India Morning Report: Markets rest at new record levels, Banks catch fire

Except of course, Bank of Baroda and Bank of India, the PSU Banks who along with All Bank are in front of the NPA tether and are likely to again underperform in results announcements today undermining the market’s expectations with a definite taste of the macabre doing the paperwork accounting for to decades of profligate lending. In more operational markets language, others like Dr Reddy’s also hold the key to big moves as markets let go of smaller volume picks not in fashionable upside with institutional investors chasing Indian weightage in their indexed EM funds. That of course includes Hero losing share to Honda and Maruti making 3X profits with the Yen a big part of the story this quarter.

English: MSCI Logo
English: MSCI Logo (Photo credit: Wikipedia)

IDFC is likely to get a good post results after taste into portfolios (despite its ext from MSCI) and so it will be crucial that it comprehensively outperform as foreign investors come back to India bonds and equities unconcerned about coalitions and hung parliaments. The No Taper refinement yesterday was not material to their return either though it is not a carte blanche as the more optimistic from Asia might have expected of Lady Yellen.

Cipla bore a heavy brunt of the funding trade and drags some of the other (Lupin) Pharma choices with it while Glenmark and Cadila will continue carrying the market flag with meaningful bumps from export earnings and real greenfield growth in market development the mid cap strs have shown to be ey

The expiry day seems to be ignoring the 6350 target in the morning session but it may just become a case of having decided on its own expectations for these results candidates. Retail investors shuld not be expected to return in the middle of Diwali spending season or even otherwise. The Indian AMCs have together more than INR 8 Tln under their belt currently and like the taste for FIPS showed are not averse to increasing enchantment with Balanced Funds as Bond markets xpand(General direction ypothesis to play out till 2025)and pension players get active taste of equities along the general direction set back in 1993/2001

Banking hopefuls like Magma Fincorp and Muthoot report results as things look to get better for NBFCs. Now is a good time to load u on infra NBFCs both Powergrid and REC/PFC/PTC

As mentioned yesterday Bharti has crossed  a rubicon with Africa markets reporting profits as new Telecom auctions also level down on expected prices in domestic circles

 

India Morning Report: Banks earnings, GDP scares markets despite inflows

English: comparative advantage in economics
English: comparative advantage in economics (Photo credit: Wikipedia)

The longer term investors can finally see the difference between potential and fact in India inc but are unlikely to leave in light of the comparative advantage India still holds, while trading flows may well continue to come back to India at 5900-5950 levels as markets bother with important questions across Bank earnings disaster spilling over to Private Banks despite the unlikeliness of the scenario.

Banks apart, breadth investors except for passive funds and India bulls since nineties are also likely to be worried instead of being enthused by the markets remaining bulls getting shepherded into Pharma and IT which remain defensives but are being listed only for their Rupee Depreciation advantage, and thus not a real page turner for Indiaphiles

The Rupee strength thus breaks correlation from equities and with GDP numbers likely o breach negatively in non agri sectors, the situation for Monday open is also grim as is the PCR rise in the rally till Monday/Tuesday. US yields have come down pretty low yesterday after the GDP announcement. Ambition targets are back in Gold and Silver and retail consumers might even be hoping markets ring the bear in Energy markets and Oil goes below 100, which might erase the questions rought forth by Export parity removing margins for Oil Exploration and Oil marketing Companies

Rupee raging stronger than 62 levels might also see slower additions to NRI Deposits while raining inflows on to 5950 levels was easier for all categories of India attracted offshore investors, QFIs and NRIs

However if markets expect better Auto and consumer sales performances in non durables to shore up immediate performance, then this might well b the end fof the rally. Money is staying in however and Energy and Metals are likely to be th new stars apart from the continuing rlly in Pharma. With Sun Pharma and Glenmark leading from the front today, Cipla and Lupin cannot be far behind and next week will continue this discussion of India’s prospects from much the same levels than breaking below 5800 or such as whatever possible policy measures are enacted , look positive and on eecution rather than playing to the galleries.

At this point another market created distinction may be also worthy of reminding. ICICI Bank  portfolios in loans , retail and commercial are likely as resilient and more than HDFC Bank which is already recognised among winners in the Higher interest rate scenario and the pressure on ICICI Bank may well be just the wishlist of public sector banks and DIIs and margin financed players trying to equate the inefficient public sector with the private sector counterparts.

