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: Record low PCRs mean a bottom at 6000, Iranian Oil to be feted in markets

Goin' to Iran
Goin’ to Iran (Photo credit: Örlygur Hnefill)

The Nifty already ranged by puts and calls at 6000 and 6300 is likely to consolidate signs of moving up as the 6100 puts start looking good for a ramp. Despite the global cues, including an agreement with Iran, the market seems to show the Call writers have finally suffered from overconfidence for the second time on the trot this month and second time this rally after having been caught in October. The Rupee tantalisingly at 63 seems to be a factor too but Traders and  other market experts seem to have decided not to wait frther to buy into India. Citi’s MD, Mr Pankaj Vaish as much said so about institutional investors too on the weekend.

Even as Jindal Steel makes an exit from the Sensex, markets are finally separating the grain from the chaff, KArl Slym and JLR not helping the failing Tata Motors cause while Bulls continue in Tata Steel, probably widening th ga before the Ratan Tata vehicle Tata air and Air Asia get into the fight in 2014

As mentioned above, Nifty decided against trying further value levels aand opened around 6050.

Worth mentioning n fellow Network Analysts’ would e that despite the preponderence of buys that favor Bata and also repeat Tat Global, some have decidely loved the short on Bajaj Auto. Again Bajaj Auto was the genesis of the bbull trap last time around and Bears and shorts will pay heavily esp in derivatives for remaining short on what is likely the most of all bull trades in specific scrips in India after Pfizer and Wyeth as Banks remain on the back seat. In PSU bank picks to short too, TRaders 20 on both leading channels showed the kind of mistakes that can be made as BOI may not yield further in the short and a UCO Bannk may already be at the bottom after a year long short on the scrips, the last month rally in PSU banks (unfortunate) never reaching UCO Bank

If played along the ground in the sessions till Wednesday the markets may well try 6350 sooner than later before Friday close, but shorts digging in at this high concentration seems to me an isolated uncorrelated event worth researching as the US VIX on the other side rules at all time lows in low double digits and ready to try new levels ona new high from last week.

Good news for Axis Bank as it enters the Sensex 30 by December 23. If Banks do respond to that as  a secular class, despite Axis Bank hit on the FII ceiling of 49%, it will not be a big trend to ride but a one off, as the Fitch/Moody’s restatement of NPA woes is a twist anyone following pSU banks was having a hard time swallowing and markets were eagerly waiting for a turnaround in Q2 results let alone letting the slide be ignored in the DEcember and March quarters as provisions likely shoot up

IDFC and LIC Housing Finance seem to be walking away with the cake and short term traders continue to ignore a wonderful opportunity as investos stock up on both playersI would back picks on All Bank and Andhra Bank apart from the return to weight for PNB and BOI as ICICI Bank comes back to 1050 levels i n morning trades

Gold’s probably going back to 27k levels if not 25.5 (‘000 per 10 g) and if Fixed Income yields spin back to below 8.5% aided by the exit of trades on the older benchmark, things would get smoother for cash equities and the December series. Polling is underway today and counting would unlikely bring any shocks next week. Bank nifty would be stuck at 11,000. Oil prices will continue south after the Iran deal for 6 months makes arrangement for Iranian repatriation of oil profits, oil sales and humanitarian trade i.e. export of food and medicine among others to the India favorite (trade terms)

 

India Morning Report: State Bank gets ready to report with PNB carnage still fresh

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

 

PNB ofcourse claimed to stabilise NPAs again but with INR 50 Bln more in restructured assets that are  now INR335 Bln on the Books, the bank has lost a lot of investor stars in this quarter. However, the bank seems to have acted as per strategy to release larger NPLs ramping up provisioning and so even though Profits were lower, the NIMs are 3.47% an industry best and NPAs at 3%  might yet be excusable keeping the bank firmly in our buy list aheadof Bank of Baroda. PNB bulk deposits are down a huge 2/3rds  at INR 220 Bln from more Than INR 900 Bln

 

State Bank will report much lower than expectations however as market expectations onthe scrip have been unnecessarily optimistic, its being in the buy lists always a function of its special charter and its exposure to SME always a much more risky diet for investors than even BOB, BOI and NB but the bank is the biggest in India and has been trying with great returns for its size in the retail lending markets, not in NRI deposits

 

