India Morning Report: State Banks, Bread and Coca Cola

First the note on infracos that have unsettled the markets
What markets had initially identified as a resilient strain of Corporate misgovernance in infracos from GMR and Reliance Infra had apparently never been a cured mutation despite consistent action and PR by the companies. Even today when the infra gap is being addressed, because of group leverage showing on the holding companies, GMR, Reliance Infra remain active short candidates especially for those bullish on Kushal Singh’s DLF despite its bad results. Hoever, the short interest looking actively to rerate the markets has probably been snuffed in the bud and will likely lose out in this cycle as the day progresses today.

 

English: Tata Prima Truck by Tata Motors
English: Tata Prima Truck by Tata Motors (Photo credit: Wikipedia)

 

Brokerages re-rate SBI and Tata Motors

 

Expected disappointments from Tata Motors and on expected resilience from the State Bank panning out a lot of uptick has come in for both stocks, At 249, Tata Motors is indeed a good defensive buy and its JLR performance can only improve as it seems to have managed to keep sales volume increasing esp in China where they grew by 50%. JP Morgan and UBS have also upgraded SBI as the bank’s chairman explained on the networks that domestic NIMs are a healthy 3.75% and the international book stable with NIMs of 1.7% , in itself a very good performance given that the State Bank’s International portfolio jurisdictions are not in politically challenged geographies like BOB has.

 

The Sun Pharma and DRL conundrum

 

At this bottom of the Nifty cycle , the other cvonundrum also gets highlighted as growth successes like Sun joust with almost regular failures like DRL and Ranbaxy that have lost the confidence of investors but keep the sector rated as a defensive. Emerging Midcap Stocks including Glenmark, Cadila and even Biocon are thus seen as having capped prospectsmuch like the consumer goods stories like Dabur, Marico and Unilever but most analysts have distinctly berated the laggards and moved the active investments to an aggressive growth cycle so passive investors and DIIs have to follow in due course.

 

And the ascent begins..

 

However, these are but regulation battles at the end of results season in India Inc’s diverse investor and corporate objectives’ joust for relevance and India’s uniqueness as a 5% + growth destination has not been lost to the cycle , the entire move down and the restlessness in the markets likely to be attributed to pre budget jitters in statstically consist4ent studies over the next decade as this inflection point is real and investors relevant to India stories carefully watching even if from the sidelines, checking if the stories fed to them by domestic media and other interfaces about India’s struggles are as unlikely as growth sponsors of the country make it out to be and perhaps convinced by as tately transition in 2014 under a new government that hopefully will be more of the old.

 

Private Banks like ICICI are likely to enjoy today’s mini rally from 5870 levels in rare moment s of perfect correlation with the State Bank and exploratory shorts run out if the OMCs are indeed able to puh thru a round of Oil price hikes on the weekend. Europe has of course scared global prospects for 2013 and that impact has probably run its course by the end of next week fully.  q. GS

 

 

 

India Morning Report: At least having followers ensure you don’t get to listen to sermons on Destroyed Value from rising indices

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

No one would have thought that Oil short targets would again appear at only above Rs 5150. In fact copper watchers and other commodity watchers would also aver the current bullish cycle in the doctor of metals and the rest of them are also tentative with global pricies still moving up only to $3.67 a pound expectations, implying  asteady discount at higher levels in the indian market. A sell off in Gold too underlines belying of Domestic expectations and will with sucha broad thrust be able to move the Rupee up as a better balance sheet beckons in March and an equity rally is pretty much out of the question

Cadila and GMR results disappoint and the former’s doubling of losses though expected by many,  was supposed to have completed restructuring of its structures by this time to spread the debt load , Male notwithstanding and the latter is much a shocker after Sun Pharma climbed out of its stagnation pit almost on cue of ithe global business cycles improving. Sun’s loss of Taro control will continue to bite as others like Glenmark continue to come up in the domestic ranks and that anyway leaves Cadila on the back burner with no visible leadership in either international or domestic segments but would be on as many buy lists as Cipla and Biocon with bigger and better stories because of an assured growth clip while others are subject to volatility from innovation and automated trading as well in a traders’ frustrated market series in February 2013 when the pre budget rally has been scotched but the India report card is sunny as ever, when Asia FDI will start retreating as China peaks but India FII and FDI interest is safe in the pockets of stable acquiescence we engender in the world investor community.

