 6800 mark if it comes in this rally may be just a market verdict and a bubble rally to boot without investment spending kicking in, but the same levels would be underpricing Indian markets in 12 months when investments are underway a s corporate earnings have shown. I think that weight is enough for one day’s business. To Neelkanths(Credit Suisse)  credit too, if Powergrid indeed commissions in TN and Andhra, the Indian GDP based on contribution from just that Southern grid will shoot for the skies

Meanwhile another journo got the better of my market specialist verdict,catching that the more leveraged the trade, the better its performance. By the end of the first flush of 5% increases in banks and all other stocks, one was able to catch HDIL and realty not doing well as also Stride Arcolabs hitting the lower circuits, (down 10% at 10 am)

Rupee finally appreciates this morning to 61.50 targets and Gold investors have been satisfied by the BJP’s coming , growing the metal to 32k levels in these few trades.

Delhi’s 67% turnout is another India investment indicator that has hit the scenes and well, in defence of the incumbent which delivered at the State level, Delhi-ites might still see a AAP – Cong coalition post counts as BJP  is a pariah even for the Anti corruption front that has probably garnered the 20% of the vote that educated Indians had stayed in vacillation , having to vote for politicians ( not just a half joke, probably i would go all the way on this one)

The Nifty rally is strong, Banknifty leading again, and as Banknifty is a well traded index ( or one mis spell may say trading index) it will likely return after a big rise to same 11,000-11500 leves for a new rush of bullish trades as this rally lasts the mile. PNB leads with ICICI Bank on the Private sector side and bulls seem to be cornered in YES Bank for the same election reasons, otherwise I do not see any capped upside in YES Bank either. Axis, ICICI Bank and PNB are all good for a 10% jump from today’s 9.20  levels itself(or 9 am when 6400 was tagged on the index in the pre open)  but if other PSU cranks, muddy the Banknifty at higher levels instead with a sharp irrational step up, they might see lower targets around 1150 for ICICI and still atleast 650 for PNB

Even a vote or BJP might be just a part of India’s reform behemoth, having carried India thru fiscal and industrial reforms more in hope than in action in the first flush of growth from 1998-2007. India is very different from other EMs and even China with an autocratic government despite attempts by even passive investors to blur the differences. Witness the Apple China Mobile deal (rumored) and the comparitive with an Airtel – Apple deal in terms of what volumes mean for Apple.

Investment cycle will also remain weak under the new government for some time but as we mentioned any 7000 level on the Nifty 50 will be a value play within 12 -18 months of these levels signed into this rally by the markets L&T is a slow elephant but the Power sector would showcase a great score, REC may have topped off  and Powergrid ready to carry the rush with PFC, PTC and others and as the requirement of the sector more Financing power and utilitiy pricing power (12% /16% CERC pacts) or mega power signings

On the global front the Euro has started moving up in vain obstinacy as contraction and deflation strikes in tandem in the Euro 17 and the overall 27 nations that encompass the European effort, double signing into the deflation and the Yuan has taken over from Euro in all important trade finance contracts, making the competition between HSBC(volumes), Deutsche Bank(!dealmaking!) and StanChart(price) that make up the Asia carveout

Professional Disclaimers and Opinion/Fact checks: We agree with only 8 of the Goldman Sachs dozen ond one o of five featured Credit Suisse picks in this rally as published in November and December 2013(today on tv18 for Credit Suisse references). 

