India Morning Report: At the top, VIX = 18, NSE Nifty = 6535

DIIs are again trying to correct the market levels hoping for a bigger correction sooner than expected as markets having scripted a recovery trade from all time highs of 6500 level look to executing the same fueled by FII investments. Hopes of a mild correction in Banknifty continue as trades from 12000 levels in Banknifty are also stymied by the lack of positive PSU trades, SBI and BOB still counting as fundamentally short picks. PSU Bank Capital plans are likely to strain Government finances as Insurance companies also reach their sector exposure limit of 25%. It remains inadvisable to increase sector exposure levels from 25% as well and the problem is likely to get complicated as many PSU banks are unlikely to stop NPA accumulation at the 100 bln mark they magically topped up to in December 2013.

Meanwhile the Powercos (Distcos) supplying to Delhi have a long expected bonanza in regulatory assets allowed to be claimed by the State Regulator (DERC) (–see BS lead of date )but apparently the price rise and yield is already been priced into Rel Infra and Tata Power ( Tulsiani)

The VIX trade in the meantime flies off the handle at a tepid 18, the move from 14 to 18 completed in all of two trading sessions on Friday and Monday as Option writers finally got busier and naked calls and shorts covered out at Monday highs and markets continue upward. The PCR also is likely to be stretched at best to 1.30 and till then considerably larger highs could be established for the markets to return toa as indeed foreign buying of INR 16 Bln on Monday is likely to be followed by more such thrugh this week with many shortlisted stocks showing new stamina including Bajaj Auto which is likely to go up to 2050 levels if not 2150, Bharti which is still at  305 levels and can trade up to 335-345

Buying opportunities in ICICI Bank and HDFC bank would be grabbed by the markets though shorts re likely to succeed in Axis Bank as well, with its NPA and management problems unresolved. IDFC is one of the rare scrips that offers liquid trades witha 20% range from current levels on the long side to under 130 levels and YES Bank is also still a big gap from its earleir high valuations of 6000 valued  on the same economic scenarios back in 2011 as India repeats its unique performance twice within th single minded slow plodding recovery after the banks broke in 2008

Reliance however seems saturated at 855 levels and GAIL seems to have been ignored unnecessarily at 355 levels as Pharma is likely to be ignored till the end of the week Cipla headed to below 350 levels, Sun to 580 and probable 1950 marks for DRL while domestic producers with an export portfolio like Glenmark, Cadila and Aurobindo Pharma are likely to get a fresh batch o f long term investors from current levels itself

The Rupee’s trades at below 61 levels , opening at 60.70 in the morning are likely to be followed by better and lower yields in the Bond markets as investors follow the currency buying with some debt investments in India and hopes for an investment cycle upside to India increase with easier availability of “ECB” debt

One should choose pedigree and portfolio when choosing infra stocks and not follow for leveraged small promoters as deal wins in the space almost threaten the existence of such corporates instead of improving their chances given the debt raising limitations

Infy and TCS are already topped up in investor portfolios and current falls are fundamental revaluations and not much institutional trading is likely happening in the two stocks right now

The 2010 consumer flotation offers including Talwalkars, Prestige , Page and LL remain premium stocks with Thomas Cook for FIIS looking at sectoral picks

 

 

 

 

India Morning Report: (Closed for Shivaratri) Markets hoping to be tested again at 6250 in the new series

At 6240 levels the market achieved yesterday itself, another round of consolidation is due for the markets and with the second round of investing in November having attracted Passive fund investors while the active foreign interests remain bought in, Indian markets unlike China batting on euphemisms and an opaque economy non responsive to new stimuli, India will retain most of the bull interest as it proved at 6000 levels and then two consecutive bump ups in a testy 2014 start .

The March F&O series may see more active Foreign interest returning, but it remains to be seen if markets can continue from here. In any case, markets will increase the propensity to remain flat and one suspects the new correction that laziness induces next week, may be short lived till a volatility of 18 is reached before deep corrections are completed in individual stocks closest to heavy overvaluation, namely the SBI, BOB and other PSU Bank trades among others

I don’t believe India’s increased short term foreign debt situation is causing any fresh payment problems as Oil has decidedly planned to start a bear trade globally and in India and hot money or NDF mispricing does not seem to have the desired hook on the trend, as markets might indeed get a positive pricing kicker from the NDF markets on the currency as long as Oil trades lower and a commodities bearish cycle licks in across the broader spectrum , esp those in demand in China where domestic production has not only suffered but been officially deprioritised.

Indian Fixed Income Markets seem to agree with Governor Rajan that CPI may not trend lower as the Governor sets his sights on an ambitious training target program for inflation thru required government diktat to support the Urjit Patel report. From all signs, however RGR is a pragmatist and given that India will anyway continue under the spectre of high 9% bank rate scenarios, additional rate hikes may actually hit more targeted spots on the consumer inflation , but banks are unlikely to have increased transmission of the available liquidity to the broader markets in terms of reducing extraordinary deposits and increasing effective velocity of money as the investment cycle awaits other signals. RBI also completed paperwork on CDS issuance in Corporate paper ( IG and HY) while the market continues to look for th esecular India pull to deepen India’s debt and Fixed income markets

Expiry 2 pm trades on Wednesday had not seen a sharper cut, but the markets could easily turn any new 6250 positions of sold puts into short interest could have tanked the market back below 6200 levels to watch for as expiry otherwise is a dull newsless affair, the above discussion being mere undercurrents the markets have faced for more than 2 years now. Markets are closed for Shivaratri today

Energy cos, like the OMCs retain a default rating of BBB- . Sahara promoter, Subrata Ray got a rude shock on the delivered judgement yesterday as the court issued him a non bailable warrant and ADB signed a new road project in the backwaters of Chhattisgarh.

India Morning Report: Foreign Interest steps up to confirm the boom to 6250

FII buying, now adding debt segment purchases over the last week follows on a 10-12 session consolidation in the current play on Index Option hedges and Stock Futures bidding they have initiated as a class. At this juncture the trend needs further confirmation too and borrowing on the same strategies would make much more sense in a secular trend, strengthening their overall importance in the market as they are indeed the larger players right now, the DIIs having taken a counter-cyclical opinion as always to balance the steed and likely not buying beyond the coming 6250 levels.

Even if the DII opinion does change for all investor classes buying together one needs to remain watchful and the markets will continue to strengthen their skew towards rewarding longer term investors despite the volatility at 14 levels, an extreme low for the Indian markets and all increase in volatility negating any good part of volatility. I.e. The future of the stock markets is now interlinked with all trading margins being defined by shorts and all long gains going to investors if we just look at the definition of volatility and its reward for risk.  A new Liquidity index in the Derivatives segment of the NSE consolidates price trends across the 15  most liquid derivatives underlyings and the index is now 6 months old.

Trading longs again probably negate all their advantages with a backing of almost ready to be shorted posts like L&T and SBI, which is the reason I brought in this more technical discussion for the morning Report readers. Markets open near 6200 levels on the index as markets broke out of the bear hold by breaking 6100 earlier last week.  To fess, I was still hoping for India to prove Good volatility and I would warn others  naive enough that this is not going to be so in this rally.

PNB will likely respond easier after the call auction ended as SBI investors back off and PSUs including larger entities like Bank of Baroda remain short fuses. Banknifty remains mildly positive, lending health to the trend going up and consolidating as India outscores in the Gloom quarter of 2014, down apparently only 2% compared to other Global markets and Dow having a nice return back sustaining a comeback as snow fades away in Neverland, USA, USA continuing the dream recovery.

TCS is due for a rally but Infy’s rerating looking to ride up to 4000 levels seems to signal the coming badging of the sector as a passive defensive again with the Rupee making a comeback

HSBC global results were a great comeback, though analysts following the stock did not expect Q4 to flip globally into lower revenues and while the bank remains the bigger player in India and China, it is focussing on the UK market comeback this year, UK also having ducked the continuing gloom in Euroland.

In other unlisted business, reusing quick reports from Trading Economics, FDI inflows are expected to continue to be a strong $2 Bln a little over 50 times lower than neighbourly flows into China, but in terms of Western FDI , that number is much more equitable and ocoupled with a domestic market and domestic depth in India makes for a more Economic bang in the Indian recovery seeding which now strengthens into consolidation.