Bharti, ITC and Bajaj Auto lead my list of high performers, while IDFC , YES and ICICI Bank may see lower levels yet but are good investments. One feels SBI is about to take a nose dive for its own follies rather than be part of the market standoff, and is not really at value levels especially as the higher interest rates hide its already bleeding NPA portfolio and the ssame is not true for PNB and some others but not UBI and BOB either. ING vysya may b a good pick but their emphasis has not returned to India and Indusind has probably already done whatever it could and will enjoy some sedate growth yet along with HDFC Bank will be scoring 20% topline and 30% bottomline growth regularly

BHEL is obviously our only turnkey project executo es in the Power sector and probably will not hit any below book value pick (from Religare) in  a hurry and at worst may prove a big struggle with the bounceback already started. One might look at Kingfisher’s example which lasted a full five years as a everything for everyone scri from 2007 – 2012 on the back of a improbable comeback and which has just started paining lenders while paying slaries yet to executive management Which remids me, heling Laloo with the Ordinance delaying incarceration due MPS suspension/exit may actually be quite a big setback for India tan imagined by a coalition government extending the courtesy

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: Weekend results from Cipla, Sun, vs the ultimate low for india’s production statistics

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

 

July and August data that comes in the next few weeks could make the data for June and an almost negative IIp at the cus p of the biggest Rupee depreciation move since May 22 seem like next to nothing in comparison as Services crash in on the devolved growth mandate and curbs on non essential imports kill any remaining Hindu growth consumption in the Economy. Auto sales reports for July from Siam are as low as 131,000. Mauritius and pakistan could robably account for more cr registrations in a day but that is not rater affecting India inc.

 

The day has started well, with the obvious move back in Power NBFCs that could well merge into any revival of demand even as investment lags in corporate India have no end in sight. The revival of demand in such services could lead the way back to growing inventories , before they become a hangman’s noose around dealerships and the robust credit is used to demand off take back to a positive IIP. Today’s IIP reports and Q2’s first GDP estimates next month could thus see their worst data to come . Cipla’s results for example showed a 17% domestic sector growth, a continuing island where branded goods in both FMCG and Pharma will continue winning share at the expense of the unorganized market in sch a slowdown and Corporate India and Banks could easily maintain a non negative topline in the September quarter

 

Hero Moto is already responding to the covering rally as if its worst is over but then that is just a n ver motivate d market looking for trading gains as sBI results bringing in the last wreath for this quarter’s rituals on a continuing mourning for unreported asset losses being absorbed into the system even as the banking system gets ready for new stresses on asset quality as interest rates rise even before the coming injections of liquidity once the rupee stabilizes, but Corporate India performance and the continuing unique growth measures of India ensuring that things do not continue n the worse vein but grow back a clip from here even bringing back investments as Savings and investments have both been cut to the bone.

 

Jyothy Labs reports another big jump in profits to 287 mln after a` 4920 mln profits from Cipla even at a bare 25% EBITDA shining as Sun Pharma’s EBITDA after a bad quarter is still a giant 44% on almost a $1 Bln in Sales but needs to be penalized for the ` 3000 mln loss this quarter from the settlement

 

 

 

India Morning Report: Global investors may not withdraw from equities

Citizenship For Sale (Garage Sale 2012)  ... F...
Citizenship For Sale (Garage Sale 2012) … Foreign investors flock to U.S. (June 11, 2012) …item 3.. Monumental Maneuver (Jun 20, 2012) … (Photo credit: marsmet481)

 

While US tries to balance its Economy after a spate of QE liquidity is seen as injuring fiscal and monetary health, a rise in interest rates in the Economy with or without inflation could do wonders for the paradigm of growth as China and Japan return as investors in US treasuries and 10 year yields rule around 2%. The US economy may not be able to break the limits of a sub 3% growth even if yields spurt in the next few years in the US even as Europe falls back in an extended recession and the South catches up, esp Italy and Spain with imports to offer to the rest of the Economy making a brilliant recovery this 2013
However back in India after the deep cut yesterday, the Economy is very much invested in and FIIs are unlikely to leave this isle of relative prosperity even as the struggle for relevance continues for India Inc and Domestic consumption keeps the beer head on even keel if not frothy.

 

Indian currency would have few takers in the rest of this month before the budget speech even though the Cuts in Borrowing would lead to a minor rally from here as the Rupee was anyway unlikely to move below 54.50 levels. Yields at 7.8% are likely to be a defining high instead of the 8% plus seen earlier in 2013 and may creep back from there as Asian investors withdraw from the Global rally but funds flow to India are again unaffected

 

Markets would choose carefully between equity choices on offer esp as the cut in Private banks by 4-5% brings back another choice of PSU bank investors into those chosen to run with (Investors normally choose to exit than reenter same scrips on a trot) but Energy and even Metals are likely to be in favor with Cement and Sugar returning to Demand pull after a long time and it is likely that Banknifty might still be rerated or reconvened ith a higher private bank weightage in 2013 .New nifty index scrips also seem to have lowered the impact cost for the index trades and higher index liquidity could be critical in roping in new funds for Indian Markets