The Rashtrapati Bhawan which is the residence ...
The Rashtrapati Bhawan which is the residence of the President Of India. (Photo credit: Wikipedia)

 

India Morning Report: A technical correction to make space in the move

Nevertheless, whether the lost steam of the rally is recovered or if markets correct this series a little more steeply long enough to stem selling by Domestic institutions and some investors, profit taking would have been good for your business last week in both the Rupee and Indian equities (NSE Nifty 50, BSE 30 Sensex/BSE 100 or the MCX SX40). There has apparently been a natural disaster in Hang Seng Exchange ahead of the China data release today (Flash PMI) and next and the exchange is closed because of the Typhoon for two hours before the afternoon session. China’s manufacturing jump has gone up from last months record 50.8 to above 51 this month, but it is unlikely that Copper will indeed respond too positively if you are trading commodities. If it is equities, yes markets outside India incl OECD markets are likely to jump at the news , especially the European session ahead of Nifty’s late afternoon sessions. Doing well in China – Mining an Real Estate s something may well be wrong and come out so before next month but definitely trade data will be up as well for August. That optimism may change the course of the Indian markets mid day itself

 

OECD Countries Blue
OECD Countries Blue (Photo credit: Wikipedia)

 

SGX Nifty however leads the Indian investors correctly for a change ( a Feather in the cap of CME and Nifty teams) and the markets will definitely dip below 6000 before deciding whether banks are strong enough or the rebound before the repo rate increase was justified. A Repo rate to 7.5% upset the rally completely? Surely we are better than that. Banks not being given that vote of confidence could indeed decde the quantum of the down move(two thirds of the reason), as also to the other one third of the reason would be any volatility in he Rupee correcting from 62 levels down instead of continuing the up move to 60 levels. A good sign is if banks get new OI encouraged by build up in Put volumes sold at now definitely amongst the lowest levels for the Banknifty, so the Edelweiss analyss recommendations on ET Now could be right on the money

 

Infy has responded well to the Rupee appreciation, avoiding a reaction still correcting to below 3000 levels, but the HCL trade continues to put the wrong risk takers in the lead as even consolidation of the company with HCL Info is only a face saving device for the hardware business and not value accretion expected in the merger

 

The troubles of Ranbaxy keep the scrip in the spotlight and fortunately it never put the Indian Pharma sector under the wrong spotlight despite their brazen actions and the continuing cascade of FDA actions plant by plant at other suppliers as well fueling the anti-India anti-Quality prejudice traditional in OECD investors

 

Urban India also probaby thinks NaMo’s commmunal licences can be similarily ignored as a quirk and the resultant fractured mandate is not just India’s biggest fallibility bu also sign of the inadequate proficiency of Political Sciences in a land otherwise profuse with globally renowned academics and probably the situation in these arts and sciences is more deficient than the lack of educators in IITs and IIMs

 

The Nifty however may not leave the range of 5950 to a new number on the upside, which is still likely and which may see FNO action by midweek

 

 

India Morning Report: No Taper and Nifty on to 6100 levels

A rather unexpected reticence by the Fed, allowed Global markets to uncoil their expectations of a taper and the Indian Rupee opened at its best price of INR 61.5 today barely hours after the announcement. the shorts on banks disappeared overnight as did the opportunity in depreciation lit IT with the Banknifty finally moving 650 od d points to above 11000 today and the 7% increase in ICICI Bank to 14% in Yes Bank possibly still allowing steam in the rally to 6300+ levels and a long awaited rally in the banks with the liquidity measures likely to go away. (what if there’s no taper?)

Apart from the bigger damage to shorts on Banks, the rally has caught most by surprise and thus some may wait out for lower levels to start again, but stopping market enthusiasm at 6080 levels itself is likly to fail with the momentum of the event generated uncoiling allowing immediate 6300 levels. Also the taper remains on the horizon for the US Fed as it tries to tackle the question from a new structural cap to growth in the US and the  Rupee may be allowed to break below  to erase the damage since May

F1 Australia Grand Prix - Thursday
F1 Australia Grand Prix – Thursday (Photo credit: Wikipedia)

Indian yields are back to 8.16% levels. ITC and  Bharti have continued investor fueled upmoves at 350 levels, while Sun Pharma and ONGC and the Energy companies rebound to 2010 levels. Investors also found the chances to get back into Hero Honda and Maruti, both of which may easily by rejected later for Bajaj Auto in the Auto/Two wheeler sector

The Rupee might close a little lower but above 62 till 4pm and in RBI trades after.