Global High Yield and Yuan issuance seem to be good for Asia in the four quarters thru to 2014 as well and if that survives, Investment grade Debt and gilts could also come back on the strength of the currencies in the second half of the year

The morning Olympics have been a subcontinent show with only one or two comments in almost rabid monlogues making any sense, almost making one feel like a backbencher has been allowed to speak and you must just suffer through. Of particular delayed incapability and thus high Avodance quotient was the so meandering opinion of parrying institutional investors who are later than the last back bencher in grasping the importance of investing and if the same backworking backbencher theorems are applied and still make sense, these would produce more defensible evidence on employing of research teams in advance than jumping on to available decisions already in action, and thus the morning has been an almost entire waste of time and as readers can pick and choose when to survivve my opinion than comment on it as is being written, I was the only one who suffered. IIMA recruitment also back those wanting to get into a research career and I am still wondering Iif I will have to go thru an entire Ph D program to get suitable rich to be employment. Research for trading desks intermingling now with Front Office Quants, look like much more succinct and concise and thus productive except for Risk managers hoping to write a book on avoiding risk.

Hexaware has finally survived a s a reminder of the annuity business IT and BPO bring, the sector surviving the month of Rupee appreciation only because Auto consumption is still on training rails on the takeoff leg of the runway.

Seriously though, what is it about Capital Markets, Banking and any other tenet of GDP growth that gets so much negative attention. And why do they continue to hog most of the GDP growth then. Execution? Kudos to MCX SX on launching th SX 40 indices and starting trading in over 1400 scrips. Unlikely though but they would be going all out to get attention for “real” institutions, to grade up the edigree of their promoters who try to come out of the shadow of harrassment by regulators and use of free market critique of regulation as overpowering spices to mask any cooking in the rice below.

India Morning Report: Standing on a vertical ride at closing..

NSE Logo
NSE Logo (Photo credit: Wikipedia)

Does not leave much to imagination or prescience after the Nifty travelled the Vertical Flights of Fantasy to 5950 levels before closing gong struck at the NSE terminals and the soon to be public BSE that the markets are a settled lot in the morning and a final big correction is being ramped up in commentary to a big killa round hopefully over 6100 levels .

That means the Nifty and the exchange has another big weekly move  and probably not immediately next week though looking at the eagerness with which the House of Elders vote on FDI brought to profit taking it is obvious the wait and consolidation has been a long one even for FIIs or as some mention, most of the floating stock is yet gone.

In true indian market fashion I can duly see without undue overanalysis that it leaves opportunities like Jet Airways and Orchid Pharma ( as it negotiates with late lenders like IDBI Bank) for a grand capital appreciation burst. it also shows that markets have matured to the virtual exclusion of retail players though US markets can still claim to over90% retail invested in equities , but one guesses thru discretionary and non discretionary forms of institutional and hedgie managers.

As mentioned yesterday, globally alpha is back in vogue meaning India is likely to remain in currency and the market has thus that upside led by players like YES Bank and other private banks wwith double digit growwth left in this rally for them and other blue chips for the mass of your portfolio to settle down with.

Ramesh Damani looks to be in good form as always making the next level of case for a big correction for indian / DII buyers after the likes of Ashwini and SS failed to get markets to see any worthwhile correction in the meantime but it is probably time to see some institutional buyers move or rather churn their portfolios to the new limelight , even though they might feel like still holding on to Indian Pharma and even dabble in fiscally imprudent PSE banks on their indian panel’s whims.

Stride Arcolab continues its run it missed last week as Maruti and Baja Auto stay with Biocon to catch more idle profits on the take.

 

India Morning Report: A tough act to follow!

The resilience of the markets is absolutely breath taking if you can let go of the greed of the trading tick and forget you could have created 10-15 more points in any move of the last 2-3 months. INVIX must be one of the most stable volatility indices needing some good data training over the next 2-3 years as it gets two distinct levels along 2012 and tries every other vol input inbetween except the limited market range, setting it independent of market levels which becomes counter intuitive after this length of time.

Business volumes on the NSE are holding and MCX equities seemingly will only add new volumes from its 300 registered members as and when they start with the same 1000 scrip universe ( NSE has 1600) . Chinese data was actually positive but the markets wanted to see a bigger difference and local shares continue to tank from 3 year lows in Shanghai /Shenzen.

The Thanksgiving anti trade in Asia and Europe will likely fade away till Monday when US markets open as traders await the big news from Europe and EC takes the weekend time to solve the big problems UK has with the budget. I ndia is now actively interested in these negotiations with its EU trade droppoing at the expense of others and its Trade GDP seriously affected by continued recession in Europe which it is hell bent on following up with large spending cuts on the EU Common budget and the slow dribbling away of the banking union while UK firmly in saddle strengthens its local EU trade in Spain, Porto and Italy

Bajaj Finserv morning interview on the networks was a great segueway into the stock but comes a little late even with new business premiums growing at 18% and Allianz interested in increasing its stake. after an almost 100% rise in the year. Like PSU Bank Capitalisation and Drug Price Control, Bill impact from  FDI increase in insurance is also likely to have been played out long before its actual play in the House and is unlikely to move the bulls or the bears sitting on selected positions.

