India Morning Report: Rollovers underline a strong Thursday close, Merry Christmas India

English: Eugene Fama receiving the inaugural M...
English: Eugene Fama receiving the inaugural Morgan Stanley-American Finance Association Award from Rick Green (Photo credit: Wikipedia)

Inflows have been strong in second half of the Calendar year and Net Exports have been rising (nice, Manishi RayChoudhuri/TV18) . RGR was a brave face as he shot down the traders bamboozling him and the follow up interviews by the Guv on both CNBC India and ET NOW are great hits but without Investment to the real sectors and not real estate or Financial markets the return to 7% growth levels is a shard unwritten.

I hope he can stay off some future rate hikes too even as the auto sector underlines that the recovery has not happened tomorrow or this month(January) either. Fixed income yields still have a chance to return to 8.5% but then thats me hoping in counter balance to markets hoping for free money on a tree, any tree! (lolz)

New Open Interest at the start of this week even makes a 6500 close to the series possible but probably we will stay at around 6350, no less. HDFC Fund”s INR 150 mln-200 mln purchase of the Morgan Stanley funds is like showing up how tough it is and will be ,  while hiding the almost nationalisation part of the transaction, allowing a stuck Foreign fund an exit from an incalcitrant (Recalcitrant plus contumacious plus that commission factor?) market it is unable to grow not unlike Fidelity as entry loads bring bak the downselling to th slow growing asset markets that have still grown from INR 5.5 Tln before the crisis to almost INR 8 Tln today, the indexes barely having moved on the round trips in between. HDFC Fund’ last big buyout was when it got the top performing Zurich funds and till now has been masticating these previous transactions without any growth and is unlikely to start growing from here despite the 400,000 new customer accounts left high and dry. Market sentiment is indeed positive and getting better and may the DIIs forever looking for a bargain keep cash and money markets running to good demand for Indian paper.

Back in equities, the markets are busy rolling over their bullish positions on the penultimate day of trading in the series and the shorts have to probably fall out except for the 6500-6800 Calls on the Nifty which can be written with certainty till expiry, now predominantly in the January series, given the markets are eager because of the safeplaying, to turn boring January into a contest of Fireworks from both bulls and bears but probably with a 6300 bottom till some big negative news plays out not counting out inflation as Rural CPI may still sike and Vegetable inflation may still fall behind the news of prices going down last month

YES is a great buy even without a new IFC contract signing, IFC’s co lending probably its most profitable program in the subcontinent and its return augurs well in the last decade and more in jumping up Investment in India but with intthe currency hanging it will probably take a few more Dollars from them to move the trend to the Indian waters this time around. Hopefully, EXIM Bank does not need allocations from the Government in this quarter either to move export credit and keep double digit growth in Exports on track even as the gains from a gold clampdown disappear

Individual stocks

The sells on Jubilant Foods may not be needed for substitution of ITC into buy portfolios betting on the recovery nor do straddles get anything in the 6300-6500 range in January ( Ashwini still out of depth a little like the DIIs without a correction, though there  has never been any benefit to markets in acceding o their demand for lower levels , tabs , whatever. Interesting downtick in Volatility this week, One thought/heard positive volatility had disappeared totally. The only remaining downside risk to the market now building up is the jump in Canar Bank stock and such investors and advisors now again rooting for select PSU bank stocks.

Update price not disclosed, the MF purchase cost HDFC Funds upward of 4% of Debt fund AUM

India Morning Report: Market correction sows signs of split down the middle?

English: Human Capital Investment Model!!
English: Human Capital Investment Model!! (Photo credit: Wikipedia)

The correction from yesterday’s opening highs continued into Tuesday, as markets have opened with Banknifty below 12000.

What has transpired is that the correction and the realisation of the individual mixed fortunes of investment sector favorites like L&T and BHEL have combined with a strain of distraction from the recovery as investments into the real economy continue to lag and the same has seeped into the other Capital investment beneficiaries including drilling and project engineering stocks like ABAN and others, forcing the markets into a rumination on whether markets will resume any bullish candles in the remaining days of the week settling in at 6350 levels for most of the interest additions till mid series. Pressure on markets will however ease as Put Call Ratios trundle up on every such small reaction and saturated markets will only unwind shorts. Thermax is definitely on a stronger wicket compare to other Capex companies

The FII portfolios had added $5 bln of flows in the market rally since September, all being attributed to a BJP vote and change in government since Sunday but the production data coming towards the end of the week and the RBI rate hike designs may likely be sullying the recovery for the markets. The Fixed Income yields are down again to 8.88% after showing the strong surprise in splitting from a strong rupee back into the historic strong Currency /Bond markets stream at 8.88% yields after Rupee also lost most of the gains at 61.25 in the morning’s trade.

The RBI’s cause to not live with Inflation seems surprising as also the increased likelihood to get the MSF higher to 9% in next week’s announcement with a corresponding 25 bp hike. However as Rajat Monga points out in CNBC TV18 snippets, the banks are quite comfortable with the current liquidity given the policy rates and the bond markets at 9%

NTPC struck 10% lower after CERC guidelines announced take Power Reform to a new level. NTPC has been utilising the gap period making up for unavailable guidelines by showing tax activism towards consumers which has been hit b the regulator primarily as it also moves towards Generation based incentives

CERC reforms have hit ancient contract ridden NTPC which continued to charge differential tax rates to customers while paying lower rates at a much later time , an arbitrage blocked by new CERC guidelnes. Distcos will not be impacted as much with Hydro projects enjoying a 35 year useful life along with the Distcos and Powergrid will be connecting the South grid adding Power to shortage marred Andhra and TN

Comment period lasts till Mid Jan for these guidelines whence other clauses impacting the Power companies will be clarified but do not impact the ROE assured by CERC for 12% on older PPAs and up to 16% on newer pricing including PPAs

English: Image depicting Central Electricity R...

 

Happy Thursdays! The bank rate catastrophe | Advantage Research

The North Block, in New Delhi, houses key gove...
Image via Wikipedia

While the “bank rate” has been already used into Indian policy as the commercial benchmark for banks to lend and thus borrow, the policy rates set by the RBI in the ordinarily and now by policy fixed channel of 100 bp has definitely made Fixed Income more interesting with yields touching 9% soon whenever a rate hike of more than 25 bp or a WPI inflation move to double digits is confirmed even as a blip. Luckily, the ECB rate hike would already be done tonight and we have a week before talks on QE3 are more than an idle opinion at PIMCO.

As mentioned in the networks ( by Commodities experts, I suspect) the end of QE2 would soften the inflation blow for us and if it had come six months earlier, India may not have been tackling hot inflation either, which unlike in the case of China is not from overusing existing domestic production capacities and is more from supply inefficiencies and the skewed pricing vis a vis dollar we sustain for our exports. Also, before we forget challenges continue for our forex earners in other punitive action vis a vis knowledge workers and the expiry of the Doha round, even as a great performance on the fiscal deficit at 4.7% outruns our dismay in FY2012 for a likely 5.5% deficit an almost 20% jump without Telco licence revenues and lack of availability of cost cutting measures as we continue to under invest in Infrastructure as also Education Welfare and Healthcare.

My analysis however begs again that we find the space from the globally inspired inflation that has been unwillingly thrust on us and soon because we really never could afford a tight monetary policy for the Private sector or stop printing money for Welfare schemes. The catastrophe being in the RBI having to hike rates ( and they will raise it again) to bring inflation under control and keep growth moving forward when a drop to 7% growth does almost become standing still for us because of our size and diversity

Up ↑

%d bloggers like this: