India Morning Report: A sudden change of heart(afternoon) as Banknifty breach closes up

English: Logo of Bharti
English: Logo of Bharti (Photo credit: Wikipedia)

It wasn’t a wren and martin breach however as the morning saw weak NPA stories slitting from private banks in the Banknifty components, but as that grouped SBI and performing PSBs such as PNB with the weak quality ethic portfolios the breach rather filled up and the traders move on the Nifty south frrom 5950 itself has been closed by the afternoon before morning FTSE and European trades took business elsewhere in the global 24 hour timeline for today’s markets.

Trade data showed exports up to $27 Bln, a nice growth dividend , though a one off in the year  also leads to shoring of sentiment as the weak India story tries to grip old India pockets in Financial centers like London, themselves struggling to make a mark in what started a s  a benign year of recovery.

EMs are back in portfolios and Services Indices n India and US are under pressure from spending cuts with Euro still hot in afternoon trades as the October FOMC passes by tonight with a mandate for Yellen. SBI got a shot in the arm after the duress long exected in the stock, as the SBI GM in place and a likely future Chairperson, Arundati Bhattacharya explained the process of shoring up quality  in detail and IT investors and other traditional India trades tried to ngulf the bank’s weak asset quality in a single south trade on all government owned banks

One still wonders if changing norms to release Government Bills and long dated bonds from controls will work for India wih such strong anti-measures from the  “India Bull” community

Also on the credits is the way Bharti managed the press bytes and the non devolvement of the story around a crushed Walmart in the run up of a Modi inspired changeover at India’s helm in the 2014 General Elections

India’s growth charts currently continue at a flat minimum under 4% and the same was confirmed by IMF in yesterday’s report leading to the morning clouds as Rupee slipped back to 62.5 levels. Since then the Deposit story is back with NRI swas and more and the Rupee is back at 61.7 levels before infy results later this week

India’s exports at $26.8 Bln were nearly $2 Bln ahead of the staid $5 Bln average rate we hit early in 2012-13 wih the plunging  bottom of the growth story and were fist signs of growth in exports let alon import substitution after the currency went thru serial pangs of double digit depreciation from 47 levels

Bharti will easily survive the retail FDI wind-down while it remainsan important ndia focus brand to own as does ITC. Yes Bank and HDFC Bank also remain great picks with a lot f investing capacity for foreigners and IDFC is catching fire again to fill any gas from “lack of confidence” in India’s branded consumption stories like Bharti, ITC or Bajaj Auto


India Morning Report : Rally snarled by a lack of fundamental strength (seen earlier)

English: World GDP growth rate and GDP growth ...
English: World GDP growth rate and GDP growth rate of total OECD countries. Data source: World Bank Group and OECD. (Photo credit: Wikipedia)

Though the Indian growth rate will be beyond the reach of most emerging markets and outside the projected future rates for any OECD countries, the growth in GDP below 5% and the return of food inflation is scotching confidence in the markets as it waits on edge for  the Tapering news to go by and Emerging flows to return allocations to India.

Unfortunately today’s report come after closing of day’s markets, a day when the Rupee also snaked down unnecessarily biting its nails on the supply bottleneck hit food inflation which will also probably become the legacy of the Food Security Bill later. The stakes – to get India’s growth rates back to 7.5% and keep inflation in check. With core inflation below 2% the onion inflation index cannot be allowed to influence further investments in India

Our note however can still remind investors that not just Consumer Durables but the consumer staples sector, offers a unique opportunity in India among the listed scrips and current 30X multiples in the sector may be no sign of investor saturation as bellwethers like ITC and Bharti are rare publicly listed behemoths in the sector which have also successfully avoided the defensive tags unlike the Pharms biggie Cipla where investors move after things come full cycle at Ranbaxy and European CPG pioneer HUL, now an old story for India Inc. Others in the sector are either privately owned or multinationals and pricing power remains in this sector, with its packaging strategies and working capital cycle flexibility in brand selling working them the advantage required to absorb supply chain inflation and raise prices at the right time.

The other story of the morning was the inelastic August Demand for Full fare airlines as the price increases amounting to more than 60% on the Delhi Bombay sector even in he best fare book-ahead rate plans could not stop passenger traffic from returning to a positive 3.3% growth in August. Such ricing power is important in this market where Oil is a major component of the import bill.