The underpricing in Bajaj Auto continues to be a big surprise and Biocon is a good long term buy at these levels. Why are Orchid and Opto out of favor? One fervently hope it is not because promoters are hoping to be bailed out on their personal loans

 

India Closing Report (Week Of 12-16 November, 2012) (With Trading Strategies For The Week To Come)

Oil and Natural Gas Corporation

 

The Diwali holiday shortened week proved the dictum that if you flog the same levels for the market long enough the markets need not kneel out of fidgety bear’s interest or tired bulls leaving. However, the markets nearly rerated themselves and shorts ar eopen in the market esp as revised Telecom company targets including winner Bharti may be too much too soon for operation al challenges and negative margins in most markets on wafer thin Operating profits. One does not except writeback profits either except for those like idea who won back the same 9 circles from the previous auction without another penny in cash due to the government from them

 

Banking as expected will start Monday with strict guidelines on what is private and profit making and what is not, BOB and SBI showing they are in no position to compete in the sector even with size and rural reach or international access on their side.(BOB in Africa)

 

The market punters are still markedly divided along the same lines in consumption stocks with those that favor Axis and Jubilant and those who switch ITC, JET, YES and a few others, keeping them all in the not so Mid Cap but not blue chip ranks. The continuing fall in Cairn and GAIL makes that sector as close to Value pick range as it is allowed to get but neither ONGC nor GAIL or CAIRN look like they will be first picks in the coming week the foreign brokerages and morgan stanley having marked a flat range on the market which has obviously found 5620 to be more than fairly undervalued but is still a bit stuck in the mud even before 5800 is ht on the tripwires ( a tripwire is the simplest form of a shock trigger setting a limit beyond which the alerts start ringing)

 

Biocon has made another deal with Bristol Myers for anti diabetic medication while the diabetic market globally is expected to grow to nearly $60 B a year with even Novo Nordisk insulin yet just 25% of the market. Automobiles however do seem to be near the bottom of their range and could start ff the week’s investing bits till infra traders make a mind to take a plunge again IDFC in the lead and private banks like ICICI Bank and HDFC Bank following in.

 

The unexpected rise of Coffee stocks mid week really has set a cat among the pigeons as a 20% rise in those three cannot be easily replaced by any other competing equity or currency investment one thinks. and Tata Global remains a wonderful investment at 175 as Starbucks get s a little faster on the blocks with store openings in 4-6 weeks.

 

 

 

India Morning Report: Ahh, I hope you got the rally..

Here it is, the Fiscal Cliff. Markets are soon going to realise the celebration of Obama and the general panic in the US markets are both in equal measures a global celebration and a classic over reaction that ticks off momentum in the other direction.

If India denizens do realise the limited impact of the issues including the fiscal cliff’s promised red splotched shores of recession then they can follow the DII traders into buying into the India markets even before the day is over but the correction is mandatory. ITC is up smartly, so is ICICI Bank and there are the Mid Cap acts to follow the trend down which will present unique buying opportunities including Hexaware.

Biocon Logo
Biocon Logo (Photo credit: Wikipedia)

Biocon should be back in the mix except for the ill informed market sentiments in the areas of “focus on outsourcing” and “outsourcing is over” that seem to bring the edge back to the markets every other rally as unfortunately they remain unimportant issues esp to the business models of Indian companies succeeding in the US market and capable of building a domestic market franchise in their labs/sales departments

The markets should have probably continued up yesterday in New York and therefore here in Mumbai and we should still hope for a 6000 mark before the year is over if the muted correction is followed by a good rally next week. Mannapuram and Muthoot have failed to pick up from October levels while NBFCs like M&M Fin and Bajaj Fin did follow up on the good results and continued Tier 2 market development due to LIC Housing and Shriram Transport while Jet is back at invested and yet interested in investing category, Accumulation having begun earlier at below 340 and traders hoping to make a surprise kill into a 5900 rally

Silver and Gold will probably weaken as Dollar surges back and the Rupee almost crossed over below 54yesterday but is hurt in early morning trade today towards its current LOWS of 54.6

 

Market Street
Market Street (Photo credit: glennharper)

 

 

 

India Morning Report: Markets do not have to correct at all, there is no such requirement

Sudershan Sukhani gets another look in on our bullletin if only for the 100% trader’s attempts at catching a correction again at 5700, with sell calls on Biocon and Reliance Capital. Anil Ambani is easy pickings though the rest of them may not move and then you will lose that one too. I am not on any 100/30 strategies this sector of the market and think 5700 is absolutely valid for the market to start any move. Though if you want to , markets might oblige a 30 points in the new series as they assess whether another move like the first week of october can be absorbed in the markets.

