India Morning Report: Wish you a Happy Festive Season and a prosperous New Year

The diwali diyas at Diwali Celebrations at Ban...
The diwali diyas at Diwali Celebrations at Bangalore 2010 (Photo credit: Wikipedia)

That of course is Diwali day trading, a welcome to Hindu Calendar year 2070 ( there are many variations of this year 2070 too, and we follow the ‘Vikram’ calendar ‘officially’)

Goldman Sachs has upgraded the season’s new watermark to be 6900. Others have posited a 7500 mark to aim for till next October and the markets are a little broken, down 30 points at open in sync with the rest of Asia and most market operators simply look at the number and believe it is more about building that appetite for new levels and with buyers primed by the good analysis floating all around, and retail investors held away by “the urge to splurge” the trends are rock solid this instance. ITC is still funding the new entries and new shorts have been segmented in JP Associates, ITC and IT in the F&O market

After October’s record inflows, the November marks’ buoyancy is likely to create a currency ripple and strengthen the Rupee to 60 levels and probably bring Fixed Income yields down by 20-30 basis points through this month and by the time equity series expires on November 28. The day is off with short calls and if the trend is indeed sustained above 6200 levels, the first target will be the long-awaited 6350 rush. domestic institutions will be staying out in this rally and unless you have an appetite for longer term investing – YES, IDFC, ICICI (down 30 today), ITC, Bharti – you should also watch from the sidelines and trade in derivatives along strict lines for the big bang when you read the risk.

The institutional hedges ave to move from shorting the index this instance though some of the longer passive fund s would still short  at the OTM 6750 levels. A 78 Rs move in Reliance has made it the largest contributor on the Nifty and as was its wnt in the 90s, its stemming the correction singly. PSU bank trades were no trecommended here, esp in Union Bank of India and Indian Bank ( a very counter intuitive “bottom of the rung” move by bigger tier 2 operators /proprietary desks at indian brokerages)

The Sell on HCL Tech (Prakash Gaba) is an instant success recipe and remember to book your profits. The shorts in Powergrid and any dips in REC are good opportunities to buy . In fact REC is good at current levels even s press notes of further clearing of roadblocks in projects worth INR 4 Tln are not worth the sound bite, but the infracos have the rights to an ultra explosive take off, IDFC already up 12-15% in the crossover. Real estate will not be too hot despite the great results as the pressures remain, gold demand down 40% after a non-existent takeoff in coins and other investment bullion trades. Metals rally is on, though with the miners (related) NMDC and Coal starting back in favor. Gains in HUL will be along calculated returns for high yielding investment strategies. MidCaps are going to have to wait

 

India Morning Report: So, what exactly is out of favor?

Bengal Ambuja Upohar Condoville, Kolkata
Bengal Ambuja Upohar Condoville, Kolkata (Photo credit: seaview99)

 

That seems to be the important question settled by the markets at 6200 levels as they now plug out of trades that may not happen and get a chance to incentivize good results by penalizing worse performances in erstwhile favored stocks including defensives. Thus capex companies like L&T and BHEL are out of favor with BHEL leading declines as punters drop the hot rod for the new variety available. Globally Consumer discretionary have had an exceptional year so more QSRs and ITC will be available for the switch as the Indian markets complete a small measure of transformation with new gen IPOs.

 

Exide similarly will be penalized heavily for a recidivist score, ike other traditional family managed Indian companies including Asian Paints. The straddle ranges moved out but have come inside 6200 again and the markets will lose steam till 6100 maybe as confusion reigns in research and trade between how much of a urban winner like Bajaj Auto can score int he same trend when Heromoto has come out with a pre festive statement in its results. However good Heromoto may be, an exit from Bajaj Auto at this point is likely to be a missed opportunity as also probably the chance to catch M&M and M&M Financial as they make it to FII portfolios and ramp up scale of performance. The CLSA short on Bajaj Auto however seems to be a pime example of research gone wrong and could be ignored by markets

 

Pharma and IT are not out of favor and banks not leading the rally post Capital infusion also is a done deal but banks will pull up more than most others in the Diwali season and before the next state elections are completed. ACC and Ambuja similarly posted bad results but are probably at the end of 13 consecutive not so good quarters ( Except for Ambuja’s strategy specific wins) Energy is as of now a big disappointment in the last 20 trading days and again may see some speculative interest as Oil at its lowest for WTI seems to get stuck at 108 levels at least for Brent and other Middle East varieties

YES, IDFC and ICICI Bank are back in the running and are definitely your best positional longs at this juncture for the entire shorter two week or longer 13-26 week horizons apart from the usual additions to investment portfolios

 

 

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 Closing Report – Week Of September 24-28, 2012