PNB will continue trading higher provisions for lower PAT as the coverage is still 55%, lower than others in India and the only risk factor is its high reliance on the restructured book which for PSU banks has turned out to be  window dressing game, skeletons of which cupboard may be expected to be found industry wide in a couple of yearswhen they are reclassified a s NPA instead of standard assets. PNB may perform better at that time when actual results are available  and its Treasury revenues ( Gross of INR 339 Bln) remain best in class

 

Currency and Bond markets are still twirled up in a tizzy and the Dollar Index at 81 levels may continue to rise though confirmation of continuing EM inflows will change the sentiment positively. Indices flagged off below 6000 levels and Sensex may well see sub 20k levels keeping short itches alive this week after a seeming end of the line earlier in the week as trade data was seen in the right light. 11 more sessions in this series which hidden to most, has even seen Ashwini Gujral and the Institutions change their staple trades, IDFC and YES back in lay as mainstream sentiment carriers

 

I for one consider the State Bank to be fair valued at more around 1400 levels, a purveyor of bad asset quality for whicht he rub off on PNB and BOI is almost unfair and that the State Bank can be punished isolatedly instead of crowding each and every constituent of the Banknifty

 

Food inflation should e allowed to continue at 10-12% levels the CPI component having come in at 12.56% yesterday. The IIP at 2% was well below what could be and expectations cannot be lowered to where the series presupposes to lie in the coming election months. Tata Power has irrationally picked up its pair with RPOWR and Reliance Inra again, turning south after Reliance boosted its results fr the companies earlier this week

 

 

 

India Morning Report: A little late and not better for it

Definition of Sub-Saharan Africa, according to...
Definition of Sub-Saharan Africa, according to the United Nations institutions (Photo credit: Wikipedia)

The Rupee reaction petered the rally at its 6200 floor well before the November series was out and so things do not look well for the downward pressure building in, on the news of the “cosmetic taper”(Marc Faber) deciding to take the markets for a ride across Asia. It is mostly as ET reported, because of the perceived lack of quality stocks and globally because Dollar bond yields need to rise regardless.

Yields at 9.12% do not really threaten the India story but signify a sell down which given India’s small base in FX, Currency and even commodity markets where a single import continues to equate the Indian equation to the underdeveloped Economies of Sub Saharan Africa if only in market perceptions. Moody’s and S&P mandate for India apart, this as we mentioned last week is just one or two players and hot money choosing a quicksilver trade and the Rupee as a target for such trade does not necessarily mean another big cut in India markets. Trade should pick up around 6100 levels only and the Rupee should not move to any risky levels above 64.

Gold investors will remain in surfeit in this stage in the Global markets and that need not be correlated as strongly with Growth as other crises jumps in buying.  Lack of Indian Investment demand for commodities an lack of demand at the pump in Oil in the US has still meant good overseas investment demand for Oil and Gold given the new lows

October data for Imports in this Fiscal at $280 Bln is down 4% and Trade deficit is still high at $90 Bln. The NRO/NRE Deposit swaps have apparently collected enough for a number around $20 Bln to balance this trade deficit as estimates for the CAD have been already brought down to $60 Bln. The October deficit is however just $8.8 Bln and Exports a healthy $27.7 Bln, the MOM increase in deficit probably immaterial.

The Sensex started the day 135 points down at open and is currently trading nearly flat from Friday’s big cut on Nifty and Sensex. Also, the Tata Motors trade on the positive, post results trned out to be a dud bag as we said . Shorts on the market can however pitch in, shorting the Index though IDFC, YES and ICICI Bank are quite done in independent scrips and Pharma being defensives are also on the secular buying list apart from being good India portfolio picks. IT sells will roll back in this leg as they benefit from the “India, Sell” tags

However, one still feels the /Indian yield curve and growth story were back without threat of inflation and the rate hike affected in October and to be repeated now in December to 8% on the Repo rate is the mindless exercise which is triggering this spiraling of yields and only strengthen the rating agency view keeping India stable near junk than giving its due and correcting the rating’ own regional imbalances and prejudicial biases, still favoring an untenable proposition like Brazil or Russia and a market failure like Turkey over a stable story like India.

Is India really fairly marked for a NBFC only kind of play with the coming high interest rate scenario?

 

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?” (kbc.sonyliv.com) One Taj Md. Rangrez has won the Jackpot in this edition in episodes shot till now

 

 

 

India Morning Report: Markets out of short opportunities at 5350, Rupee actively down to 68.63 at open

ITC starts the day at 305 levels, a good buying levels as the FMCG opportunity tanks.. Markets will be unaffected by shorts like Voltas and Tata Chem (Mitesh Thacker) or even shorting in Titan with buying Idea (SS) even as indices jumped to near 5400 levels at open after a scare from banks not jumping in at 8600 Bifty levels RBI norms on Developer loans from banks on the other hand obviously come as Banks’ lack of opportunities again lead to a ramp up in rel estate loans through 80-20 loans allowing developers to drawdown on bank project facilities before starting construction.