Ford is ramping up its small SUV production for Export markets this year in Chennai and Nissan and GM may be forced to follow earlier than usual in 2014 itself if the global markets have indeed completed a overall cauterisation of their expectations of a bullish recovery breakout.  They have earlier over stepped in 2010 in equities and frequent breakdowns of recovery memes since 2012 have indeed made such prognostications more cautious , lending more credence to them for investors hoping to break new ground across Global opportunity.

The G20 Australia 2014 remained a hub of big activity last week. Despite the almost fully ‘denatured’ (pardon the pun) irrelevance of the G20 ( compare with a technical irreverence like applying the law of diminishing marginal utility here, and I am on holy ground) , RGR did force the conference into adopting a aggressive reconciliation towards supporting global monetary policy coordination and the Rupee has responded strongly this week. Rajan said , “International monetary cooperation has now broken…”

I like this definition for India’s new apolitical elite, used for RGR (link): impeccably credentialed , elite.

Meanwhile, polls in Delhi confirmed AAP holds sway in any new election. Modi’s claim to India seems to be weak at the point of Gujarat vs India Inc and if Congress does consolidate around the thoughts of a Jairam Ramesh (IBN Live, Sardesai interview) it could have a real chance of at least getting the right issues to coalesce around in the campaign for the General elections. On separation of Telangana and Hyderabad II into separate states, J Ramesh reminded the editor that State reorganisation is an unqualified mandate. I recommend that the word juxtapositions apart, the only way Telangana becomes a reality and the reform beat maintained is if the issue is indeed followed up quickly with active voicing of the cause of breakup of UP, the monstrous state with 75 districts and 800 blocks. Also, yes Economic development in TN and Kerala have been equally promising if not better than the Gujarat model and this could definitely weaken the economic bloc coalescing around a non sartorial, non erudite Modi who seems to be potently  walking around with a foot in his mouth as much as Rahul himself. I believe Advanu would have been a better choice for BJP too. And Congress , waiting to welcome an even younger lot with Rahul who may not all be able to pull off tags of ‘ able administrators’ make it a  ever extending churn block for India Inc ready to forget any hopes of a consolidated political establishment as the Open democracy treads the path to a Top 3 GDP country by 2050

The US mid terms similarly could still turn out to be a facesaving exercise for the Democrats reeling at their lowest ratings just before the mid terms and the chances are about even to Rahul Gandhi actually coming back to lead He will probably take a back seat from Parliamentary politics if his party does land rights to the Opposition benches.

India Morning Report: Vote on Account does not offer anything by definition

Not to be dismissive of other efforts to research quantised discernible notes in the market, we have beaten others hands down with the preciseness of each sentence seemingly in a complicated human language. And we are not artificial intelligence, just something more  populations can understand. However, that is all a predilection of becoming  part of a deluge unless we can remember the basics. Like 6100 yesterday, 6050 today and stuck at 6250 again. Or for the currency it is an even simpler, 62.50 and broken till 63.00 now returning to break 62 on the upside, waiting to break till 61 to start a trading move in that dead market Foreign investors pass by with just a tenth of the allocation to the China which would be enough impetus for investment I guess.  That is adding the currency noted going out of circulation bringing in additional thicker statistics streams of returning investments instead of churned velocity without disposition, which remains the only unexplained flow for many developed and EMs. Meanwhile India posted a latest velocity of another 12.5% and growth of 4.9% kept WPI ticking under at 5.5% , inflation at 8.8% (and still high to merit 8% rates for the RBI policy (India’s Central Bank)

Now to get thru the market open again, HCL Tech is done, L&T is not coming back so soon, having clarified there si no better financials in the old heavy pipeline they keep carrying in New Orders. However, the note of caution from Kotak does not translate into a correction in the markets, as it is a known flaw, using subsidy deferral on the way to an improved performance and as we have always maintained to PC’s weaker arm, its not anything to forget to talk of.

Banknifty is at 10,250 but their seems to be a dearth of substitution for older SBI folios, because SBI has to go down to 1250 levels ( broader guess) bottoming out near 1280 ( our estimate – not to be confused with the statistical mark of MLE). HDFC Bank is up and out of 640 levels but no 645 it is..Pharma should not have been a defensive trade, esp as Bharti and ITC remain powered on apart from the IT scrips which can keep current levels once HCLT returns to 1400 levels. I have faith in ICICI Bank surprising in the post speech trade if India’s Financials are surmised as feasible, though it is just necessary expenditure for the six month period going forward and the Macro economic review has already been celebrated. A smaller gross borrowing figure for instance , may not be possible as that may be the only accommodating flag for the noise of governance to come. Also it would be a shame in my mostly moderate opinion otherwise, ( cooked to become the mainstream o-pin-onion like other examples of better business leaders than the half cooked Modis and Rahuls of today) if PSU banks join in the rally just for their survival has been noted by additional Capital for FY15 in this month again confirmed in any allocations. YES Bank and IDFC remain mainline (first leads) not for this bull segment but for the secular bull cycle that remains.

Nifty i s actually having a hard time at 6080 and will not drift down but 6100 is the new bear dominance levels, mostly because the media presence as Citi explains ( in that elusive to understand bid for retail investors here) requires reusing old hat ( from this trend) and the market tone is still as 6250 the normal would have been but that is a likely illusion in the distance, with markets using the distance again and again to tone down , letting shorts bound them up and show the futility of expectiung an overnight renaissance in the Indian Fixed income Markets. StanChart in the meantime has sell side macro posting the VoA precursor on ET Now since AM, looking at Government freeze to show the numbers.

I’ll leave that unedited para  in, just because I have things to do before I come back to edit it. It is just a Morning report. I may not be writing in the vote on Account speech or the dictum,

The markets may not break down, mercifully, for lack of reason to celebrate, a not new feature of beating down equities at their own, esp cognisant to those who bank promoters accounts and promoters’ who play their equity to death in a monetary degrowth, which now runs an extended life with a defined taper even with a reduced nozzle draining out the dumped in steroids, in the recognizance that US was critical and that most of excess liquidity remains excess. I wonder if one coming from my free markets background can make enough morbid adjustments, but one knows one must to explain how taking care of the trifecta is not done by just that phase of liquidity and now by the withdrawal of the same. One does note also the 16 mln unemployed uncounted in US estimates when declaring a successful 6.5% unemployment statistic from the same.

I like Crompton Greaves for the capex trade, old Mid Cap plays will be sideline for the 2010 IPO brigade in most cases. The fisc will score the most points when it reports a positive surprise. The FM should not aim for FY 2015 without thinking up options and should look to a fat target as we have probably over reached in the current fiscal itself. I would even let him off at a 4.5% target and that will not get BJP any further advantage.

Post Vote On Account satisfaction, Congress is going to be a quick disappearing loser in the elections, BJP winning it however would be disturbing not to India’s soul, cause there was not any in the conventional modern world definition of it, but it is can only be a rude awakening to India in a few years, however growth will churn in any government, because of the strong basis on which we stand up and shout for more, and the bureaucracy , the technocrats ( non outsourcing) and Private investors / Business will remain the agents of  this growth. Bank lending will never be a constraint and there is no wishing away corruption. One can even learn the vast cycles of it in local, regional and International Sales processes, and is not a equivocal nodding to suffering , nor a socialistic bite of suffrage that will make it the topic at the corporate dinner buffet.

explains: in the middle above is used as colloq/sms for explanations

India Morning Report: India’s flipsyde from global correlation markets independence

All its successful recognition as a unique misstep of policy in trunk Asia investing, still leaves India a unique place in the sun, inviting specific negative correlation from trades and investors in asset markets, marking its independence streak. However, this is just a improbable hypothesis and an unlikely share for the Morning Report (in this form ) except that Dow’s 100 point rush closing yesterday is overshadowed currently by India’s own woeful exits with the Nifty streaking a negative 80 points making the Rupee start this positive Asia morning at the bottom of its current range. Likely this is the stage NDF price discovery also tail lights trends to be in extreme discovery actions and the Rupee easily could have been at 61 levels here with trade purchases and sales in the same range as earlier years Gold would be thus in a greater rush to complete a mini rally in the reduced taper euphoria.