Another fuel hike well and truly puts paid to any political ambitions of the MOF /Chidu and a rate cut is impossible to clear on Tuesday. Energy stocks get another sleeping level move, unlikely in any other sector in India and the positive rerating, for a change, is long overdue in the sector from ONGC and GAIL tot he OMCs and even Oil India which has been neglected for a good 5 years now but may soon become more active as ONGC Videsh runs out of the big plays it had been sitting on. The piped gas plays similarily are interestingly undervalued but waiting to staay with Market Beta than move independently again after having moved once on fundamentals in the last three years.

Bajaj Auto and Dr Reddy might be the convincer markets need to move up and printed good results. Banknifty has definitely made a fresh bottom support at 11600 now and ICICI Bank results can only move it north. IDFC is back too and so bets might change by 10 am from Sells to Buys on the trading stocks too.

MID CAP PHARMA Coverage: Orchid Chem

Though we have tried to cover all companies yet on Sales and Potential in the Healthcare segment, we are really short-staffed to push out first in class updates on the same. Suffice it to say that with Orchid Chem FCCB redemption coming up, bonds will be called and the fear has driven the scrip down from 186 levels.

Current TV18 interviews with promoter K Raghavendra Rao confirming that fears are misplaced as a further ECB has been tied up to return the earlier FCCB debt as also domestic arrangements have been made. The company also ‘guides’ lower interest costs in 2012

The company is profitable with a 10% NPM and good Q_O_Q and yearly growth in the September quarter, running to $500mln + run rate. Definitely not worth dropping and something you should buy and keep with Glenmark, Opto circuit (devices) and hold Biocon if you have any

If you do the calculations, from the USD 500 million of our sales, around USD 420-430 million is exports, and against that the import component, it is less than USD 200 million.

The delta of USD 200 million on profit and loss statement (P&L) is in terms of dollar inflow and my dollar outflow including FCCBs is less than USD 200 million. My dollar balance sheet is mildly positive hence rupee volatility is just a paper entry and it doesn�t affect Orchid on six months or one year basis.

Lupin and Cipla are the bigger ones in the area who were actively looking to sell out ahead of changing FDI regulation in the sector where earlier M&A has already scooped out much local infrastructure and biggie Sun Pharma is adding inorganic marketing and research strengths. Dr Reddy is a stable business with sales intact a a $2 bln run rate

In most cases the domestic market is relatively small,  but that is more of a limitation for MNC pharma stocks still listed

India Earnings Season: BIOCON, September 2011

Biocon
Image via Wikipedia

Biocon 

 

Biocon maintained an EBITDA of 29% with yoy growth in the 6 months ended September 30 good in Branded Formulations of 37% with a 46% growth in Diabetology with its INSUpen and revenue from Pfizer’s diabetes related launches. Diabetes remains Biocon’s icket to cash and market positioning with other strong brands in renal Transplants growing at 25%. Onco MAbs are another growth area for the company being pursued currently in NPD/NCE

Reserarch Services grew at 20% and Generics (Biosimilars) at 15%

India’s largest biotech company stayed below a $500 mln run rate for the year with profit growth slowing to $17.2 mln for the quarter and $31.2 mln for the half year

India Earnings Season: Dr Reddy’s redeems the sector’s performance

Dr Reddy addressing at Patent Symposium
Image via Wikipedia

You know Healthcare is beating other sectors this year..

But here in India, Ranbaxy and Sree Aurobindo have led results based depths for the entire market while MNCs continue to showcase $200 million  odd sales wshether it be Merck of MSD, Glaxo of GSK, Pfizer even after sign up s with Biocon and then Sun Pharma itself which like Abobott find Piramal Healthcare is trying hard to diversify into bigger segments

Despite impending regulations making its imported APIs expensive to use in domestic best sellers and its production snafus of Q4, DRL reported great 23% and 101% yoy growth in Sales and Profits  on a consolidated basis to ready itself for a better FY12 with $500mln in sales bringing a marging of 16%+ to $84 mln profits keeping it the Top 3 heal. Lupin’s results continue to show a plateau but the management is greatly appreciated by investors and analysts, Stride Arcolabs a sure winner and Cadila consistently shining in results. Orchid Chem has had some volatile performance swings but along with Glenmark seem to be good scrips to stay with and push esp with FDI and M&A control regulations changing for the lucrative sector soon

Biocon
Image via Wikipedia
Logo of Pfizer Incorporated.
Image via Wikipedia

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