The precipitation for yesterday’s 650 point fall on the Sensex and near 200 points on the Nifty was the missile test by Israel and Obama admitting he is deciding between Congress cooperation (prefered) and otherwise attacking Syria after the Chemical Weapon deployment by Assad Bashar

IDFC and ICICI Bank are slow on the uptick and more worrisome is the Power NBFCs failing to shore up the trends as Powergrid falls thru in double digits in 2 sessions, to 87 this Morning. Bharti is still a buy and Bajaj Auto has started off the day smartly.

REC is floating around 166 levels and PFC and PTC are up barely in a bullish market, probably moving only on a sustained move up from tomorrow. Oil risks to the CAD seem to be contained with India already having reduced its exosure to Iran to less than 15% and unable to increase it.

Jet and ITC may sustain higher levels as domestic aviation price realisations are set to jump in airlines’ and encouragingly Jet would just be following Spicejet. ITC jumped its own retail price ponts in the tobacco business by around 14% per brand variant

Tata Motors rerieve as it counts its chickens from JLR based on last quarter’s EBITDA seems short lived and may be an avoidable investment. Tata Steel however is a good lace to start your post crisis 2013-14 portfolio

India Morning Report: The lack of political prowess of the Nitish Modis and the NaMos, Advanis and Dear Rahul!

The General Post Office and Reserve Bank of In...
The General Post Office and Reserve Bank of India building from across Lal Dighi in B.B.D.Bagh, Calcutta (Photo credit: Wikipedia)

India Morning Report: And after 5600, is 5500 ..then 5400, 5300, 5100, 4900, 4500, and on it goes pegging poor buyers..

That would be one loose definition of retail investors currently ready to be pegged as not so germaine and India being resilient and a winning post even as RGR takes the board at the Reserve Bank of India. Vallabh Bhansali tried a valiant effort while MF managers ( again to be free non academic and interested in discussing with the educated layman who has other professions to tend) can be loosely ascribed as the educated investors’ abode and banks as continuing bulwarks of pressure for enterprise even as the NPA saga will not bleed anew but will extend its lasting periods well into 2016.

However if you do not ascribe to these notions as a first party or as third party notions of whats ailing india, which we would happily accept is not so, coalition politics to come and the lack of political prowess of the Nitish Modis and the NaMos, Advanis and Dear Rahul are going to cost India inc dear. One of course does not mean this as a crutch of benefits of stable seating charts at the RBI here but the ailments of the system will not be solved by monetary policy and one sees , like the continued selling of infracos and infra NBFCs even as banks rebound on the news of the new Chicago educated governor taking over (Deepak Parekh also was prominent among those welcoming the change). Fixed income Yields and more promisingly CDS spreads could respond to the timely change of regime at the Reserve Bank

Beautiful Gold Jewelry Designs from Golden India
Beautiful Gold Jewelry Designs from Golden India (Photo credit: epSos.de)

JLR results will be down this term, the defensives have been hit hard with HUL and ITC responding negativey to being tagged defensives after just having broken into growth on the trendline for the 3rd time together in a decade. Its a wonder SESA Goa , Sterlite and Tata steel are still falling sharply and that just means the market is unlikely to quit correcting till the CAD measures yet to be invented by us or experienced Economists like RGR and CRA (Rangarajan) are implemented to sustain the Rupee. Pharma and IT, the big white hope of those living and operating other Indian businesses from outside India, hardly seem geared for growth, most sticking to just small additions fom conversions of Fx and Exports though a stable share not growing fr pharma including the continuing risers in Stride Arcolabs o rthe youngest pig to the slaughter , Torrent even as Glenmark and not Sun pharma look great investments for the future

DIIs are still not biting and rates will be hiked sooner than later even as RGR tries to keep the bridge between the politicos facing elections and rolling out the first entitlements bill (in cash).Imagining Jet Airways at 300 levels while celebrating the final inking of a 24% stake from Etihad would have been unlikely even for those who started 5, 10, 15, 20 or 25 years ago.