I am apparently getting ducked on Kejriwal and Pepper spray much like I expect Independent Women careerists to, in the office today.  But markets could have easily ignored it and celebrated the successful Spectrum auctions and the India recovery data linked with global news of India’s importance in winning 2014 portfolios. India CPI ended under 9% as the urban CPI receded well into the background while IIP was almost positive with its 189 index score a big jump on the previous month apart from the strong consistent jump in utilities.

A secular Telecom industry uptrend excluding unlisted Vodafone (in India) , is likely after the media rounds prepare a consistent analysis of all players, both Idea and Jio(Rel) having bid INR 100-110 Bln, Jio adding monopoly of 1800 waves in its repertoire against Bharti which with Voda, focussed on winning back existing markets and prepare grounds for improved pricing. Idea having won price conversion over, is unlikely to create another loss making value bid in the retail markets.

In more humane form, India again loses its advantage as it starts off the recovery with an expensive rate hike, a shallow debt market and a doubloon of proprietary traders mesmerized with no good corporates and an officious monitoring and handshake philosophy engrained in Asian culture its common denominator with other closed end markets allowing a 5X US Dollar impact and shallow development hubs. India’s WPI announcements are likely to be near 5.5% .

SBI reports midday with another INR 6 Bln in provisions for pension, INR 25 Bln increase in provisions and INR 85 Bln from an ever expanding restructured asset pipeline in this quarter again but the stock will react further post earnings tipping off a expectations rally at its nadir as it comes out improving the NIM expectations in a better rate environment for lenders from 3.19% in the previous quarter.

ONGC proved great results yesterday along expected lines, profits to 71 Bln , sales at 208 Bln just 1% off last year’s data in the 30% increase in Net profit(28%). Realisations will improve substantially in the current year. Q3 realizations having dropped 4% at below $46  before depreciation earnings. Subsidy expense was more than INR 100 Bln up 10% making the 30% jump more creditable. The company may however get squeezed this quarter as the government defers subsidies with the fisc coming into an expected range.

SEBI added lines of caution on Executive compensation, independent Directors, Women Directors, public succession plans and a mandatory whistle blower policy into the Corporate Governance Code. Along expected lines, The listing agreements at the Stock exchanges will be updated immediately.

Employee stock options have been withdrawn for independent directors and nominee directors are not permitted the dual role of independent directors (DNA India, ETNow).

IT’s attempt to woo the markets with forecasts are likely to fall on deaf years as markets already topped the range on a half rush for new Rupee levels now more likely to be equated back with outsourcing jobs as Pharma breaks out in a good couple of years.

Apparently the stock of debt in Telecom, that can be shared publicly is more than INR 2,000 Bln.

In unlisted business, Kiwis have been bundled out for 192 and India will make sure it has one overseas win in its belt this time after a thorough bashing in all forms of the gamme. RCBs fortunes will be interesting to follow in the IPL with 4 marquee players and none of the local stars like Manish Pandey and Karun Nair.(TOI Blr) Lankans were ignored for an English Summer. Faf du Plessis went back to Chennai as the Gurunath investigation proceeds. Ben Hilfenhaus, will be the likely winner in relatively new entrants this year with TV Networks and Captains working towards the same objectives, Beuran Hendricks winning the Owners’ curse taking in another quality seamer. Dravid shaking down Nathan Coulter’s bid agst Delhi. The list on cricket next atill includes only CSK rosters, duh!

KKR had some money left over too after picking Manish and Debabrata (Ist Round Mitchell Johnson) while Kings XI and The Royals probably walked off , purses safe from prying eyes. This time, even as Shikhar Dhawan is down under, Sehwag bats for Punjab who have Shaun Marsh. KKR got most of the RCB slough offs after the  Fished Fisher dug himself out 

Royals kept Watson, Binny and Rahane, while Mumbai bid in Corey Andersen, Hussey and the Zed.

India Morning Report: There is no hope trade in sight

But I’d say keep accumulating as the indices break through a critical 6000 mark. Many blue chips, like in global markets offer extreme value in buys even as the speculative trade fails to take off on a delayed recovery.  Gujarat’s downfall over the small matter of a receding poverty line not helping the cause of the markets rich BJP is a puerile coincidence for the markets, but correspondingly there is no Congress faction left in the markets to buno the tanabana, Markets selling the stable BJP proposition backing out for an increased negative momentum(undesirably sharp)  on the downward side

The IT trade coming into profit taking for the almost first time except for a pre results redenomination, there ae buyers out there who are ok with the premium on Infy to a low 3475 market price and HCL Tech is good for a move of Rs 100 or more. Thus if all sectors move together like the Tuesday open, markets could see almost unheard of hlevels receding to 2012 levels no longer required by the New Dolla r prices. That also means these exits will cascade the Rupee even as it holds at 62.50 to 63 levels , that being a new fresh level for the currency. However it is still possible that with DIIs coming back as markets sell off that the gradual sell off can indeed turnaround and complete the prophesied ( by certan others , also old hands) pre election rally in India. The sell trade on ITC will likely never exit 290 levels an such picks abound with limited downside even in the correction which will confuse buyers into making losing commitments so a wait and watch is necessary. F&O markets return back to index only specials and i the downmove is to be arrested by Vols at 14 this will be a small enough move, but that is unlikely leaving vols (India Vix) ranging between 14 and 16 till the first buyers return whence new VIX levels would only see increasing volatility

However as we were stock specific going up and DIIs look for bargains to pick up pieces, there are gaps in how the markets will rebuild momentum most buyers holding on to prior 2013 selections including the new Aurobindo and Sun Pharma trades( a great defensive for mopping up your prop liquidity) in IDFC at 90, ICICI Bank almost ready at 930 levels ( the next levels are around 871), Yes Bank ( bottom at 267 will likely not reach the same so accumulating should be ready  – like a dark pool premium),  Bajaj Auto, ITC, Bharti and no – not ttk and titan currently as there is much more going down in that specific market despite the penchant of the self funded margin traders in our domestic brokerages like Angel, SMC and Centrum including the overlap with commodities wealth accounts. There will be no dlf trade north, none in Jubilant foods, titan or ttk and none in HDIL or unitech much later. Axis Bank’s orphaned again being misused in the prior rallies, leaving nay of the F&O speculators heading there at great risk from those targeting their brand of stupidity after getting on the right investments. Trading as a game may try not to suffer though sharp bear phases and quick bull recoveries are not ruled out with brokers and traders living the cricket dictum of well left alone even for great value picks in Midcaps The trades are mostly in Spreads, Bear spreads in your choice made by buying Puts at the just OTM (ATM-OTM>= 0) and selling a lower put to part fund the trade. Bull spreads, which wold be due n a couple of weeks, go bought Call just OTM (ITM-OTM>=0) which reflects better liquidity as well and thus better premiums, and partly funded by distant OTM Calls ( nly one or two will have  tested and liquid quotes where you do not pay excess liquidity spreads)

 

India Morning Report: Markets digest a rate hike and the new Maruti equation

India Auto ExpoYou heard it in 2009, Suzuki may go it alone:

The 7th Maruti Suzuki plant in Gujarat adding capacities to its 1.75 mln cars from Gurgaon and Manesar which has already seen union troubles in the North, will actually belong to Suzuki in a new Wholly owned subsidiary and as royalty terms have not changed the new production available from Gujarat in 2015 will improve MSIL’s margins. MSIL already is the dominant component of Suzuki’s global sales. The markets are however punishing Maruti for the loss of faith , the automaker springing the surprise from its ranks mid afternoon yesterday. Today’s morning quotes will be 20% lower and likely fall a further 5% tomorrow though 1200 is improbable. A Suzuki coming into India alone means it may be planning exiting its Maruti investment except for its commitments to successive Indian governments over the years. Maruti trade is being closed within this series as speculators likely get ready for a short trade in the new series after having been farmed in the construction sector. The Gujarat plant will supply only to Maruti production

Biocon is back in Volume breakouts from the switchout in cash

Rate Hike

Markets will likely digest the rate hike given good liquidity, as mentioned in Bank Policy Tuesday yesterday however the 8.5% and lower yields will now wait till end 2014 and at least one quarter of good growth with strong positive investments. The higher rate environment may not translate into higher retail rates and credit expansion may also not be threatened, but was it required? Yields did move separately from Currency markets before policy and thus Policy rate hikes squeezed the exchange rate back to 62.50 levels

Airtel again, Idea bhi

Airtel is definitely back in the mix, changes at the top likely positive even for Manoj Kohli who finally moves to the new businesses invested from the Telecom win for the Mittals over the years. Idea’s ARPU gains despite revenue per minute dying means both Idea and RCOM are also likely to see long trades and Bharti remains the back bone of he market as IT and Pharma break down. Tomorrow would probably be ITC again and the day after that Bharti

Bharti PAT is up 20% on quarter and ARPUs to 195 frm 192 spectrum auctions stamp their market print on Feb 03 and Feb04(post announcements). Africa ARPUs are up 10c to $5.80 or INR 360.