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

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

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

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

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

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

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

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

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

India Morning Report: The new series gets no welcome!

English: The Local Head Office of State Bank o...
English: The Local Head Office of State Bank of India, Mumbai Circle. (Photo credit: Wikipedia)

 

US equities are holding up as global corporations despite the mixed economy, find leaders finally surging ahead in Sales and growth at Ford, Starbucks and eve Amazon. The net result of this might be bearing on India too as weights might shift back in favor of the big rush in US equities to counter the initial down impact to growing interest rates. India’s results already destroyed by Dollar moves even as exporters fail to catalyze on the new opportunity with current goods, the markets that have been and continue to support higher values on the eigenvalues of growth seem to want to give in to pressure to develop the fangs required for a big equity move north more than bearing south.

The Banknifty corrected fast to below 10500 after Thursday and thus is spirited for a north move but has probably squeezed the wrong bull or two which remain the important bearers of Options liquidity across global markets, writers “capitalizing’ on the lack of buyers with prices quite out of subsumable range factoring in their safety in higher prices, that refuse to let markets and VIX become an enabler to trends.

Apart from these silent trend breakers, that usually provide no barrier to any defined move, markets are getting bearish just from the wait. The policy announcements today by being in the continual mode will further drive the north move in the Banknifty and ICICI Bank, probably HDFC Bank better than most, and even SBI and PNB whose results were no disillusionment of its backers, SBI and other PSU banks continue to shock most headline followers through 2014 and 2015 as they continue the long drawn process of declaring their backed up system NPAs holding out media hope of starting the up cycle all the time thru at least December 2013. Forex reserves are down slightly at $279 bln and China order activity is the slowest as Asia starts the week in deep red territory. The Rupee could not hold north of 59 levels and still holds negative risks south with trade deficits now proving to be crucial data points for every dollar north or south counting in days of plus and minus moves of significant size(30-40 Nifty points) or in flash corrections on either side, worrying economically intelligent traders even more into a flat dropping market zone.

The Jet move up takes Indian aviation firmly to Air india – Kingfisher axis of south south on governance as the FDI proposal cannot be corrected enough for the desperation to sell out to etihad. Investments from the comfort zone is probably non existent and new FDI will come with too many strings of control the situation of Telecom and now aviation sharply negative portends for any robust escalation of FDI inflows

Credit growth has turned positive and 14% is a good start

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

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

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

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

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

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

India Morning Report: Banks react well under pressure, buy levels established at 5800

NSE Logo
NSE Logo (Photo credit: Wikipedia)

Banknifty shennanigans did not disturb the market breadth leading to a further decline in volatility and your short strangles are doing well. Shorts on ICICI may not pan out for traders but SBI will bear pain for continuing on bad debt downhill slopes even as the PSU crowd per se led by PNB and the private sector biggies improved their NPA score till FY2012-13 to 3.33% as discussed by PC yesterday. Private sector banks have done well to bring down the cost of Top 10 NPA accounts to less than 40% of the total and the Foreign banks continue to focus on Trade banking as is their success mantra in Asia overall with High NPAs in select accounts

IDFC and LIC Housing as expected did not yield new licenses but one should continue holding these investments as the current cut is unlikely to turn into a run. Unfortunately India Post also has to do a lot to convert its vault of small savings into a bank from the signs.

Banknifty may well not move down below current levels esp if one constructs an index of profitable banks from the current index and neglects SBI, United Bank of India , BoI, Vijaya Bank and a few other borderline red marks in the current BSE and NSE indices. I for one eagerly await new volume in the BSE 100 and even MCX to test options though Nifty remains a key barometer unlikely to lose significance.