The Sensex could not keep its morning cues intact going into the 11 AM post morning session and may sjow one more steep eigenvalue of fall on th Nifty and Sensex even befor the weekend comes but then it is becoming likelier at these levels after 12 sessions that the markets will not be freshly bet short and that this time means you should take one big short but it is improbably improbable that from here the hedge you take in buying the Banknifty will possibly probably and without virtual nanobots, make likely more money in the period to August end of series. So, come ray with me the markets last at 5500

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India Morning Report: Markets ready for expiry Thursday

NSE Logo
NSE Logo (Photo credit: Wikipedia)

Markets have probably decided to test the 5650 mark for Thursday’s expiry and may well show a similar small positive move tomorrow and end up with a big play on expiry Thursday as rollovers would mean shorts have it bad with only index shorts by FIIs evidence of the downward move in the last week. Though by itself that does not mean that the put call ratio of 0.75 or the current 0.85 at open will result in a bullish candle to 5700, traders betting short if any left do not really have returns on the short end of the trade.

The Sensex is holding 18500 levels and even if the nifty drifts lower instead and there is an outward risk of a big short, no new shorts have been added in the last 7 days on the BSE or the NSE according to the network reviews Discounts on the June series are obvious and should not have been treated as informative for trend with June longs hoding a healthy enough 10 point premium for a market move in any direction and is unlikely to accumulate speculative long only interest in this market . The pull up might again weakly ensue in OTMs as without active shorts markets amy still make a feeble attempt at closing June closer to the starting point if not in positive territory which can easily be ruled out.

Bank Nifty is holding 11200 and July may well not shout for lower levels though there is still a definite probability of a deeper negative move purely n the extent of unidirectional momentum created by the Fed pronouncements for fund managers using it a s an opportunity to pare holdings in US bonds and thence global assets including EM debt and equity as that would avoid them frequent shocks when outflows continue as a result of the Fed prognostication of a complete recovery is roved wrong for the US and its trading partners.

Pair trades with ICICI Bank on the buy side are doing well as also those who have chosen the bankNifty for the buy and shorted a PSU bank with negative prospects. Today’s move is well treated as a dead cat bounce till expiry is closed out.

India Morning Report: Nifty recovers despite Cobragate 2

Capital Group Companies shuttle bus, Irvine, Ca.
Capital Group Companies shuttle bus, Irvine, Ca. (Photo credit: LA Wad)

The follow up “revelations” of almost all due process (sic!) used to manage fund accretions thru mutual funds, insurance and deposit products in the Sub continent’s private Banking/Wealth Management units failed to enthuse the markets despite the expected ‘seriousness’ again to be accorded by regulators, finmin and banks’ compliance functions as known tricks of the trade admittedly still deplyed by at least 17 of the accused banks are so commonplace that cooperation among banks also part of the revelations is a defacto quantity and yet not news at least to those who try to engage the markets and develop the discipline of asset allocation between short term liquidity and longer term investment/retirement and event needs. Though some youth might be encouraged to consider this as a sign to push for transparency and progress and banks will show them the clean house they need, these practices are not even necessarily questionable and are known to all salaried taxpayers who remain most enumerated in the Indian taxpayers contributing revenues to the government.

 

One wonders the efforts for black money recovery could further gain pace but only from continuing increase in banking deposits and registered investment products though you would agree that a full fledged DTC implementation and that of an integrated GST would have had the benefits to revenue one expected. The morning has recovered since the Cobrapost expose with the Sensex up a 100 points and the bank rally is still alive if you do hold long positions on the bank nifty

 

Fixed income yields have not ticked down with an eye on CRR pushing pressure from rate cut to extra crisp liquidity in the coming policy or two and RBI also will be busy with arranging OMOs and as always look at its longer term SLR/CRR obectives in this light a s needed

The Rupee in this leg is bound to follow a complementary target to the equity moves but with lesser dissonance between the two markets the atmosphere this week is overall more conducive to building up long sides of the trade and even expecting Thus do not play for volatility trades in this series or look for too many day trades unless it is your favorite mid caps or blue chips still not out with their results and outlook for the rest of 2013  and which you are fully informed about.

 

South Indian Bank
South Indian Bank (Photo credit: Wikipedia)

 

India Morning Report: Another Week, Another Level (5650)

The week closed right 2 points next to the week before last levels on the Nifty and the Bank nifty is technically still able to maintain 11600 levels at its current 11585 banknifty score. The result, humdrum existence for those who thrived on the growth in India inc translating into indices moving up in a definite trend if not by leaps and bounds. An humdrum existence probably made interesting by surgical precision of tv series’ characters in our “day to day lives”  including the clinical refusal to a date for candle light dinner with hubby dears like us.