Sell 6100 Puts

If you are finally tired of shorting the market and Ashwini baiting from your camp you may join in too but ahead of expiry, 6100 uts are likely to look tempting and markets will close 6100 with such a huge magnitude of newsflow  getting hope trades shucked off by early market moves last week and shorts on DLF , Unitech and HDIL would likely be the biggest winners of the series. The days trading would likely see a similar mood sneaking into 6200 uts , which however is a function of the other market forces discussed with a 40 point increase in NIFTY being par and leaves tthe markets at 6160 and markets may not want to control further BEAR GREED till todays close whence the 6200 trade still rewards that additional risk

Banks are a big buy

10,600 seems to have done it for the Banknifty and investors are likely to stay glued to ICICI and HDFC Bank on the rise. Axis Bank fell 3% yesterday at the fag end of the correction ( on markets breakdown post Maruti announcements) ICICI Bank reports with India Starbucks (Tata Global) . Starbucks ma also prefer a new 100% investment in India after 25 stores have opened with Tatas.

After ICICI Bank’s clean sweep today, tomorrow will see earnings from Hero sandwiched by Bank of India and SBT and after the Adani and IDFC reports on Friday we close out earnings season with a fairly robust performance, near 20% profit growth still standard fare for the biggies.

Other Results

REC, M&M and Cox & Kings report on the 14th of Feb, ILFS Transpo, Page (and Lovable?) and Finolex Cable on 12th and Bombay Dyeing on the 13th. Lovable is doing well in the trade prioritiising for the New FMCG adds in 2010 IPOs

India Morning Report: 6220, then, true bottom, market move up please.

Namma Metro
Namma Metro (Photo credit: ashwin kumar)

More impressive than Horn OK Please, but then two wheeler riders deserve beter(sic?!) or not, National Highways are safer for Trucks and Four Wheelers and so no, this headline is not about the mow down of two wheelers or by two /three wheelers in the urban meltdown. The 1000 odd rich families in the People’s Republic are treated with such disdain twice as vitriolic as attributed to the rowdies on Indian roads and they are definitely equally cognizant of the traffic rules as the four wheelers. As I write S&P seems to have marked India’s rating to stable.

More often than not, these urban snarls on the way to work have lately been marked by spots of new construction hanging because of bankrupt cities and states or other EPA/non EPA but documentation relation bottlenecks the construction crew is pretty used to. The BMRTC however, continues to break the mould in setting the benchmark for delayed and inept project handling, while the Bangalore Metro remains the only pristine mass transport crew in the world, after 15 months for nothing else but the 3.5 km distance it covers in totality to the CBD.

A “Dadi Balsara” inspiration that could work for the city and other Indian cities, is to break Bangalore into 3 different urban entities, not a loose conglomerate /federation of municipal divisions/organisations like in Delhi but cities with passports , if required, to travel in between. Singapore has managed very well with the urban transport problem and along with the Scandinavian cities that started it, London and Singapore remain great examples of how to create and grow a city infrastucture and plan urban Transport

But then, I am in the 9 to 5 mold like most Indian 18-40s and more or less wait for work to come to me because that is the smart thing to do.

English: COMPULSORY SOUND HORN sign
English: COMPULSORY SOUND HORN sign (Photo credit: Wikipedia)

Markets are dull, lifeless and the nose is pointing up as 6220 held and will declaim into the biggest rally yet as Earnings season successes have put the GDP growth residual to the crisis into a proper perspective, India becoming one of the most undervalued domains and like US equities, the depth of the market gets its own sponsors while Currency and Fixed Income woes almost strike a t will, the lull taking again a single seller to push a sharp toll on the incumbents, the currency lopping a wide ball to 63 and yields kissing 9% . The RE60 quadricycle will be good for the Indian soul and perhaps sponsors like Prince RJ will even push for it to displace the 800 (in the minds). Bajaj Auto, suffered a setback despite  adding export numbers in October as markets remain uneducated about its portfolio and expectations are at variance spurred by the single line item hope of the return of Hero in this Festive season. Three wheeler sales are strong again and M&M is making a comeback in the Global Auto sector citizenry where they have made a unique impact ( not from 60s history but here and now)

Those who watched it will be carrying it home as Rajeev Gowda handed the BJP and CNN IBN an apt rejoinder on the Poll /Survey action initiated by the CEC ahead of state and General elections. Results season is over not just in the USA but here as well. The remaining PSU banks and Dhanalakshmi Bank and Dena Bank report over the weekend. Next week sees more MNC Pharma results and Sun and Stride Arco labs  report big earnings quarters, Sun Pharma closing on the 14th. Both Cipla and Sun Pharma report on the 13th and Sun could wait for 14th morning before appearing on the networks as Stride Arcolabs reports. Tata Global (Starbucks) reports with the Reliance pack on Tuesday/Wednesday

RBI guidelines on Foreign banks entering thru the WOS structure plug in the statutory gaps  but cannot more than show their good faith and welcoming arms for Foreign banks who are already staring at cutting themselves out of more regulatory capital holes cropping up to bear the expense of global expansion hitherto unfathomable in an industry used to being welcomed on the strength of an opaque global HQ without farming Capital to such “territories” Even as the regulations are required and Indian Bank sector will expand and mature with a growing debt franchise , India has already been bracketed into an “exotic” category with the likes of Brazil for its reliance on traditional lending products in the credit basket and the split from shadow banking ties or one still believes even the lack of depth in wholesale funding. Also none see India as a pioneer for having always kept the inter bank market to a minimum as global banks fight the war with regulators for drying up the inter bank market. Credit continues to contract in Europe at near double digit levels, the single most factor affecting banks even as they stabilise the new era of growth and the best in class retain double-digit RoEs.

Bank Policy Tuesday: RBI Governor completes policy action

inflation
inflation (Photo credit: SalFalko)

With the forced liquidity constraints as the currency devolved on the nation in June ( after May 21 announcement) RBI was stuck in the middle of a rate cut leg of its policy to encourage growth. Already hampered by banks using Central Bank liquidity to the extent of INR 2 Tln instead of market, the Central bank’s rate hike onsequently in September even as the MSF hikes were redacted and brought back to the normal line may finally break the back of the markets on the verge of a bullish move from 6200.

The only inflation out of control however is the Food inflation which may not respond to any rate hikes and this rate hike may just be a mechanistic response continuing since Duvvoori Rao demitted office to stabilise the higher rate environment, in which case India may old these levels for a good six months, and in developed markets this new intermediate leg could have lasted years, till the rate cuts can begin again.