India Morning Report: HDFC Bank gives way, KG D6 ‘honestly’ increasing output

Of course the news of the week, last week preceding today’s AGM was the burly new gas find in MJ1. Actually predominantly for Oil, the MJ1 also falls in a gas rich area but details apparently have not filtered from the ongoing AGM and will probably be easier available to ‘non-digitised’ social networks  which remain the most important achievement for Reliance and partake of their retail investor community of yore. Reliance will be forcing a turnaround in KG D6 output levels too after a long wait.

With india’s digitized data communities and even the lack of analysis communities a virtual impossibility, online social networks in India remain dominated by shopping cart brands and facebook and twitter remain ineffective for real business conversations despite teh affectatons as a large global user of social media.

Importantly to those of us who missed Idea to stay on the run to bank nifty, it is the right time to invest in banks es as network analysts and “chhutbhaiyas” in the markets continue to try to scale up the tiredness of the bull move earlier as always falsely seen to be led by HDFC Bank and HDFC for a few.

The FDI panel has made its recommendations and as with all things UPA, hose that have swtched to the bear side are still on the other edge because of such policy pronouncements that are so comprehensive one has to wonder if this government will ever go beyond cabinet Oks and then continue to miss the parliament or ordinance, an uncomfortable fact they seemed to have used home with earlier such comprehensive proposals  already proved to be not worthy, excet for the putting of thought on paper and certainly not an implementation blueprint giving the holey book of India to the dubbas of the opposition  NaMo and namesake Amit and one hears Adani as ‘implementation power’ of rural India.

Update: As Oil tracks evening session vales on the MCX in toay’s morning session it seems to have reach an optimal level for a big optimal short and if one is willing the 5400 contract can be kept rolling to a target of 4500 but in more than three months from here.

However such new eigenvalues and initial states apart, one still does not see any need to push forward recovery or for FIIs to exit India again as the bare minimum in play now is big ticket enough to get international media coverage of the coming big ticket recovery and of course the elections as well. Stay long on private banks like YES and select PSUs like PNB, don’t short the Banknifty and dont expect any pre election rallies either bear or bull for now.

Sell Side brokerage research however is increasingly reaching their ‘trend flatulence’ in the hype cycle esp detailed notes from Macquarie progressing retail credit growth at ICICI bank and their use should get limited too, till more coherent thought can lead the selling of India recovery to foreign players in the next wave aa normal di in the usage cycle of new products, in India’s case still true for research. Rerating at brokerages and new players like Deutsche, despite a good global dbAccess conference (in its most obscure markets, USA). Stanchart had a good media ‘week’ just less than a fortnight back and the HSBC seems to have slipped with lack of HQ and trading room attention on India.

Deutsche and even MS despite a good back handed effort from Riddham Desai for ‘India according to Morgan Stanley’ last week sticking to its 6% FY14 stream of thinking and detailing it rather at the last minute but still making it a comprehensive view. You prbably cn already guess about my opinion of other such commentary by the BNP Paribas wealth, trying to skeet the losers of yesteryears as Defense scrips converting to trend leaders, another “strategy push” which failed to interest the bulls or the new money to INDIA

Things look dustier in fact in Turkey because of the revolution and in Taiwan / Vietnam as China gets ready probably for exporting jobs to Asian locations and importing a lot of foodstuff in more wholesale ranges from American pork(M&A) to wheat rice and more.

Though in a more copious mode under the China series’ we would have covered details but right now i seem to be on shaky ground wrt revenue/study opportunities and writing has to be restricted to these daily / weekly updates i hope readers and followers do not take for another occasion to stop reading and writing. Aussie is going to be the other big ticket investment soon and Korea is not far behind so India still does not get rerated up in global indices, but one can see the noise of rerating up is real except at S&P which is better off completing a going global transaction of CrISIL it is stuck with as its arm in India

India Morning Report: Really, the failure of the food bill?