 

Henderson New Star
Henderson New Star (Photo credit: Wikipedia)

 

Again I would still prefer no straddles be bought as they bet the markets will necessarily move and strangles be not capped at 5900 or 5950 esp if your investment is limited to even a few lakhs. Lupin, Stride Arcolabs, Glenmark and Cipla make excellent investments again. ICICI Bank can be accumulated at current levels. IDFC and stolid infracos will lead the new rally movces and it may be soon on budget announcements but that one is a vain hope not worth long term investors’ time or money

 

On Wed, Feb 20, 2013 at 11:00 PM, Amit Mittal wrote:
>
2011> more sectors seem to creep into the equation as the marketstructure gets hijacked by those trying to make it look like the same as a retail investor could do in the fun 60s rolling on the floor…but Power NBFCs led by REC and PFC remain good moves in 2013 and PTC could get a bigger stronger role in the quad with Powergrid unlikely to lose relevance and despite roads being deprioritised, there may be enough speciality infrastructure bids ( I mean ports and urban planning ventures as well as welfare structures for the new deal) to keep all other infra midcaps floating. Also I personally back GMR Infra and Reliance Infra while berating overleveraged pops like even GVK and some mid cap Mumbai Real estate juggalos

 

Five Rupee Coin
Five Rupee Coin (Photo credit: Dinesh Cyanam)

 

 

 

Morning Trading Strategies (addendum to India Morning Report) : Shortson IDFC and LIC Housing seem…

English: Logo of Etihad Airways
English: Logo of Etihad Airways (Photo credit: Wikipedia)

Yesterday’s move up was a defining one and is likely to be bet dowwn in today’s reaction. Also, infra is likely to be rated down as Election year approaches and India inc battles with inflation. However shorts on larger movers like LIC Housing and IDFC are unlikely to give more than the required minimum in the reaction and remain larger movers on the upside. Also Jp associates as expected followed last week’s DLF into the quagmire of being shortlisted wwithout a salary for the bulls on offer and are unlikely to be further good for more than a 5-10% move down or up. Similarily Bharti , another favorite on the downtrade, has already reached barely 300+ levels and may not move.

However, the loss of control in the Aviation investments being sidled in are a serious issue the market swill discount as Air Asia gets sleepy Tata and Bhatia (mittal in laws) investments and Etihad goes out demanding CEO and COO positions for its investment

Maybe a leg in Pharma before an upmove and that highlights Lupin and Cipla, while OMCs also offer an uptrade and private banks below ING and Indus ind in the pecking order get picked up further on deal buzz (warranted or otherwise) including Karur Vysya Bank, Federal and South Indian Bank all with almost no

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

available float for takeovers or buying of a NBFC to expand footprint.
Maruti is still not a blue chip for the Indian Market and Hero and Maruti infact make for a big short i would try as they can be kep t open well into next week a day before budget moves take over

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: Markets dodge the overvaluation scare with timed tears in the market fabric

 

It could still be a time to buy..

Ofcourse anysuch big move like the inflow of INR49.50 B in September would cause the 6000 target to be completed in December on the Nifty. The time to buy stems from recent well timed correctionss bringing up time to fill the tears in India’s struggling and listed consumption story.

The tear in the consumption fabric has filled up

While markets are tentatively suggesting a bad Q2 which just means it would not be a surprise when it does land, the mid cap Consumer plays have filled the gap for seasoned traders with Dabur still on play today at 135 levels. One feels similarily Lupin, Cipla and ITC and Bharti Airtel could be buys and no one attempting shorts on those plays will land anything tenable this week or next even if the markets stay in consolidation not uptick.

Real consumption is going to bring the real scare..

It is also similarily obvious that despite the protestations, Q2 results will actually revive profit growth and thus the real scare is that the slowdown has continued from September into Q3 and thus the jump in September results will be actually followed by a dumping result of the real bottom in December while India’s services PMI supports the current India outperformance fable perfectly with a 54 mark from 52 in August keeping india in the lead with 5% + growth globally. 

Time though for the banks to not rise too fast in the meantime and HDFC Bank is right now correcting sharply to keep the indices from floating up beyond reason for pressure on DIIs and other traing FIIs to enter the market at this stage and book 200 points on the NSE indices having already spent two-three months waiting

THERE ARE NO SHORTS on HDFC or HDFCBANK implied in his report

 

Morning Trading Strategies – India June 27, 2012

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

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

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

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

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

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

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

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

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

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