Meanwhile consumer staples will continue to see large double digit price increases to correct 2-3 years of suppressed marketing budgets and pricin pressures unrequited to keep basic sales growth alive in consumer markets

The announced policy steps however will increase bank rates and as retail lending has reounded such increases are largely going to be absorbed by consumers and however will have had debatable impacts on fueling furthr inflation now controlled by bank rates. NBFC business is already looking better in consumer durables with a clampdown on 0 interest loans and while that may not segment the market in favor of first time durable buyers that have been an absent quantity fooling marketers and policymakers, it will continue to better control the negative output gap with more advantages for NBFC lending even for banks that have already relied a fair portion of their portfolio on the sector at the expense of obviating the real winning consumer sectors or industry sectors winning n the changed scenario

RBI hiked rates 25 bp and MSF channel has returned to 100 bp over the repo rate clearing the path for a return to the Repo rate as the Bank rate.. WPI forecast has been banded to the central bank’s comfort zone as 6-7%. GDP growth is updatd to 5% for FY 2014

The banks lead the Nifty comeback post policy action as they assume the deed is done and currency will consolidate around 61-62 levels before going back to the trade deficit control led highs nearer 60-61 levels The sponsored rally ost policy is however blushingly even across non actors and non performers in the banks bunched with YES Bank, ICICI Bank and even HDFC Bank and Axis Bank. IDFC has recovered its morning deficit too. BOB is up 15 pointsand BOI is in the positive with Pharma/result candidate DRL also staging a mini rally. The short on LIC Housing ahead of results has also disappeared and tomorrow’s results are likely to see fat positives as sentiment needs a good build up and inflows ontinue to allow market makers to perform as such and the Financials are likely to reward investors who stuck through the unreasonable 2 months pre the last MSF related policy action. Further policy action unless embargoed by inflation is likely to stay with seeing the bank rate climb down from the current MSF 8.75% to the Repo rate of 7.75% ( The Revese Repo is 6.75% where  RBI issues new collateral securities)

 

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

 

Bank Results season (India Earnings): ICICI Bank keeps showing long term tracking to objectives – Q2 FY2014

Your favourite bank did start showing  hidden wrinkles as it eagerly snapped up a 26 bp NIM increase to 3.26% this quarter an Net interest income grew in line with the bank’s voracious appetite to INR 38.88 Bln. The retail surge which slowed down to 20% and Deposit growth continues without buyouts of deposits  at the industry rate of 14%. That means the retail team is unlikely to prove other results without the earlier snafus with retail processes even as it opened 250 new branches, 150 in the unbanked regions. The chink in the armor is that the bank will smooth over its increasing gross NPAs as the continuing expansion in margins gets the bank to override and lay down the news of a jump in gross and net NPAs. Gross NPAs for a large bank as such are horribly disavowable at 3.23% and Net NPAs are also thrice the rate at equally sized HDFC Bank.

The stresses however may not be l

India decadal growth rate map en
India decadal growth rate map en (Photo credit: Wikipedia)

inked to its growth as one looks askance at the 15% plus ROE. At this moment however I am unable to more than cast a  doubt on the Capital Structure for such ROEs and the same however is not to be confused with the global banks which still have a entirely different Order of magnitude of liquidity and derivative profits/risk management. It might still have an audience requesting that they be treated as peers especially on the comments on Capital Structure while structured product profits would still seem unseemly. The results will probably bring the bank under fire from its Indian peers , starting here at the ROE growth which seems awkwardly as always one step ahead o f the coming high interest rate regime when it actually expands margins.

Profits are only up 25% less than the expected INR 24-25 Bln mark at INR 22.54 Bln

The Active CaSA strategy for the bank seems to have worked wonders again with another 1.95 increase quarter on quarter to more than 43%. From here CASA would go on reducing once it reaches 47-49% levels in three-four quarters(at this pace). Average CASA as been reported duly at 39% , ad the gap is showing , which may be a disconcerting note for investors as the surge in retail and commercial deposits continues to bank the margin till rates are hiked.

However to reiterate, The Bank thus now has been completely clean on the paper trail in terms of its profit, asset growth and retail loan growth objectives , also fulfilling its rural objectives , covering the unbanked and continuing to improve its show while the fissures in its wholesale international book and the growth in retail NPAs coming hither will well be masked in the current reporting as well, leaving it another show of increased transparency  The bank has however totally dominated its peer HDFC Bank in the banking sweepstakes for the two universal banks heralded in India at the first stage of bank reforms in 1995.

India Morning Report: India needn’t have worried about Fed pronouncements

The only island of yet positive GDP growth with near 0 domestic investment, India could have easily ignored Fed pronouncements overnight but instead as the currency fails to find any buyers fell through at least two credit buckets in a single sweep with the Indian Rupee progressively targeting a 60 mark twice in this week and Oil imports continuing to drag the CAD warnings to future quarters with General Elections admittedly not recognised yet by the market as the proverbial ‘blinders’ to any further cognitive thinking and not many options left on the straight and narrow

The FII investments year to date are unfortunately a never before $15 Billion and the debt market continues to see withdrawals. Yields hit a circuit breaker as the old 10-Y bond was trading aat 7.57% and the tracked 10-year yields have hit 7.37% and will be moving north to track the new Oil bill expenses from here

Coal India Limited
Coal India Limited (Photo credit: Wikipedia)

Though markets would like to believe LIC is standing buying against a whirlwind of sales in equities as well, the situation is much easier in equities with the 5750 breach in the morning probably still the last move of the index south if indeed tomorrow markets recognise that it is much the status quo for India Inc prospects in the entire schema developed by liquidity flows and Europe’s demise in the last few years

Deep cuts in Foreign ownership rich stocks target private banks with ICICI holding together a motley crew of foreign investors and telcos barely surviving with the new FDI proposals lifting the cap to 100% by ordinance. the SS (S2 Analytics), Angel Broking and Ashwini Gujral comebacks today were effective I in particular paying attention to the Coal India short by SS that  should yield Coal India to 260 levels Also BOB may breach 600 but may not have further downside and Cipla and Lupin shorts should be ineffective as also further shorts on Banks despite the new market levels prognosticated to 5100-5300 levels by the Bears who finally caught a break after paying hefty carryover and I am still buying the banks, IDFC and Bharti and ITC for the bang on the upside. Jet Airways is also running the thin rope easily almost on predetermined lines to switch agreements on the Control issue allowing etihad powers commensurate with its 15% holdings.

Also despite the FDI in retail, one suspects most of the domestic investment has already been predated in the new bout as Walmart was already a back end partner and many others arrangements also have not sported fresh investment and thus this marks the deeply worrying sign tallying with the bears that indeed Fresh Domestic investments and thus fixed Capital Formation has yet to find any viable grounds or sources. However, in our final analysis this has all been discounted and equities will not see any money leaving after today’s cut making anything like 5600 impossible for the markets to fall to and even if indices fall to those levels it would not be linked to actual investment withdrawals of note and scrips already selected on the long side will not be impacted.

 

Bank Policy Tuesday: DMK steals policy limelight, Rate cut hopes of India Inc

Though we did not suspect the political mulligatawny soup that will lead to a face off in the Parliament on the Lankan Tamils issue and should in fact be used by Indian polity to align to US on this issue and come down on belligerent China friendly Lanka, the very least done today in the political arena with the Nifty barely holding 5750 and yields hardening closer to 8%  has been the virtual throwing away of the monetarists wheel in what can be educative to all large economies hoping for moneteraistic target based Economics to bring home the citizens out of the global crisis of growth overtaken by stagflation.

RBI allowed another 25 bp cut in Repo rates to 7.5% and though it seems pat following fixed yields early 2013 move below 8%, it removes any further room for easing for the Central Bank. Cheap RBI lending thru the LAF should have already impacted yields to move down as inflation remained in control. LAF rates are now 6.5%. RBI has also posited the MSF as bank rate at the upper end of the channel in the mid term review. India’s GDP growth was the lowest in the last 15 quarters at 4.5% in Q3 of FY13

The Governor meets the press at 2:30 pm.

SEMI Breakfast - Fixed Income/Credit Analysis
SEMI Breakfast – Fixed Income/Credit Analysis (Photo credit: ceonyc)

Rate Cut Economics

The bank rate cut to 7.75% was already an avoidance response to the  Type II error of over tightening the monetary turf by the RBI which is already conducting large OMOs to provide continuing liquidity. The last one was just this week , the 3 day repo accounting for INR 1350 bln. In real terms rates have only risen after the last rate cut announcement in Indian Fixed Income markets despite the appreciation in the Rupee and counting today’s rate cut of 25 bps thats 50 bp of rate cuts shouted out by India bears waiting for the debt trap that India Inc could never be. Indian credit stock instead still remains the lowest in Developing and Advanced Economies globally at 75% of GDP ( both data points in this argument have come from this week’s RBI data releases)r

The Challenge ahead

Despite the 30% growth in NBFC credit this January (based on RBI data released for segmental review of bank credit) credit growth will likely challeng e the 16% non food credit target. In market terms(equities) , though 5750 levels are holding on the Nifty, expectations have definitely been turned down three notches after the violent 100 point mid day reaction and as profit growth eludes and food inflation rules the rest of 2013, real income growth may finally turn out to be a mirage and bring down curtains on future consumption growth for the nation as it dives into political uncertainty. RBI rate cuts could have been avoided to keep the market discipline better in later months when the fixed income markets would have been in situ better able to target a downward slide in yields and keep ahead with higher growth enumeration as non food inflation instead of staying low now tries to bite back with global demand improved by China’s lot However all that still means India grows by 5% in FY13. The lower data of worse cases for FY 14 enumerated above are still low probability events and can be easily avoided though these downside risks should also blanket any other global downside risks.

