Bank Policy Wednesday: India stands PAT on rates in December

Even as RBI shows concern about the retail inflation, it has probably factored in the welfare sustenance supply chain requirement that has necessitated a higher tick of Food inflation likely to last till 2015. Even though the jump in core inflation to 2.66% has reached worrying levels, the RGR regime has played it on the level, standing by the current Bank rate at 7.75% . As banks have already moved off the higher MSF lending or the last quarter, banks would anyway be unaffected by the lack of change but the markets can seriously take the impending rally’s mechanics from here .

The FOMC reports later in the India day, closer to midnight when they can , we agree, start with an early taper. However, The Fed meeting is likely to also be a sendoff for Ben Bernanke and so any such major policy announcements may be skipped for Janet Yellen to attend to in February, April or even June 2014 and as the Fed has managed so adroitly, the Taper would not mean tightening. Though the Dollar remains weak, the Taper is unlikely to still avoid the Dollar strengthening into a vise like grip on the US own Economy.

On India’s Policy announcement, the 7.5% mark would have been even better but as noticed concerns on Food and Primary inflation are real and may spill over to Core inflation unless kept in check. The RBI Governor notes that Vegetable prices that jumed 99% in the Friday WPI report may fall sharply.

Yesterday’s Review noted, in the overall scenario

In India, the pick-up in real GDP growth in Q2 of 2013-14, albeit modest, was driven largely by robust growth of agricultural activity, supported by an improvement in net exports. However, the weakness in industrial activity persisting into Q3, still lacklustre lead indicators of services and subdued domestic consumption demand suggest continuing headwinds to growth. Tightening government spending in Q4 to meet budget projections will add to these headwinds. In this context, the revival of stalled investment, especially in the projects cleared by the Cabinet Committee on Investment, will be critical.

Banks have garnered $34 Billion from FCNR Deposits and India’s FX reserves have jumped at a $5 Bln every week from $277 Bln odd at the end of November and now at $291 Bln. RBI continues to flag the negative output gap and even a slowdown in Services

Also factored into the December decision is the virtual shutdown in Spending by the Government from January as revenues remain not so robust, which would strain interbank liquidity (LV?CNBC18)

It is good that RBI has returned to not being overtly reactive to the inflationary economy and GDP in March could have a larger chunk of the good news premium Indian data has been lacking since the year began.

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: 2G Auctions (discounted), Gas Price rise, Markets expiry and CAD data

The markets expiry should probably read F&O exiry but that is just here nor there. CAD(Current Account Deficit) data is as 3.6% of GDP is a very good score with a $17 B surplus admittedly par for the course for Jan — March quarter. Crude basket pricing has gone down to $101 for the year but still leaves a 6% bill hike for the OMCs and oilcos to distribute The resultant price increases if any including the known rise in Gas prices would not exert price pressures on the economy given new inflation levels either. Together that means that if there were buyers for the Rupee they would win. Obviously given the debilitation market punters have handed rupee trade in the imediate three weeks with the exit of INR 200 bln in FII debt positions, the cash positions re lower except at the Reserve Bank which managed to add a few dollars ($2.4 B) to the reserve before getting engulfed by the waterboarding slide uncovered by Ben Bernanke.

So musch for the Rupee and oil. The banks and telcos seem well poised for a recovery though as spectrum buys or no spectrum buys, there is great values at 280 levels in bharti and in RelComm though we never backed the scrip or even Jio infocomm as of now given the Ambani track record and obvious imposition of informal network values on bare minimum corporate governance and a resultant pathetic track record except in petrochem

US will allow more LNG imports to India while the Coal and power situation has also started improving. Chinese increases in consumption are sporadic and are being run by import consumption however in the riorities for the new government and so the US SED with Inia continues to be bland and almost inconsequential to India, a moot question most interested people between 18-40 ( and those just out of that range like us ) significantly continue to question as a fallout of the so called successful reforms since 1991