The Food Bill’s failure to carry the day for the shortest parliament year in history might bring out more ‘under the covers’ Welfare Economists like me and many ladies from colleges, schools and workplaces I have been. One odd part of the Food Bill argument post facto on NDTV was the reticence of known commentator Gurcharan Singh to link the idea of policy failures to grain lying waste in FCI and other storage nationally.  A seeming recurrence of other such arguments, the anchor was right in still feeling bothered by this denial ad these simple supply chain fractures cannot be allowed to be neglected for purely political fault lines that have long proven to be futile for the future of India, whether it is love for coalitions, BJP as alternative or change of form of government and Third and Fourth fronts of obscure policy which again succeeded for a welfare objective nosed in corruption

Importantly for the morning though, those who lost the pair trade were a little less inconvenienced by the banks trading higher as everyone agrees the private performers must, the sharp cuts in pre-open foretold of a failed section of the markets still looking to make a bear grip run for a few live hours to disturb the almost confirmed trade, a likely genesis of the recent spurt in flash crashes globally and rather unfortunate. 

Banknifty puts should pay out well at the end of the month and one should not get too greedy in raising put strikes too fast, so it is the right time to pick up a few short straddles / strangles for keep around 6100 skewed by the multiple for the short puts ( your leg long on the market)  and if you fund it further with short calls as hedges you should choose those beyond 6400, i would be vary of being stuck with a 6300 call short right now.

When markets successfully consolidate, the volatility gap to any target peak leaves them considerable room for quicker faster rewards till they even reach for a asset bubble and then extend the wrong way down) equity investors’ profit taking in the first 5 months including December’s latter two weeks of global holiday has been muted despite funds portraying it as a short sign almost for managers’ hands waiting for fresh infusions and the second half of the year will build the next local inflows that gross up into the buying frenzy to be as LIC and even other insurance funds come for their share of bargain buying made possible at these levels by some really perfect design (dessicated and elongated into another 5 years since 2008).

Some of our renowned Economic authors either due to their own perverse aforethought (being an MBA makes me also feel ‘collicky’ / syrupy or about having believed in the author in question in his earlier corporate life) or a habitual coasting to prefabricated DNA of the argument or policy made me begin this simple daily report for Thursday. The show on NDTV was anchored by Sonia Singh and though the author in question is perhaps a greater practitioner than William Bissell (Fab India )

Gurcharan Das’ tomes of the last few years  have recently stopped being MBA strategy and become Economic thought stirring India visions. However, though I would not be commenting on his writings and have not implied any in the previous sentences, the show caught him on the wrong foot and despite being of the same/similar genealogy, and having held him in great esteem for his experience, I felt stunted for listening to this argument.

The not usually required introduction herein also probably underscores that I am not ready to be a raving rant in my Morning Report. Also I found it in his voice that he had failed when he let loose an uncharacteristic rant on the Congress Government. Man’s ideals are sure misplaced engines of convenience.

Also, it is naive to assume one can keep shouting about free market ideals as response to realpolitik especially given the engagement offered by media today.

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: A Bid on the State Bank results, are Coal and Steel indeed back?

Tata Steel which pushed out another round of poor results struggling in its European pick up is ready to open new capacities for production in 2014 in Odisha and Steel may indeed pick up though not a fast ramp up with China struggling ( Open tomorrow after New Year festivities) and Domestic Auto production for one will also be out of the woods within this fiscal as low rates trickle down and consumption spending remains a norm for the younger demographic india enjoys.

New Auto capacities in Sanand and in Tamil Nadu (Ford) as well as continuing growth in Gurgaon and Manesar will lend strength to India’s consolidation auto saales while the increasing cars on the road strike another discord of insufficient highways by 2014 or 2015 and int he meantime the fiscal strength discussion between MSA and Chidu may well be more important for active wholesale Investors to watch and may careen or tank up FII flows as appropriate.

The ratings companies could have grown their franchise but have faltered in the politically opportune moments and are not likely to partner up with Indian banks and corporates in the given plop of bird produce that India begets in their global schema, leading one to wonder in cogent terms if they will indeed survive into the next decade as ratingcos.