Foreign investment flows

India remains a global island of relative comfort for investors engendering continuing foreign investor interests that should as posited turn positive as the global downside risks emerge stronger esp for Europe and competitors like Korea and Singapore (affected by the China story) get bit while others like Thailand may still not provide the required depth to global investors. BRICs and N11 stories have at one time or other shown how executive decision can help them pull past the Indian jugger naut and India needs to be better positioned to respond in global markets thru joint policy and private sector action.

 

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India Morning Report: The meandering world’s progress condensed in a fete of ‘immediate payoffs’

The Seal of Salt Lake City depicts the building
The Seal of Salt Lake City depicts the building (Photo credit: Wikipedia)

With Goldman Sachs moving its next meeting of shareholders to its other back office in Salt Lake City, Utah, India’s sloth in an optimistic IIP growth of 2% and FY 14 downgrades to 6% by a couple of foreign brokerages it was all but sure that Monday’s bad openings would be followed by a tirade to the finish line with Network analysts from Ashwini to SS and Udayan Bose (TV18)  pining for the 5500 mark to make the uncertainty go away. Of course that also unleashed the India outsourcing Bull with IT companies a safe bet and TCS the largest Market Cap company ahead of Reliance Industries.

However, sanity has returned to the market since with interest and eyes returning to Indian equities and the Dollar index having recovered its paces since the Yen correction at the start of the series without the Yen losing any of its pressure to cross parity to the Dollar and the Euro denizen of Germany proving that it is unlikely to feed its south neighbours including France (conceptually) anything other than Target liabilities for the growth spend everyone was sure Germany has keeled over for. Germany preponed its budget exercise to reaffirm its primacy of fiscal discipline as the Euro recovered last week’s blues since and the EU summit failed to move on any of the agenda items. The European economy still needs to work out a longer timeline for its recovery.

Trade deficit data however points to a tight cap on US GDP growth for 2013 and similar warning bells toll for Exporting countries like India and China though EU and Japan look at the small recovery in both Capital Goods exports and imports numbers for US in February Capital Goods trade up by a net $1.1 Bln in the ever increasing Trade deficit and a bleak month for the US in terms of the shored up Fiscal surplus breaking down along expected lines in February’s big Fiscal deficit.

India too therefore looks at a larger trade deficit even as Oil prices come down by over $10 in the last 30 days with Exports barely maintaining the newer levels it managed in the last throes of 2008-2010 and February’s deficit of $14 B is likely just an aberration after January’s $20 B hit.

Markets look better in equities from banks climbing despite the fourth estate coup against the top 3 private banks looking to make a mark in wealth as brokerages rang the bell for State Bank and the stock climbed up 3% in Banknifty’s climb back above 12000. The attention on ITC which was almost a giveaway for the lack of short interest in the broader market also encouragingly continues and the picks on Bajaj Auto should also bear long again than continuing south or short as last week. NALCO and RCF Offers for Sale also look lined up to complete successfully with LIC’s participation in the OFS taking its stake to 6% in RCF. The residual stake sale in Vedanta’s BALCO and HZL investments could really brighten up India Inc’s balance sheet in the current fiscal itself but one cannot gauge the impact of continued market confidence to the T given the fourth estate’s penchant for equating accountability for the government with all lack of information and analysis on any story /subject

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: A new high for the Nifty looks likely in the run up to the Budget 2014

Rahul-gandhi
Rahul-gandhi (Photo credit: Wikipedia)

Though the Planning commission decides most of the Capital investment allocations beforehand including government’s share of state spending and Big Ticket Infrastructure spending, the Bidget document next month is still likely to give enough impetus to the incumbent government to approach the General elections in 2014 positively ‘under new management’. Apart from Rahul Gandhi’s ascension to the throne which needs to be sponsored or vetted by India Inc sooner than later, India is now mostly looking at global cues after, as the MOS man, Raamdeo Agrawal said on TV18 right now, problems in both the energy and IT services sectors have been resolved for the time being.

We are headed for true deregulation in energy prices and that’s a relief for ratings hawks as well as those items of profligate public spending when it was indeed all getting burned up in oil spend (subsidy)

A few items of trivia glue that has confetti sticking to India Inc’s big weekend party and the world at large before we begin the Monday Morning Dharma. China’s labor force has decreased by a large 3.45 mln this month from more than 940 mln last year. GDP growth in China was yet 7.9% after a 7.4% November taking the 2012 number to 7.8% overall and likely saving it from recession adding just under 3 mln in new jobs, and urban populations almost stopped growing with expected rural migration to 712 mln (urban population)

Also our working population of women may be interested, women seem to more heart attacks on Saturday and Monday and as this data pertains to North America, it can pertain to only Working women and not homemakers. Heart attacks are 27%  more likely to occur around your birthday, and though this article pertains to our female friends, in our country at least more men than women die of heart attacks)

Swiss banks are indeed closing down, the first one in the world at Wegelin the first victim having started in 1741 but Davos is still happening with the world’s wealthiest and the large Bank CEOs and Presidents making it there to party into the night. JP Morgan CEO Dimon though paid out $11.5 mln half his 2012 package for indiscretions as head of CIO investments. Global banks have paid nearly $5 B in fines between HSBC and UBS for regulatory oversight and half , especially those with European lineage are shutting down their business in Investment Banking

More importantly the Aussie is roaring back even as US markets remain closed today and the BOJ likely to hit the precipice button when they meet on QE spending for Japan later in the day, the Yen already circling 90 and in recent history reaching almost 25 years since it has eyed the 100 mark to the US Dollar, let alone the AUD

Taxes on the super rich, seem unlikely unless the next General elections cause another rupture in stability that the media is almost imperceptibly wishing for, to solve their quads of issue boredom. Another month and we will be just tlaking budget wishes in duty cuts and tax writeoffs in the run up to the budget , all serving to mask any new legs of India’s Economic policy that may be unleashed in Budget 2014. Stock up on big banks and Infracos apart from the leads on NBFCs unless you had indeed been waiting for Infosys and OIL to come back, whence you must book profits this week and watch. The OIL divestment will indeed release nearly 30 bln for the GOI fisc blues. Another interesting issue taking shape is how the regulators and FinMin will stop the bleed as MNCs dry up profits with larger royalties back home leaving their now not to be delisted Indian arms with nothing to entice domestic shareholders and a government backlash is inevitable despite the GOI having allowed then unlimited royalty just in December 2009

 

 

 

Bank Policy Tuesday: Rates are due for a big cut tomorrow..(incl the Mid Term Economic Review FY 13)

IMF Chief Economist Raghuram Rajan at the Worl...
IMF Chief Economist Raghuram Rajan at the World Economic Outlook press conference.WEO Press Conference, Washington DC, IMF Headquarters (Photo credit: Wikipedia)

 

Maybe only 10% can see it well enough to vouch for a bigger CRR cut this morning but the news of Economic bottoming out and the data outlook from infation and IIP could well translate into a big Pre-March boost for the Economy tomorrow. Any boost in the rest of the Financial year is hardly likely to reach the Economic growth of the next very quarter and the RBI Governor has shown earlier that while he is brave enough to hold back if it is still opportune for only inflation led dinosaurs, he is equally brave in rewarding markets with better rates on such a cusp of expectations where the Economy is showing signs of upgrading itself and Credit has been strong and silent as a performer in the background without retail inflation crossing 10% in CPI terms. Also that would leave policy doves and hawks eager and attentive in the remaining three months including the call in February.

The discussions of a bottoming out however , especially in light of the findings presented in the Mid Term Review ( Chief Economic Adviser Raghuram Rajan is on rightnow). However the reduction in the CAD is not on account of Revenue targets ( which are likely lesser by ~20% of the ambitious Target to nr INR 3.1 T ) but from the Divestment Engine that has chugged along after NMDC’s successful completion the same week.

The Mid Term Review also mentions the Fisc is likely to go to 5.3% and the spectre of reduced subsidies is unlikely to engender further instability to the current regime. RBI is expected to go for a 50 BP CRR cut or more likely a 25 BP CRR cut according to the morning polls

 

 

 

India Morning Report: Go pork on your investments said the offended unsaved friend..

Rajiv Gandhi International Airport: interior view
Rajiv Gandhi International Airport: interior view (Photo credit: Penn State Libraries Pictures Collection)

 

..not that the traders had any worthwhile savings. Both Savings and investments have been down for india inc in the last 4 years and the trend has not recovered despite India standing out as a n island of prosperity relative to the global carnage. However, the whole Dickensian/Edwardian or Premchand ridden spectre ripe for a Saki short is really just in the wind because of not Services Economy GDP being down on the bend disparaging India’s lead but DIIs or others who missed the bus in August are not the only ones aiting now. Most traders have been out of deployable cash including the first edition foreign brokers’ clients who were the original invested Capital at 5000 and 5300 level but nothing a normal profit taking and reinvestment cycle would not solve.

 

Those retail investors are not likely to come again as even if they did some profit taking it was not available in their accounts for reinvesting and that also holds for any infracos / construction companies and their promoters or mid cap promoters running their banking on margin economics and unable to plough back if any of their plays have recovered. Yet, any sign of a short is likely to get quashed, tha’s all will happen in this market probably over the next 3 months till a bout of finally too untenable 2013 projections will drop the bottom out of the correction around still likely 6200 levels.

 

Blight

 

However, close calling on the indices every minute not being required, is still probably 4-5 years to go as trends are big and easily discernible (to the naked eye) and investible additions to Mutual Funds and Insurance savings are unlikely to be anything but concurrent to that except for active tax nationalism guiding a few more investment rupees to the insurance cos who thankfully report more new business from SME and MSME /Prop businesses and salaried employees who realise the enormity of the nest egg requirement now in 2012 even compared to 2002 when a big rally and a 8-9% boom of annual real GDP growth had barely kept India in the hunt.

 

Valreson

 

The leather hunt we are now part of, definitely is a sign that we are precluded from all those portfolios that are banking on inspirational growth or a viable threat to China while policy agendas from the nineties will continue to have items unrequited till now and enabled by weak governments standing on a strong constitution and thankfully apolitically activating bureaucracy that is also able to handle and changing mandates from the people but which mandates have literally all been ridden to the borderline of it cannot matter in all possible ways with or without coalitions and third fronts.

 

saving and spending
saving and spending (Photo credit: 401(K) 2012)

 

Save Money
Save Money (Photo credit: 401(K) 2012)

 

 

 

India Morning Report: I Would Not Worry About India’s Growth – India Finds A Value Blue Chip

PMI: Silvy #1
PMI: Silvy #1 (Photo credit: iksamenajang)

 

Now that China has confrimed in October data that there is a real recovery with HSBC PMI closest to the growth paradigm’s 50 mark, at 49.5 Indian core sector’s growth at more than 5% across a 13% jump in Coal production and 21% in Cement in October alongwith jump in Electricity and myriad other ‘core’ businesses including oil gas and steel means it would be a healthy PMI tracing the only other positive PMI among the world’s large Economies in the US and Net Exports as trade makes 18% of our GDP and the deficit stays in check with Oil imports cheaper even if demand for the same rise might also rise along with the definite growth clip on Services PMI

 

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

 

Meanwhile Fraport exits GMR Banagalore Airport at a fair profit and again GMR might forego on the offer to buy more of that Airport’s stake as India Inc gets ready for a ruch of Infraco orders which hold the ticket to its banking and GDP prosperity or India just might lose the edge it has with a 5% GDP growth and an early lead on recovery. Funds inflow have already exceeded $8bln this rally from July and with China at multi year ows in the stock markets any extra weightage for china may be absorbed without due transfers from other markets leaving more inflows marked to New Delhi/Mumbai from FII and FDI proposals

 

At this stage the Goldman Sachs and JP Morgans of the world might reconsider their predilection with Frontier markets and China before LATAM indeed does make a comeback capping the benefits to South Asia and India. Korea however should see more investments too, including Indian businesses oto whom cost of credit remains manageable.

 

Tata Motors in the meantime got flagged by Pandya and Sumeet Jain at Goldman Sachs India for doubling to a ~ INR 500 target or double the market cap at INR 1.7 Tln based on a new Jaguar aluminium chassis/engine as the stock mirrors its latest market China’s Economic performance and Landrover sales get even stevens at only 27,000 units per month

 

Both TaMo and Starbucks fed Tata Global remain on analyst radars as seeming corporate governance issues look to snip the investment led potential dscoveries from outgoing Chair Ratan Tata’s teams.

 

GMR Malé International Airport Private Limited...
GMR Malé International Airport Private Limited (GMIAL) Office (Photo credit: Ibrahim Asad’s PHotography)

 

Reliance’s big ticket investments for D6 with BP and more importantly its seeming victories in the bid to raise the price of Gas from its units remain new mysteries speculators get to capitalise on but the uptick is brilliantly pre done as the noise of future rate cyuts bring the market out of the sulky pout.

 

 

 

Bank Policy Tuesday: Nothing can be done for now, Markets react

 

As we mentioned, the markets had decided for the bank last week itself and while it was clear the rate cut was not recommended the market is in position to react unfavorably letting commentary focus on  “hawkishness” of the policy (just listen  to LV on TV18 carrying on live from the dog and pony show) which is unlikely its tone.

Banknifty is down 100, supports for the Rupee sunk in the melee and Nifty don 20 points. SLR has been cut 1% finally after 3 years of dilly dallying. that means with 23% SLR and 4% CRR banks now need only 27.8% in Liquid government deposits and with borrowing from the government already reducing the liquidity will improve albeit slowly as these are sticky deposits. India’s GDP  growth is likely to come below 6.5% and inflation is high according to the policy review.

I am wondering if my short Dollar position will stay in the green in these conditions against the Rupee with markets using every such excuse for running it down and are virtually uncontested in that. The RBI reference rate to the Dollar will move up today. Inflation target is now 7% and credit growth targets are above 18% wiht most of the big four affirming a 20% year

 

Q4 GDP at 5.4% Full year at 6.5%

Not Bad for India Inc as the Dollar Support also clamps on and 4900 holds on the indices. The usual suspects, Agriculture at 1.4%, Mining at 4% and positive unlike the last IIP data report with overall GDP growth at 5% having probably been factored in already in the last emergency reratings by the Big Four on the indian Economy Q4 2011 was upgraded to 9.2% almost a point ahead of earlier data, and the base effect will likely be pronounced in Q2 as well. Some hope for investment growth has been noted with larger FDI in Q2 and an uptick in infrastructure and mining that could translate into a sustainable growth rate too.

this is a likely bottom too but individual quatrter performances now increasingly depend on support from the ever present Electricity , Utilities and Social Services with the Traverl and Transportation components which are the ones that perform every quarter. Hopefull, some lessons have been learnt for the longer run as well.

The India IIP Report (February 2012)

Capital Goods production came at 10.6% , Electricity came at 8% but Composite IIP came at 4.1% up from less than 2% in January(1.14%) with Manufacturing at 4% overall. IIP is still at the lower end of the possible range. Janiary was revised down from 6.8% on sugar production data

Capital Goods and Electricity are back to highs after a -2.6% and 3.2% data scores for January 2012 Markets largely ignored the volatile data as Fenb and March GDP is already assumed to be further lower than December 2011. Consumer and durables data show great contraction 9available as inference)

Meanwhile the INR 40 bln infusion inoto Air India is hardly likely to suffice for the megalith which has run down its entire equity

 

2012 India Economic Survey

Inflation 6.5-7 % by March

Recommends Fixed rate of Diesel subsidy /Litre

FY12 Growth at 6.9% ( as per Advance Estimates , GDP to INR 52.5Tln )

Survey projects 7.6% +/- 0.25% for FY2013

FY14 Growth seen at 8.6%

Inflation may fall even below 6.5% in FY13 but Monetary policy needs to adjust to fluctuationsin Oil and adjust prices regularly

Again in repeat from last year, Petrol pricing neds to be based on a transparent formula.