As usual it may als be prudent to realise also that India of tomorrow is unlikely to return to the same power ahead growth strategies that worked from 2001-2007 , the meat of the post reform era growth and that the required infra and other capx growth has to wait for the May 2014 elections to complete and that will not stop inflows to India, making the brakes in the market to 5800 a mere hiccup as long as the Taper is an expected number and flows return to Indian sovereign debt as it attempts to brake the shackles keeping it from the Global Bond index  and to Indian equities on reallocation


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

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


Historic Valuations, Trends disregarded as flows rush in


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


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


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


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


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


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


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


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




India Morning Report: Markets horrified by ‘unaffected airs’ slip back to keep rate cut

English: Logo of Bharti
English: Logo of Bharti (Photo credit: Wikipedia)


Markets sit on a big slip as they await the 11 AM announcement of policy rates and the afternoon meet the press with bankers. interestingly this is the closest to near unanimity in market expectations held together by all stakeholders including different institutional and brokerage based analyst teams on research and bank economists and other commentators that the RBI will be giving a 25 bp cut after inflation has fallen in line and the need of a stimulus is par for the course. However, the likelihood of the unlikely event is still finite in that no one expects the Central Bank to ignore the macro weaknesses and so far the prudent fiscal path is not more than a promise either. To cut the longer story there short, the question of the RBI not following through has really made the sentiment jittery(threatening?) ahead of the announcement


Interestingly GMR to take a infraco on point kept its head above water(closed positive) while the Anil companies celebrated the gold rush with the rally peaking above 6000 levels and Bharti’s deal today for 5% equity (new, post issue stake 5%) to be issued to the Qatar fund or other events like results are largely being ignored in the morning session. The session’s preparation for the q-case of the Central Bank not conducively incentivizing the markets thus means that the rally is still on and will not breach 5800-5900 levels on the downside after a sharp derisory devaluation of the PER of the indices today. The optimism on the surveys has however like us in the past led to a forecast skew towards the right with the india positive commentators opting for a 50 bp cut signal from RBI


Regardless of the bank policy announcement however, its outlook will remain cautious till the end of this quarter bu t may include data to prove reasons for becoming bullish from July 2013




India 3.0 – Results Season reestablishes Bharti, Cognizant

A 17% rise in revenues helped Bharti establlish some glowing recommendations for its 2013 and 2014 future

English: Logo of Bharti
English: Logo of Bharti (Photo credit: Wikipedia)

even as a INR 7.7B Dividend Distribution tax and increased losses of INR 5.4 B from Africa stopped net margin to a measly 2.4%. Before the Indus Towers dividend and losses from Africa, the INR 202.73 B revenues bent a margin of over 5% excluding the INR 2.39 B from a court judgment in the company’s(industry’s) favor on interconnection charges.

The company can probably not try and push pricing to Direct margins of near 50% as any self respecting industry might want but apparently hopes to regain pricing power if industry gives it a hearing even as the CCI has tightened up its regime and ‘cartelisation’ may not be welcome in any of its market. Telecoms, like its precursor in switching technologies and business telecoms, seems to be hurtling towards, trundling dowwn to a depth of losses regime of pricing and profitability that has already taken out a few segments incl examples like Nortel and Juniper to Sycamore and others at the height of the Telecoms global roll out.

Bharti did produce a viable model of profitability for the industry and would try to reclaim that leadership and is probably the best placed for that war with overall operating margins of 32% and Africa Op margins of 27%. it has been able to use pricing to maintain a virtuous cycle in its earlier avatars despite large Capexand resulting hit on Interest and Depreciation

On the other side of the globe, NASDAQ listed Cognisant cocked a snook at leading lady TCS with US revenues of $1.504 B matching TCS revenues of $1.509 B while overall revenues of $1.89 B continue to have a distinctly anemic spread outside the continental United States which remain the juggernaut strategy’s focus in the IT services market even as Europe tries to review and rebuild sustainable busines s models for a unified Euro led future out of the current recession

NASDAQ Panelists
NASDAQ Panelists (Photo credit: Think London – connecting business to London)

A revenue guidance of $7.34 B is definitely something to be proud of despite the 18% cap on margins and annual growth of 20% on the Topline seems to be a good enough benchmark for this company (at these rarified heights) even as it disregards the 30% growth in profits benchmark we also concurrently keep. The resulting increase in attrition took data on employees attrition to 13% even as Financial Services continue to make a 42% share of pie and the US Financial services market remains lucrative yet now almost closed off to other Indian players including mid caps that may not be welcomed by larger IT strategy offices finally hoping to make a mark on consolidation and giving TCS consistent account wins till 2010.  Industry sales int he US and indeed those of retail lifestyle exports from India are likely to be hit by Hurricane Sandy in the Fourth quarter.