But that is so inadroitly expressed even I just know it is a valid hypothesis for trendatchers that RatingCos are likely redundant and center of the ne fallout before 2020 in the Financial world as it tries to come out of the 2008 crisis and bad RoE math that strikes its every rich yielding FICC and Equity trading businesses and even conservative and High yield lending and issuance.

The Bank nifty will likely run up a good score without going 3-Cliff on expectations of better improving resuults if SBI delivers on expectations and does not do another Q4 washout of expectations as India’s largest bank, having presumably cleaned its augean stables and dealt with pension liabilities and in possession of a clean retail portfoliosince they strated building it up 6 quarters ago.

Even though PSU banks have been rerated 40% down in the Banknifty the current strength in banking from 12400 is contingent on State Bank being in the green and ready to take off from atleast 2080 levels and the results need to build up from the current 2250 levels to atleast 2400 to let the others with good and bad results of the wuarter convince the maarket of the Fiscal and FY14 performance potential especially at BOB , PNB and All Bank. Axis ICICI and HDFC Bank should have no problems maintaining current levels

 

India Morning Report: And the market survives a cut to 5900

Tried and tested , yet new mechanisms of 2013

Of course, the markets could still decide to browbea

English: Wordmark of Tata Steel
English: Wordmark of Tata Steel (Photo credit: Wikipedia)

t the equities segment further from here despite the mild recovery at the end of the session. As of now my plans for going to Ahmedabad are on course and the indian Ph D programs are getting better lookie loos again with Ahmedabad “Management” ranked in the Top 100. More importantly for the markets, delivery based buying cannot be expected to ramp up in this rally as retail investors are not just stung by 2008 as journalists perceive or want to name the shroud, but are infinitely better placed by investing in inflationary spending than in equities for the future canvas.

Mutual Funds, Insurance and Bank savings still come next and pretty importantly yesterday’s negative IIP score and a near 11% CPI inflation clip ( more than 11% decidedly in urban areas, but thats just the trend) are unlikely to matter to this question of volumes. A slowdown in bank deposits could be an interesting quasi middle management at 100s of growing India corporates and IT investors could take to watching as it mirrors the real response to the production slowdown even as investment makes a faltering return to the Indian Economy and the Savings Investment gap recedes.

sinbadRevival of fortunes in steel seem to have hit an “early call” WALL a new block and tackle strategy likely to hit traders nah speculators in the F&O segment and though I normally desist but the morning call on JP Associates straddle buy invites my derisory attention by the spades. The JP Associates stock is unlikely to tank from 71-75 levels and if one expects action in the scrip in this series further it would be a clear positive, likely kicking off the pre budget mini rally instead of the rally we were going to have at the start of the series. Of course those promoting this market hiccup were the ones betting on fundamentals instead and thus calling off the big pre budget move.

Are Sun Pharma and TCS yet Defensives?

Much as Consumer goods led by HUL had been lumped in Defensives with Pharma, so also today while Pharma while awaiting the Domestic breakout remains defensive as a sector, stocks like Glenmark and Stride Arcolabs aren’t and Sun Pharma is probably unlikely  to last in the Defensives list too long (it ould not be shifted on account of Taro, however)

Similarily IT as a sector and TCS as a defensive remain sectoral strategies or more Big Pig strategies at the start of the macro uptrend where Trendlines can be drawn and in such moves as are in 2013, the stock probably would move out as a mainstream investment much like Infosys earlier. Either way those watching for a bottomed out markets are right in prognosing the comfort moves in stocks like TCS and Sun as a likely vote for no Bull run than the other way around and thus the to get cast in the same leagues as HUL, Sterlite and SESA which would be the Defensives the markets could ascribe. While Axis Bank may not get rebranded as the ‘defensive’ for 2013’s mini moves, Airtel still likely will be as the corporate gets shafted out of bull only and 130-30 portfolios for lack of a volatility linked move in the stock

Tata Steel

Meanwhile the Tata Steel calls are good to sell off probably as JSPL and SAIL indicated a slowness in the sector which is to be shed in 2013 and 2014 so it is also the time for buying this defensive as well for Domestic fund houses avoiding buying for so long since August as they get another Start of Rally point to invest surpluses.

Banks say meeooww

Banks are the move I am waiting for as PSU banks finally acquiesce to getting re-rated instead of trying trading jumps to catch up with the gap created by the NPL imbroglio in the last six months at Banknifty 13500. Thus the move from 12,400 on the Banknifty and it is not made today, will be a decisive one as Public Policy recedes and Finance takes over as the bete noir of the India Comeback strategy for 2020 and beyond.

 

India Morning Report: No CRR cuts did not cause inflation, what about these 50% growth in topline and bottomline..

Chidambaram
Chidambaram (Photo credit: Wikipedia)

 

Is there a way to improve the “weights” of positive results on Bank Policy Tuesday? Colgate for example grew Sales and Profits jumped nearly 50%, Biocon Sales are better by 18% on year though they failed to meet any profit growth expectations and even BHEL which pictured a dismal quarter early on but masked it with growing Power business scream out for more attention in the Chidu vs RBI date we look ahead to.

No, there’s no President Pranab intervention on the horizon and even Chidambaram would not mind if the governor lets it be. The CRR cut may also ease the current low liquidity deficit of INR 0.60 T with another INR 10k – 20k Crs or INR100-200B released on the cut announcement.

The Risk reward has enticed the shorts as we suggested it might but we still think that given the inflows this year were of a couple of orders of magnitude higher and targeted Equities per se as commodities spin out of control to the bottom of the pool, it is unlikely that shorts in anything other than the whiplash mid morning. Banknifty is such a plump target the whiplash alone could cost it a Double century and bring it back only by the day end. However, if you were buying today the odds ( and not the long odds only) are that you would be in the money on 8 out of 10 bets ith a little patience, what you would otherwise employ with a green thumb on a falling knioves kind of a day in the bazaar.

Coal gate in the meantime ( the American strain) could not ruffle Obama out of that battle state of Ohio and Romney is still looking in Wisconsin even as Florida and most of the Eastern seaboard float ( probably in an attempt to shore up Oil prices) and even in light of record inventories of Crude and gasoline, it has meant a green light for Oil bulls after a long time, again, apparently my threshold still says that Oil is likely to continue to crash despite. Festival buying of Gold is almost over and the disaster has brought up prices too and a bull run in Gold will start from here as the yellow metal can outlast thru equities bull cycles as well in an upturn and need not signal a downturn in equities.

Nifty Put Call ratio is still a healthy low at 1.10 and has a long way to go as shorts extend into 5700 calls after the initial interest in 5800 calls giving way to more focussed pressure on the Indian system

 

 

 

Bank Policy Tuesday: Nothing can be done for now, Markets react

 

As we mentioned, the markets had decided for the bank last week itself and while it was clear the rate cut was not recommended the market is in position to react unfavorably letting commentary focus on  “hawkishness” of the policy (just listen  to LV on TV18 carrying on live from the dog and pony show) which is unlikely its tone.

Banknifty is down 100, supports for the Rupee sunk in the melee and Nifty don 20 points. SLR has been cut 1% finally after 3 years of dilly dallying. that means with 23% SLR and 4% CRR banks now need only 27.8% in Liquid government deposits and with borrowing from the government already reducing the liquidity will improve albeit slowly as these are sticky deposits. India’s GDP  growth is likely to come below 6.5% and inflation is high according to the policy review.