The rest, once i find a paying sponsor or a working proposition for the second career I start in my 40s

Markets have opened at 5650 and may make a close for expiry around 5700 around the 2:30 m bell though the close per se may find shorts active in that case, as they look at a longer innings in the july series against the virtual non representation in Jun


India Morning Report: Yen progresses weakness strategy to new levels

Even as Yen progresses jump(down) in currency, Dollar progresses on the long cherished goal of yields going in north just in time for Ben Bernanke to not worry about a lower rate of inflation in his last year on the job, likely to also be seen as end of the Fed’s major push to exit recessionary conditions. It should not have mattered as much to India on Monday morning but the relationship linkages with the global economy are a mainstay of this Capital controlled Economy and even as the outsourcing bug in the US designs reverses for Visa hogging engagement strategies at TCS and Cognizant in light of the new bill, the Dollar chose to strike out against the weak Indian currency. The euro will only strengthen and keep transmission of Yen weakness to Dollar strength obscured and thus today’s morning move looks like the week’s top/bottom mark for the Dollar rupee at 55 (54.90) but then the Euro may take its time to get there as results season is over and the economies are sluggish though avoiding the bigger pitfalls.

Curency apart, BOB as we suggested disappointed big after cutting provisions by more than 40% in the quarter with credit growth null and bettered NPAs marginal at best. Akshaya Trithiya seems to be catching on more into the urban youth mindset as well as the Economy struggles to bounce back.

The IIP performance was a wee bit sluggish than expected for us esp with consumer durables continuing to be negative and the  mining performance also still more negative than reports would have suggested. However, the correction on the nifty is unlikely to be deeper as the Economy’s score is much past the barrier for bears to feel stronger or easier buying opportunities to emerge than around 6000 levels itself, markets resting at 6080 before consolidating in the rest of this series still carrying chances of a plus volatility up move to another Nifty level.

Yen’s moving to 115 levels and probably even 125 later for a longish innings and the Dollar engendered jump in US yields likely to bring back a bigger rush of green in the second half of the year


Happy Thursdays! Another toast to Global Duality

Happy Thursdays is a weekly statement fromt he Advantage zyaada house and almost always includes a comment on the latest India inflation figures, watermarks for market related statistics globally and our rare direct comment on global markets’ direction including facts that make us sing together..It usually show up unsung ot me too, so get busy using it now..

That’s the sarcasm right there. In the pop of the title. As you chew on total global correlation with a 0.97 correlation and more in September, and 0.7 in early August, some might be excused for thinking a basic increase in the knowledge of the markets all around and thus gains in terms of tranparency and reform. However, that is not the case at all. The sensex tanking today was a sign of globall correlations nearing one but we are decoupling as we speak as inflation draws lower on food at 8.8% but fuel persists closer to 14% for the week ended Sept 10 As primary articles tick down and India becomes the harbinger of i in inflation globally it would stablilise in India at not much below 8% while crude prcing irrespective of the “Dollar Economies'” giving up after hearing of another ‘stimulus’ The reaction to the stimulus in global

Flag of the Organization of Petroleum Exportin...
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markets will be varied as OPEC now gets to price itself out of a depression for its own, ‘US stays at its lowest growth levels with consequent 20% unemployment and Europe deals with new strife and gets used to a regular shrinkage in its production whether at UK and Germany or the GIPSIs


Yet right now, everyone was listening to the same, almost stupefied, wih a not so material and much expected Bernanke speech and mini – program somehow making the way clear for everyone to see the bleak future in its totality without hope. So commingle while going down and better have a differentiator worth its name on the way up , because nations like people are all alone..

Yet righ now, everyone was listening to the same, almost stupefied, wih a not so material and much expected Bernanke speech and mini – program somehhow making the way clear for everyone to see the bleak future in its totality without hope. So commingle while going down and beter have a differentiator worth its name on the way up , because nations like people are all alone..

The Fall of the Berlin Wall, 1989. The photo s...
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