India Morning Report September 17, 2012: A New High For Nifty As India’s Reforms Story Rushes Get Canned


The usual climactic rushes surrounding India’s reform measrues have effectively been canned with the coalition stuck Congress able to push thru reforms from UPA2 while keeping the support of the SP, BSP and even Mamata Di.

The usual protests and demonstrations apart, just in retail it’s going to take more than a year before the existing players from Bharti’s EasyDay to Reliance and Future Group reorganise their operations along statewise lines so individual permissions for JVs can decide their partner’s equity in retail

In aviation, there will be no takers for the 49% stakes except for promoters in Jet or new investors in Spicejet while one is praying for air India and Kingfisher.

But, why waste a Monday morning in recrimination ( and last time markets would have crashed on the mere whimsy that the sky is not sunny all the time and it is not raining everyday) hen fibnally everything ont he reform agenda has been finished in time. Well, there is still the case fo a new Divestment target which is unlikely to fructify as PSU CEOs put their foot down but then a Diesel and LPG hike could have made any balanced intelligence see the folly in a downgrade (which as brinksmanship would have it, takes India to junk status)

The markets will hit the path to 6000 today but as outlined above it is likely a messy positics that ill muddy that scenario for indian bourses soon as dollar inflows make markets so steep on the uptick that a deeper fall is inevitable. However, having invested in, none of them ill be planning to leave at this stage, the waiting time being immaterial for the returns expected.


Bank Credit Policy (September 2012) : Fixed Income Markets Celebrate India Reform 5.0


Given that Inflation was also expected to be lower before the Wednesday announcement for WPI and the Diesel hike importantly, it is understandable that 1 in 5 economists in the latest surveys still expected a rate cut to put pressure on the unruffled Central Bank Governor. Nomura economists and even Breakout Nations’ Author Sajjid Chinoy however point out again that the government has no room left as do we. Though you may not be able to scroll back to views as we were also away for a month on the subjects of Global Policy and Economics, you will be able to find the thread in earlier bank policy writings here and at And of course as the public sanecdote demonstrably admitted to everyone, there are no CRR cuts in store.

However having been fed reform policy the markets are unilkely to react to their v”dull and drab” version of the credit policy later today. Infact except for Economists at the banks above most in the industry will be relatively busier with deals happening in the wake of Bharti Infratel kicking off a public sale of PE investments with a not so untoward calendar in just 5 years of investment. Back to the calendarised Economics though, the dip in IIP is scary and continues to run down the Economy alongiwth a double digit in Exports but none of these would improve from an easing of credit conditions as bancks get don to safeguarding their margins by cutting deposit rates to the eventuality.

As DNA also notes however, there is no time like now for India Inc and this will take almost a year to fruition in Services and Goods uptick while inflation including the dangerous fuel subindices about to make a bigger come back having come to 8%+ in the August announcement. Bond yields will be going down because of inflows and that should not be confused with a likely rate cut for now.




Due to  POSTEROUS AND WORDPRESS ISSUES WE ARE UNABLE to POST around the morning report and trading strategies for Friday. Nofty has maintained 5330 levels and bnks are good to go, with the Euro bond buying program promising to be the long term friend global markets needed for liquidity ahead of spanish bailouts to come. Yet, China’s bemused failures should support India more if indeed there was any real policy action to follow on the interest generated and a deal was closed in retail or banking or others. Healthcare is still the sector with the most potential after banking

Flailing Auto sales in July and August have been estopped by the advent of the Holiday season and Ganesha and Dusshera will not let optimism go down in banking, auto or consumption sectors in durables and Non-Discretionary. However while many have beenlooking askance no one has called for the correction in Healthcare, Ashwini Gujral / ET Now biting the bullet again as Energy replaces any gap and older commentators hoe for a quickfir IT buzzer round to rate up scores , Infy and Bharti evenly priced. I would stay with longs in ITC< ICICIBANKand IDFC and not go short on SUNPHARMA though DRREDDY may stil have a few spinning out moves to the downside. Similarily, LUPIN, STRIDE ARCO (STAR) and the newly resurgent ORCHID and OPTO are unlikely to be part of the correction opening Ranbaxy and Sri Aurobind to more nervous action in the very few moves we will see this fortnight till expiry targets become clearly polarised.


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