I am wondering if my short Dollar position will stay in the green in these conditions against the Rupee with markets using every such excuse for running it down and are virtually uncontested in that. The RBI reference rate to the Dollar will move up today. Inflation target is now 7% and credit growth targets are above 18% wiht most of the big four affirming a 20% year

 

The 11AM Update – Results return ING to 3.3% NIM grade

 

ING Vysya remained the only bank to enjoy the margin upgrade from the sloth in the Fixed income markets even though its Amsterdam nerve centre remains otherwise occupied and hardly interested in the Sub continent retail banking pump up.

Net profits are up 38% Deposit growth slower as usual at 15% keeping CASA at 33% Th ebank seems to have eked out a large improvement in expenses , maybe not branch set up but other not sustainable savings and the bank was still able to bump up the provision cover to 90% Net NPAs have halved as it remains interested in select c orporates only Total income is still auniquely tiny INR 514 Crores (527 branches and 446 ATMs )

CDR has grown but gross advances are a total INR240 B, like indusind of the past failing to give confidence on scale or participation

YES is expected to grow NII to around a 28% annual rate Banknifty no available at 10250

 

Morning Trading Strategies – India June 27, 2012

English: Wordmark of Cipla. Trademarked by Cipla.
English: Wordmark of Cipla. Trademarked by Cipla. (Photo credit: Wikipedia)

Currency markets expiry does not usually bring much volatility as the markets inherently trade in forwards and futures. However the dollar is poised to hit 56.50 today as the Rupee’s fortunes take over petty benchmarking to a Dollar index fed by the weakening Euro. The Dollar index is itself down despite the Euro weakening as the Yen follows to higher ground on the back of its new revenue measure on a government running a 200% public debt but required for speculators who thrive on funding trades thru the Strong Yen However forward continue to retain all their premium..

English: Bajaj auto rickshaws in Adama, Ethiopia.
English: Bajaj auto rickshaws in Adama, Ethiopia. (Photo credit: Wikipedia)

In stocks, the benched NBFC sector could help the banks surpass earlier week’s levels on the Banknifty while the index rangebound till 5150 is probably ripe for the adventurous to sell a few June puts, but most should have been done by Monday. A couple of network mentions like Jubilant and Titan ind shorts are great starts. On the long side, REC, PFC, PTC and Powergrid should move at different parts of the day and typically ING Vysya and Indus Ind as well. Bank Nifty gets safe to 10,200. Setting up new July strategies should have been disturbed by the seesaw index moves and so one should probably wait before publishing bullish option picks in the segment esp as July options are overpriced. Futures plays in the Bullish sectors are safe including Healthcare which may get a little cashed out as interest returns to other sectors today. Buy Cipla at today’s lows, stay in Sun Pharma if you are already in and exit Dr Reddy

BAJAJ AUTO  is again a long and HEROMOTOCORP could recover a few in the couple of nifty surges in the day but both will likely start back from 1500 and 1960 again in the near future. Use discretion and exit any upmove after 3% for day trading and those staying in should be ready to stay out July. Fresh buys in MARUTI enjoy the same caveat. Banks are at a new level but may not retrace much more except Axis to 978 levels and SBI to 2110

Prime Focus (RJ), Tata Global (Starbucks, Indian promoters) and a few other Mid Cap picks are around including Mannapuram Finance. Reliance Anil Ambani stocks including Rel Infra and Rel Media will have a move each in this run to 5400 if it happens

English: Generic finasteride 1mg tablets produ...
English: Generic finasteride 1mg tablets produced by Cipla India (Photo credit: Wikipedia)

Infra sector is poised for a take off on its own technical steam as well as good announcements from the PMO / MoF. IDFC and GMR Infra remain prized large cap picks in the sector. GVK Power, IRB and LANCO seem to be marginalised by their Capital structure by now but Global infra financing sector would still have to adjust to a lot of India specific projects’ independent performance strictures and it will not be easy except for Development Finance plays from Japan ( $10 B for DMIC), IFC and even ADB to enter India and thence I atch out for others except IDFC

A very tough pre open, Infra may have bottomed out but it is not going to break out any faster

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