India needs fiscal consolidation and spending curbs in 2013 >> ..and inflation may tick down further does not match again and no investment in the Economy right now

Sustained high rates may hurt reality,and services sector

Inflationary forecasts at elevated levels building on the reverse base effect probably from FY12 to FY13 but that is slower demand led lower tack for inflation at its worst

Trade Deficit of 8% a matter of concern and FDI in retail important ( Multi Brand without local sourcing restrictions – Our additions in bold/italics)

Bravo: We are moving forward on Direct transfers of Subsidies for Food and kerosene (sorry AAdhar)

Land Acquisition Issues vital

Infra Finance a key concern

Need Aggressive stand to check rupee volatiliy but constrained by size of reserves

Deficit expansion due to lower Revenues not just subsidies

Recommend Customers pay for Higher crude prices – Sure!

We doubt though employment conditions have improved (monsterindia_ ) and depression in growth may jump the savings cables but the survey expects: Savings and Capital Formation expected to rise!

See slippage in FY12 Fiscal Deficit Target –

WHILE Proceed without MidTerm

DO 

Murder;

Mayhem;

Fiscal Profligacy

REPEAT 

Fiscal + Fiscal +1

UNTIL DEficit = 8% and Mamta = Laloo = Nitish/50 (2%) – NAMO*3/2 

(***FOR NEW TARGET OF FISC = 4%***)


Verdict: Why is growth back when we are in fiscal profligacy without investment

more special duties and fine tweaking of excise rates tomorrow instead of tackling reform in budget yet striving for stretched revenues

How Western Journalists keep missing the point and join a scam

How even Educated Indians feed hokum to Journalisty / Touristy visitors and the western media gets spun out by the local rickshaw-wallah

BW reporter gets the India VIP data treatment like the FT guy before..

Jessica Seddon writes this piece on typical kitty party hearsay longsy introduction about the Indian economy, with data fed to her by a likely bunch..incl the non details of India’s multi faceted debates on defining the poverty line, multi agency disputes to how you just can;t trust Indian statistics…probably clubbing it withour known adventurous neighbours in China who like racy statistics to prove the loan

http://www.businessweek.com/articles/2012-02-29/why-you-cant-trust-the-facts-on-indias-economy

Moody’s makes India P-3

English: People entering the main temple.
Image via Wikipedia

india finally received an investment grade rating in short term debt instruments at P-3 even as the $310 bln in corporate exposure to international debt now includes more than 40-50% on short term obligations, now easy to roll over int he origibnal market as an investment grade security

IIP breaking your back

The Ascent of Money
Image by Earthworm via Flickr

The Index of Industrial Production has really been the straw on the camel’s back. A Capital goods sector degrowth of 25.5% can not even be explained by the volatility of the sector specific expense volatility month to month. ( Our traded eficit goes up and down by a few billion every month becasue of booking of Cap goods and the fuel bills every other month)

The overall IIP degrowth is 5.1%, mining sector degrowth 7.2% Electricity still growing 5.6% Consumber durable goods would have suffered the likely miniscule contraction after heavy festival buying in October

Similarily with inflation coming down now, it is no surprise that manufacturing tilted towards 6% degrowth as it avoided last minute build up when it could produce at a lower cost later

INDIA Q2 GDP 6.9%, First Half GDP growth 7.3%

FINANCIAL SERVICES CENTRE
Image by infomatique via Flickr

A Q2 GDP growth in Services of 9.3% led by Transportation and Hotels  (Travel) growth of 9.9% (Q1: 13.5%) and Financial Services of 10.5% as well anchored expectations of growth in the future on Services itself. While industrial production was 3.2% in line with IIP estimates, construction was stable at 4.3% and Capital goods though lower still grew, manufacturing was a low 2.7% growth (Q1: 2.9%) and agriculture was not that far from the 3% mark either.

Interest rate environment is hardly going to get a reprieve in the stretched liquidity conditions as only money investments seem to be trending to output. The social services growth of 6.6% is also good and as spending in a challenged fisc environment barely going o budgeted lines, this is good for the welfare economy

Unfortunate noises on GST, DTC and now retail and aviation FDI show more challenges even as FDI for the first half has climbed to a comfortable $20 bln with state deficits unlikely to be met by service tax collections alone and government spending programs will now have a coordinated effort on increasing yields in the fixed income markets

Q4 growth will be more of the “shock and awe” variety with dull business in Q3 and Q4 a matter of fact. Top line sales in the US in Q4 (December) is a tough 3%and a similar crunch will travel American to India as well, unhindered by hitherto 20% topline growth beyond what could happen till here

Till now Corporate growth both in India and the USA was leading growth on the ground and while in the US it could have continued without growth in GDP in India loss in topline after mining contraction and basic inputs settle down would correspondingly now impact the Services growth where new orders have been drawing a blank since September, though India is still sitting on an expanding Services sector esp in Travel , Utilities and Financial Services and that could pull us past the magical 7% mark for the full year. Utilities ( not counted in Services in the GDP) grew by 9.8% in line with other travel and Finance, Insurance and real estate services

Q4 growth will be more of the “shock and awe” variety with dull business in Q3 and Q4 a matter of fact. Top line sales in the US in Q4 (December) is a tough 3%and a similar crunch will travel American to India as well, unhindered by hitherto 20% topline growth beyond what could happen till here

Revisions in the GDP basket have been made from this quarter, GDP deflator at 8.8% Cap Goods weighted to 17% from 31% and other changes driving Q@ 2010 to 8.4% from 8.9% else the Q2 2011 numbers would have been closer to 6% (6.4%, TV18)

September the dull month for IIP (Corrected)

A photo of a match between Chennai SuperKings ...
Image via Wikipedia

 

With credit picking up only in end September, the IIP figures for September trolled to an unimaginable 1.9% with consumer non durables reporting a -1.5% contraction(growth) from a 6% growth of last September and mining reported contraction of -5.5% The base effect and nature of bulk orders etc played truant with Capital Goods at -6.8% down over 1020 basis points from 3.8% growth in August.

Exports in October grew 36% only but will not limit bounce in IIP next month(October) Basic Goods grew at an expected 3.5% agst 4.5% in August while intermediate goods scored a low 1.5%. Consumer Goods grew 6% while Consumer Durables managed to grow at 8.7% though against a14% score in September 2010

MarkiT HSBC had reported a good tracon in the PMI figures at 5 with even Services PMI falling but staying above 50. The August IIP was 4.1% but observers had expected a jump in Utilities / even manufacturing numbers to a 4% IIP rate as per PMI indications and leading indicators tracked. Exports growth has slowed in October but remains a large $320 bln run rate to March while the trade deficit governed by the jump in Oil imports to a deficit of $19.9bln for the month

Infra output reported growth at 2.3%in the month September manufacturing PMI was India’s lowest at 50.3 PMI growth in October points to IIP recovering again in October with a good jump again in Capital goods..(no one likes the Capital goods series anymrore. one wonders if another redesign is planned)

Indirect Tax collections mark the relief for Fiscal deficit

In another structural repitition of our impregnable GDP growth rate ( at 17% nominal and nearly 8% in a down year) the Fiscal deficit overrun because of expenditure on Oil and Fertiliser subsidies and / or revenue shortfalls from divestment may be compensated by robust tax collections despite protestations to the contrary despite porotestations to the opposite from economist desks affiliated with the media.

We oursellves have found pragmatism necessary in the face of stalling growth but the Indirect Tax collection reports for April – October as well as the Advance Tax collection reports till now have been crossing the required 15% uptick in revenues. This year the small Service Tax tab has already generated INR 500 bln in seven months till October (April-October)

Also, Customs and excise collections have netted INR 820 bln and INR 875 bln well on way to the combined target of INR 4 Tln for the year from indirect taxes, stupefying hawks. That is $16.4 bln customs, $17.5 bln Excise and $10 bln in Service Tax collections till date. Advance Tax collections have to be netted for refunds later near the end of the Fiscal year Collections have grown at a rate of 19% ahead of the ‘optimistic’ target by a few points

the Exports continue to stupefy the hawks too, RBI making it clear that the numbers till now seem to be verified for correctness and India looking at a $300 bln collection but a $160-$180 bln deficit conservatively from the first two quarters of the fiscal year.

Predilections (ONGC)

Predilections 2 (FDI?)

more..

India - Madurai - 026
Image by mckaysavage via Flickr

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