 

The CDS currency series on the USD is finally trading below 53 as expected starting back from 53.5 2 days ago an dis this time likely to go below 52 intra day in the Ne October series as gold and Silver importscome to a standstill before Diwali on Nov 13. International prices of Gold move in tandem with Indian jewelry demand and the bottom is a certainty the market has seen over the last 20 years internationally and locally

Retail FDI aspirants are active and biudding up their real final control equation wary of the $100 m in 3 years and the back office requirement as they run for good M&A possibilities int he space. Aviation rerating from FDI is abviously because of more international demand for listed stock from Spicejet and Jet to Kingfisher and perhaps unlisted Indigo and Air India as well

The jump in Nifty is a little bit of a surprise , one expecting the bull commentators to again not again get any returns in the fresh series gambles and while new picks have not succeeded the enduring stories from ITC to ICICI BANK and IDFC have not disappointed. JP ASSOCIAT deserved the run and TELCO’s (TATAMOTOR) mysterious run continues flummosing all and sundry a nightmare compared to REliance Capital and Rel INfra’s expected rise and fall on good and bad days in a spree

BHARTI is still at reasonable levels but given that it is  a less than 50% holder in front office big retail with almart expect some investor groups to leave it for its portfolio fo international /US investments The bump isn profitability if that is the hope is still a mirage a nd a lot tof hard work from the management returned in kind by new consumers and governments important for that to happen. Th eDCHl case is a mite mysterious as ell, ICICIBANK obviously relying on the IPL franchise name to the latest tranche of loansin 2011 and now the immediate restructuring while YES holds out for franchise assurances. USL rise is likely limited from here as promotores have already haked therir stake for collateral , almost the entire 27.7% and their hoep from a Diageo/KFA investor treasury purchase is on debt improving the bottomline from a upto 50% drop in interest costs

 

Happy Thursdays! A good day for economics

Hero Moto Corp, HDFC Bank and Bajaj Auto all hit expectations right and made merry of the third quarter encompassing a giant Festival run for India from Dusshera, Diwali nad Id to end with Christmas and the new year celebrations.

Quarter on Quarter comparisons showed up great daredevil performances by industry leaders even as food

Mitchell Johnson bowling a delivery on Day 2 o...
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inflation, negative for the third week in succession, for the new year’s week ended Jan 7 at -0.42% and Primary Articles at 2.47%, fuel still 14.45% and onions still down 75% on the same week last year. the 52 week average for the jan 7 week (nasdaq/rttnews.com) is 9.96% and this number considerably lower near the 7.41% number for December 2011 Fuel weightage is 31%, and non food articles at 20% weight scored a low 2%. Primary Articles were less than 0.5% for te weeek ended Dec 31 last week

The Nifty stayed above 5018 and you should be buying puts now, (check our choice FAO strategy) as the index may not climb further to 5100 from here without a plateau and thence the breakdown. The remaining optimism will remain on call from today’s results however.

IPL auctions come back in February, with the entire South African team and the choice speedsters including Peter Siddle and Mitchell Johnson on the block from down under.

Back in financial results only 47% of the last two months results announcements were above par in the US incl Citi and JP Morgan below the line and headed for more pain in 2012.

 

Predilections: The Organised Mindset of a bear

Diwali celebrations in Coventry, United Kingdo...
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Or, What you should be doing when the markets go dropping off that Pirate cliff:

1a. If you are thinking about buying gold, do rethink about that one as Gold has to wait for strong bearish pronouncements to move from here. However did you know that Central banks have bought 150 tonnes of the metal in one week and are still at 10% of the levels they held in the 90s when they sold and everyone else bought gold.

1b. As Central banks count as the most followed buyers right now, Gold’s meteoric rise in the last few weeks may restart Also India becomes a candidate for taking everything down right now as it gets into a tighter inflation high, currency weaker every day and deficit unsent kind of tougher twirls with a higher and higher downside, but then we would still do 7% growth so do not think of a a market below 4500 Nifty, really ( even if it breaks down to 4420 you can beasar with me, right!)

1c. Did you recheck your list of stocks to buy: All time lows everyday present great opportunities for investors out there to verify at leisure. You have at least 2 – 3 weeks to select, drop and re- select winners..