 

Anyway, equally critical and probably funny is how another batch of shorts is out from market practitioners in a clear derisory preview of a Monday which should be extremely bullish at its key 5650 support on a Monday in the beginning of a series after such a reshuffle. It is likely my bet that the markets are up a 100 points on the Sensex today but that has been precluded by any such move likely snowballing in such aforementioned general climate into a 450 point move or the Nifty similarily running up closer to 90 points. The unlikeliness of the NIfty moiving into such comfortable orbits makes today’s moves limited. Of course there is a faint probability and thus a skew in the favor of a definite move down in terms of risk rewards because of the low probability, which means markets decide to take the south direction today for keeps is rather unlikely fortunately and not unfortunately as followers of risk reward charts might imagine.

 

Really if you deciphered that all, you are likely still less bright than my daughter whose schools reopen tomorrow as markets continue in a range bound equation for the growth in EBITDA this quarter which the TOI reports at 27% for index companiies having reported and includes FMCG and Cement while not giving the thumbs up to the 20% deprecation led 30% eyarly growth in IT and Pharma revenues. Net result, no picks are good for bigger and better exposures in ICICIBANK, IDFC and YESBANK which remain winners of the trend to Indian victory equation (Political and Business largesse and influence on the region)

 

And apparently I would not be inventing any quantitative constructs for such clear diction ona complexly meandering subject when I do start my fellowship at Bangalore/Ahmedabad later next year.

 

Banks however are likely to get more finegrained classification , the subject area being clearly defined and pushed by growth parameters from the potential of the unbanked and the unbranded to the potential of global competitiveness brought by globalising of the Indian Banking brands, no tthe outpost business we do to debilitate the banking brand from India today.

I for one would also give Duvvoori Rao a break and a C-Off for Chidu too instead of forcing anyone on a rate cut.

 

Monday Monday
Monday Monday (Photo credit: soonerpa)

 

 

Pre Closing Trading Strategies- October 18, 2012

The week has been good for those waiting for a clear trend to emerge as the road to 5850 looks swift and clear. It may easily target 6000 on the Nifty depending on the Rupee and the levels of the Sensex that can get the indices to a 6000 Nifty/20000 Sensex orbit before seriously considering a technical correction.

Interestingly the rise in EBITDA margins at Cement companies expected at Ambuja, Holcim and ACC has come in tandem with th jump in old textile scrips with Century and Raymond going up 4-6% in the session giving one quick shots to move into for Friday and for next week. The EBITDA was reported at 18.4% at ACC up 500 bps

Infra and Banks may not move together this time but older stock market favorites could turn up like a Shanghai surprise for investors and traders, with Raymond itself tipped for a 400 target ( Mitesh Thakkar, ET Now)

Cement scrips are a good pick as JP Associates finally gets a higher offer from Grasim (Aditya Birla) as well to 130 per tonne capacity for its 11 MTPA plants on Sale to reduce the group’s debt burden and synergise in construction services and Infrastructure/Power

Sun Pharma unfortunately could be a miss for Friday and Monday as the markets review the loss of its Lipidoc sales in the US as the original drug from JNJ is probably back in the mearket

ACC Net Profit of 2.42 B makes it a good pick but Axis and BOB are already up too much for a 30-5% move and I would prefer to go with PNB, SBI which at 821 and 227- are still underpriced and ICICIBANK and HDFCBANK. The isolation of CNXIT could infact augur well for Switching strategies later lengthening the move in the broader indices. A NSE 5850 target is obvious so F&O interest in Futures and Calls for the next two weeks are interesting but it is the latter half ogf the series and any carryforward positions are equally likely to bite overnight

IDFC could start the infraco bite on Monday or Tuesday for another 10% catch up to earlier stable levels from the current depressed prices including L&T and BHEL and not mid cap infra or DLF and construction biggies or IBREL.

 

 

India Morning Report: Market forgets Hero hit in Reliance comebacks

Image representing Panasonic as depicted in Cr...
Image via CrunchBase

Hero is a forgotten brand today haemorrhaeging 5% market share from August 2012 to 36% in September even as Bajaj Auto maintains its key following of the brand and generates interest in new export markets. While the idle October till now sa markets reacting with aa dropin consumer Discretionary and non discretionary performance on the bourses in almost a synchronous reaction, the consumer brands including unlisted Sony, Panasonic, LG and Samsung with new lasting promotions and discount melas to save the festive season as consumers have not said they do not want to spend.

Financial markets in the meantime were roused appropriately by Axis Bank’s good enough showing though as promised Axis booked another INR 5 B in provisions on top of 2.5B in the year ago quarter, maintaining its 20% growth in Profits and a NII jump of only 16% to INR 23.2  B Both are nearly 10-20% lower than that of HDFC Bank and the bank is expected to lose higher NPAs than the industry in the coming few quarters. Non Interest income is stuck at INR16 B for the quarter. It seems credit growth has plateaued at the bank

Image representing Sony as depicted in CrunchBase
Image via CrunchBase

concurrent to losing restructuring battles and exponentially rising provisions. But as of now ‘like Citi’ this was expected for the bank.

The highlight of the day and probably all week was the jump in refining revenue for Reliance at a new $9.5 GRM for the company. Its other two businesses hasd petchemh holding to its share of revenues of nearly INR10000 Crores or INR100B, overall topline slowing to INR 90.3B down 6% sequentially instead of the usual larger drops due to the continuing reduction in E&P revenues as E&P slows down at KG D6. RIL revenues are up 15% over prior year and the stock has finally got a new range perhaps still redefining ruling Sensex levels after any correction as it moves up smartly from 821

 

RIL Logo
RIL Logo (Photo credit: Wikipedia)

 

 

 

India Afternoon Report: Sensex winds down to an Expiry Thursday

 

icici bank
icici bank (Photo credit: Wikipedia)

 

Nothing much happened though we missed the morning report because of the Bangalore early morning traffic and associated hassles. if you were one  of those who did not miss the Morning report then you ar elikely one of the associated reasons this blog and these reports are not dropping in on time or making such a difference e all make. So all of you out there do start missing anything we miss and get a little verbose on it when you do.

 

The markets ofcourse know its time to unwind traders itching to but no one is really ready to exit at these levels nor are they going to lgo low enough to trigger buying from those who wait.

 

The dichotomy between the investing priorities of the FIIs and the DIIs was obvious as ICICI Pru started unwinding on consumption initiating sell coverage on FMCG and consumption plays while FIIs and investors look for more market expansion plays in the wake of retail FDI each listed stock unfortunately quasi indicator for almost the sector than the promoter or the business strength esp at plays like Britannia Marico and Dabur even VIP almost undifferentiaated behind Jubilant and Titan.

 

Healthcare accumulation is what we root for and is already happening at more than just European banks and erstwhile short heavy india baiters. S&P reratings have helped the cause of the crrection and the result is a 30 point sorrection still above 5650 and a tad under 18400 for the Sensex.

 

Here anyway is the outlook for next week after expiry, tentative buying in banks 2 days out of 5 and a rally day run by a big hefty for the banks who have increased their contribution to the GDP to nearly 10% and banking assets with their continuous 16-20% growth esp with policy segueways for infra funding making infra stock of credit more than two fifths of the 45-50 Trillion credit stock we run to from a 44 T start of the deficit heavy fiscal.

 

 

 

THE 11AM UPDATE – MORE NERVOUS ENERGY IN THE MARKETS! (SP pledges issue based support)

A nod from SP as expected and Financial markets actually jumped and are 100 points up on the Nifty today. It just shows when markets refuse to go down after a stinker they really can bounce North very quickly and for literally something that was ” no big deal” as i thas become for players and commentators of Indian polity. This ould have been a chugging along at 550-5600 day except for the move and elections aren’t farther awway than when the day started

India Closing Report – July 16, 2012 – July 20, 2012

 

Monday Monday
Monday Monday (Photo credit: soonerpa)

The market seemd to never move throughout the 5 days of trading but is very cannily poised at the bottom with banks shaken. Yet one would like to believe that this will be a new bottom for the market because the overall correction from 5350 has been completed and tied into most fundamentals with results seasons positives. Even as analysts on the netorks are set to orrily look the nifty in the eye for the banks’ not being up anymore, I would be going into the weekend long on the banknifty at 10500 mark.

It is not a leap of faith but new positions on the banknifty on Monday may miss a good 100 points on the upside.

However back to the analysis of the week in question, it alloed one to feel remiss about India Inc and hopefully tempered expectations from Policy reform as most expected a panacea from government speak to propel further gains like on a couple of nes stops on Sibal and spectrum last week shooed in.