2. Watch that hollywood movie that gets released in India on time during market hours..You could not get a more predictable market direction with no trading bumps mid day since last to last Friday. Also Disney and ESPN are doing much better this decade than their worried little India doobies of a decade back, esp as Pizza and China surge

3. Reorganise India’s infrastructure priorities, find time to review M&M and Unilever (Despite a fundamental change in the fortunes of these two companies from directed strategy, they get good results and attention on a tough down day only, talk about predilections)

4. Teach other knowledgable friends – Who being optimistic on India esp during MSCI re organisation will be full of ‘know all stuff’ you can bear down on with gloating dripping from your eyes and mouth dfor weeks on end..(like the savoures you cooked for Diwali but did not last)

5. Figure out the Economic Indices: Wierd Inflation and IIP volatility, not to mention the staggering deficits not every month but every other month, the winning margins of a UPA government motion in parliament, the no. of public losses Anna is unable to bear and other ..Most of the economic ones we have dissected and detailed over the last three years here

5b. Count and read up the number of laws still required to be passed in Parliament to make reforms work for India, if only just Corporate India..GST, DTC, apart there are two years of laws to make new banks work, countless banking supervision concessions to be worked with to be international bank franchises including voting rights to be passed as clear as day, Capital controls on Forex vis a vis restructuring for a new indian currency instead of pegging to $1=100, are all end of the rainbow ideas that are not at stake either, the laws need a simple fresh Corporate law basis and has to be apart from all the changes to the M&A and competition code, Bilateral and multilateral agreements and treaties, and include Social Welfare, removal of fertilizer and oil subsidies and funding and execution of PPP projects such as the DMIC, (with NMP), new ports and unlimited gaps in education and healthcare not being considered for private participation and foreign participation to the extent required.

6. Tell everyone to “Take a virtual dive”: Right now is the best time to start on something you have never done before..In the AEs (RBI term for US and Europe – Advanced Economies, the latter have become candidates for REMs now – Re emerging Markets) they have even stopped asking people to start blogging, it’s so passe. You could take a dive into a shopping mall too, a good crowd as always

7. Ask people to figure out the probabilities of a recession in India: No one will put a blame at your door now that India is going to get tougher in the next2 years and who knows your chances of a recession in India may have just improved from 1 in a 1000 to 1 in a 100

8. Review your family’s eating and drinking habits: Especially those zombies and moose heads who are still stuck in your head and inner ear without turning you into a schizophrenic, trying to imagine themselves as a fund manager, not investing with you or paying you for your reports or research bothered with becoming a complete spectacle and proving themselves to be ones.

9. Pay attention to India’s Defence budget we are getting everything we need even if so late and even though China’s spin counts in the media we don’t

RBI Bank Credit Review shows small pockets of growth

Diwali celebrations in Coventry, United Kingdo...
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For some strange reasn we are dealing with September Data by Segment after getting (flash) data for the fortnight ended Oct 07, 2011 instead of the Diwali week, but do not get confused by that. Out of the INR 16 Tln non food credit, growing by the predicated 18.7%, Credit to NBFCs has grown year on year from INR 1.16 tln and INR 1.56 tln sometime in June to INR 1.83 tln or $36.5 bln Total creit had grown to 42 tln to the last week of September as already covered.

ET carries a detail table based on the RBI release not carried online The misguided analysis by the young ET analyst still shows an ability to review the data though home loan growth has actually pretty much slowed things for banks everywhere and it holds right now for India oo and any patriotic assertions not backed by data do not do good to India’s investment inflows

The gold mine of data is apparently located at http:/dbie.rbi.org.in. The segmental breakdown (thanks to the villains of all financial confusion at moneycontrol.com)

As margins in retail industry contracted, food supplies incl Tea and Sugar companies took credit off the table in 2011, while credit to industry grew at 22.7% and Personal loans at 15%. From looking at the Auto sales data, it is apparent that the trend in personal and NBFC loans will continue to grow in October as well but at the expense of mandatory big ticket spends of the festival season: House and Car.

Infrastructure credit to Power is up 11% over the year to INR 4.8 tln New Infrastructure credit requirements at NIMZ under the New Manufacturing Policy could include INR 3.6 tln for the DFC and another INR 3.6 Tln for the DMIC builds However work on the greenfield projects is unlikely to take off any time soon as even in Power, 5 out 15 UMPPs are ‘indefinitely’ delayed ( nice B-TV analysis)

Growth in Credit is lower than the overall 18.7% growth in all industries except Mining and Gems and Jewelry and sub segments like growth in NBFCs credit by 46% stand out. This growth will be mostly to real restate projects already sanctioned and retail unsecured credit, not encouraged at banks like ICICI Bank but fueling a lot of NBFC and even banking credit growth

Personal Loans are a 18% of the Gross RBI credit at INR 7.02 Tln or $140 bln outstanding as of September 23, 2011. Over the year Vehicle and Home loans have also grown at 15.7% and 19% but to INR 3.06 tln and INR0.86 tln out of the Personal basket

Credit card spend has started ticking upward after three years since February 2008 from this month now at $4.62 bln outstanding credit and a monthly spend that is about the same..

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