English: Dainik Bhaskar logo
English: Dainik Bhaskar logo (Photo credit: Wikipedia)

The week began with MCX addingequities platform licenses from the regulator and Sensex futures getting into the limelight as well. ifty currency contracts have been gaining volume in the 2012 move but as of now the currency is tick at a one feels intermediate not so lo mark of 54.9 purely for trading reasons

The Power reforms were solved adequately with Mundra expectedly left alone and SEB loans lobbed to states duly.

MCX Logo
MCX Logo (Photo credit: Wikipedia)

Germany has already approved the Spanish bank bailout and finand will complete the exercise before markets open on Monday. There are still 45 minutes of trading left as I close out the week in the report. Healthcare and Utilities standout as powerful movers for the indices and Banks and Financials dominate especially after results were compared. The IT story was finally accepted as relegated to the second rung Media scrips and businesses survived another quarter ithout groing subscription or falling Advertising revenues and making good enough big money with Dainik Bhaskar’s 43 crores and Zee News’ 158 crores. Fresh investments are due.

 

Bank Nationalisation - India - Newspaper Clipping
Bank Nationalisation – India – Newspaper Clipping (Photo credit: Wikipedia)

 

 

 

Weakness in Commodities does not a Rupee trade make.

The One Rupee Banknote.
The One Rupee Banknote. (Photo credit: Wikipedia)

I am willing to admit I am rather a big Macro kind of person even during trading and as most are, the Rupee’s upside is indeed limited by the size of the market it plays. While the Aussie does not want to and yet makes stronger against the Dollar, the dollar itself wantonly strengthens contrary to tis economy’s weakness because of the “Flow to safety” trade and because of the large foreign holdings of Treasuries not unlike the yen ( that story in the later paragraphs, do read thru for it will also play out) thus a weak Friday Jobs report for the first week of July meant that the weakness of data actually was expected to and did make the Dollar stronger and later bring it to the brink of a deflationary scenario.

It does not need to be the Dollar to affect such an inverse transaction as Yen has suffered for years on end and the Euro and the Pound Sterling carry a similar risk. On the Indian side however, the comparatively lower Dollar value of trades in the currency similarly preclude the rupee from having any upside advantage and as it gets stuck on the Euro’s downside its inverse transaction riding the Dollar Index is much more than other currencies.

Other trading economies of Asia including the pass thru trading economy of Singapre, similarily suffered but the Won and the SGD benefit from the larger share of Dollar transactions and build out a better case for strength in the currency and thus domestic inflation and interest rate management with slightly weaker equities as witnessed in Korea when Samsung results took the equities down but the Won managed.

Speculative flows make the Rupee’s comeback from 56 levels tougher as witnessed in sharp comebacks pegged to the Dollar Index (DXY) on Friday. However if there is strength and institutions are willing to trade it to 54 and lower on the “upside” nothing can stop it from happening as flow traders would ride that move equally.

Similarily a global weakness in commodities would help other Asian currencies including Indonesia as the Sell Indonesia buy India trade probably winds down if the Rupee remains weak in the face of weaker commodity demand from lower global trade demand for commodities Oil and Gold controls will therefore only help the Rupee gain back ground rather than fixatiing on government support from $289B in Forex reserves.

At certain points in the climb though Rupee does acknowledge the weakness of the Euro and that could be material in bringing the rupee to competitive levels and win back benefits from the falling commodities price cycle that begins with the Dollar Index poised to hit 90.

India Morning Report (June 28, 2012) – Expiry Day is here, Nifty on way to 5300

The Big Thursday is here and stocks still have potential of a positive run despite a continuing more tentative move that seems to be taking Nifty the hole 9 yards to each new high especially ith the Dollar linkages still in the equities segment. Dollar should be weaker in CDS trading today as the upmove is confirmed and most tail events behind us with the Presidential battle on. The SGX is enjoying its moment in the sun as a leading indicator of the collective sentiment and Sensex futures are doing fine too in this and the July series. July series positions include good rollovers in Public sector Banks like Bank of Baroda, big moves in the Big Four in Banking and that could mena a big upward correction for Axis in which shorts continue unabated.

Reeforms are not likely to be germaine with  a valid impact on the markets as most would be actions on direction we have seen turn out to be wishy washy temporary cliffs for bears in the wild. india however continues to hold the solitary hope for a global recovery with China yet not buying and the BRICs sentiment challenged globally by fears of hyper inflation which india watchers and India bulls know to be unlikely in this part of Asia

Reeforms are not likely to be germaine with  a valid impact on the markets as most would be actions on direction we have seen turn out to be wishy washy temporary cliffs for bears in the wild. india however continues to hold the solitary hope for a global recovery with China yet not buying and the BRICs sentiment challenged globally by fears of hyper inflation which india watchers and India bulls know to be unlikely in this part of Asia

More to come..in this ‘short bout of volatility’

English: Company logo for CLSA Asia-Pacific Ma...
Image via Wikipedia

There are miles to go for India to even try a fair chance for GST, DTC and Infrastructure investments to name just three seering gaps. CLSA downgrade of India – biting for Sensex levels of 25% lower near 11000-12000 could be the ‘tru dat’ of a sinking European bank season as it hits Asia at a very vulnerable time. No one should deny the loss of purchasing power of the rupee at a rate of 60 to the dollar . PPP terms should thus become wider from the current rates again

However, Banks are being targeted somewhat unfairly raising old concerns of it being because they are our only liquid stocks that run on financial assets that can be willingly spiralled into submission. And that is perhaps precisely the reason they could be targeted. One could see India testing hyperinflation and other denigrated “IMF tenets” of deficit economics being raise by this hot money tail. As funds lose close to 20% and a s flight of capital also ensures lower than 80% availability of locked capital, it is unlikely that anyone can defend against the shorts that are required by traders to recover income in this cycle for their investors and clients.

Global fundamentals demand perhaps that India understand the downward spiral like the other sovereigns. Of course that still does not deny that we were at least 5-6 notches better than Italy and Spain, whereas we have been alooof to the crisis because the “developed world” of the med had a lot of downward catching up of ratings to do with the emerging stars like India and China. Unfortunately though, we have lost the chance to be an equal with China, irrespective of how proud we are of our distinctive identity

China's FIRST McDonald'sWith the dip in stocks on non conformation by the RBI ignored for a late afternoon sell off, Nifty could well do another 250 points till Thursday. I would suggest waiting and watchin gon bargains with a holding capacity of 10-15% of paper losses at 4200-400 levels

Happy Thursdays! The India June Reports on inflation and expectations

HSBC global locations
Image via Wikipedia

with the Friday tray of goodies gone..diesel and LPG are upgraded to almost profitable for OMCs. India inc is on a roll waiting for the fuel inflation to build up in the July treports. Stock market volumes across India, US, China and elsewhere have been down by 10-30% ( in the US NYSE now trades 17 bln shares a day) . However, the commodity prices going down have helped the cause of investors vis a vis inflation hawks and the market is showing a lot of skin and a fresh round of global FII recommendations for the next half of the year in India

Last year around the same time, we had taken up increases in the price of petrol and the cascading effect on inflation was pretty tough scare for India Inc. This time Diesel is even more directly linked to input prices thru freight but everyone would be happy if the RBI kept raising rates allowing a sneak vision of even a 20000 target for Sensex. But I would not be fooled with food inflation still 7.7%, fuels still 13% (before the impact of 5-10% hikes on Friday) and inflation still 9% for India Inc (week ended June 18, 2011)

Also, it was great listening to Wilbur Ross on the differences between European and American Banks , the critical being that Our credit deposit ratios never exceed 75-80% unlike Europeans which thrive on 120-160% Credit Deposit ratios but Cost Income ratios are intact at less than 60% ( Of course that does not include global survivors like HSBC and StanC)

The Bombay Stock Exchange, in Mumbai, is Asia'...
Image via Wikipedia

ONGC finally sets sail

Oil and Natural Gas Corporation
Image via Wikipedia

The answers to a higher fiscal deficit may well lie in ONGC’s FPO next month as paperwork gets done. With a higher subsidy burden a conservative valuation is a must.. Esp so as the eGoM has never met to even raise Diesel prices. A sale of more govt shares will bring back the Oil major above Coal India, which crossed it in May 2011. With a Market Cap of INR 2.2 Tln, ONGC still lacks the capacity to pull out rabbits from its hat unlike its early hey deys and the coming fall in price of crude may further squeeze its profits. The offering will garner close to INR 10,000 Crores at a 5% discount to today’s market price of arnd INR 253. Retail discounts do make it available to retail investors but with a larger institutional cover , the issue will go through esasily unlike SAIL which withdrew last week ( rescheduled) SAIL would have got the government another $2 bln. PSEs in India have added weight in the Sensex since yesterday’s annoucement for adding Coal India replacing Rel Infra in the index

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