India Morning Report: Energy Cos, FMCG follow into the bull segment in January

English: tata steel lake black and white effect
English: tata steel lake black and white effect (Photo credit: Wikipedia)

The news of breaking thru to better levels in the next segment have started crystallising on expiry day as OMCs and  Tata Global catch up while Aurobindo is a strong candidate to become the trader sentiment fundng stock as it battles the challenges from a local branch of the US FDA in its new avatar(US FDA’s new avatar)

Divis’ is another if you think it needs a scratch to win the Pharma segment in 2014. However there still is significant (75% +) investment upside in stocks like Cipla, Lupin and even Sun and Dr Reddy even as they review their competitiveness in the blue sky territory (Ashwini/ET on Aurobindo) for their stock prices.

Mining and Metals are not going to get a broad rally and may sustain bear interest but Tata Steel and a few others are definitely heading for a better future, Jindal Steel on the flip side continuing into the nether. IOC  and BPCL could be strong picks, HPCL having compensated for the lack of interest within the sector in 2012.

The long stretch at 6200  now sees thinning out PSU bank trades and new investors looking for the non Quantum broking “hidden gems” i.e. analysed not in this block of 5 years but surviving the negative glare other trader favorites have been subjected to as Bank and Dealer trading rooms get increasingly traded out of the select short list making the back bone of the as always overall positive prognostication for the Indian Markets as a steady uptrend of more than 15% gain in 2014 has been divined for the overall markets. 

However the FMCG jump backs identified in Talwalkars, and Jubilant or even real estate newbies in listed trade like Prestige or earlier RKJ picks NCC have already shown their limited stamina in such rallies and the same applies to a McLeod Russel or any other such Midcap picks and Tata Global will probably lead a pack of 6-10 such winners . Others likely to be included in such a cross section of winners would be the winning infra trade from IRB, Lanco and even the blue chp pick IDFC,  and another from GVK, GMR and Reliance Infra on better leverage news in 2014. The ones rejected for quitting on the bank licence race or just trying include Shriram Transport and LIC Housing. ITC and Bharti are not good for the day but remain part of this segment of winners to provide fairweight to sucha trending portfolio unlikely to be able to depend on Maruti or Axis Bank (probably just because it was tired by traders thru excessive lay in 2011 slurring it as a bulwark of the bada$$ trader instead of India’s flagship trade) Punjab National Bank alone is making up for the required breadth in Banknifty underlying/components along with the usual volumes in SBI. Seemingly, Powergrid is also nearing a FII limit at its current aproved 24% part of the overall sectoral limit.

The Power NBFCs are good for the rush, HDFC Bank is not out of favor and REC and PFC continue to lead this other mrket spine overall, but the other spine/splines(if you read) would come back in Powergrid and GAIL. As mentioned earlier the L&T and BHELs (esp the latter) or the metal and mining Hindalco and Hind Zinc may not provide such an alternate portfolio enough weight to survive the daily storm in 2014

Also, on the overall, like Reliance in the earlier years from 2005-2010, one should stay away from a Kingfisher like future looming for Tata Motors as cash gets reinvested at luxe rices into JLR and it is fully matted in domestic markets

 

India Morning Report: Another US FDA bird hit, US GDP caught with high inventories, Markets broadening base

World map showing GDP real growth rates for 20...
World map showing GDP real growth rates for 2010. CIA world factbook estimateshttps://www.cia.gov/library/publications/the-world-factbook/rankorder/2003rank.html as of Januay 2011. (Photo credit: Wikipedia)

 

Jubilant Life got another US FDA warning taking it closer to the brink though the numbers in the same year (two) may not suggest deepening of in its case a contract manufacturing problem and the plant is located in the USA

 

In the meantime a flat market keeps its promises to the India VIX after a big ‘corrective’ rally yesterday bringing the bull trend forth to another dead in the water lay up at 6250. The US GDP report yesterday was the second successive sub 2% score with inventories taking it to 2.4% in September(for June 2013)  with a 0.4% contribution and 3.6% in December estimates counting 1.8% from inventories in the September quarter. More on the US markets impact ahead of the all important Jobs report at advantages.us

 

Asia and US trends will be the next to break correlation with the India equities, that have corrected most other vulnerabilities with continuing inflows and a 100% vote on chances of a recovery from here. Rate hikes also are behind insular shield for this market as are even coalition credentials despite the markets correlating this BJP win with a bullish market’s highest scores. 6000 levels offer almost single digit index PE within the year and Energy and Metals are ready to support a bigger sustained rally momentum while Bank Nifty seems to be discriminating between the riht banks and the wrong banks without the markets showing strains of very few good stocks as FMCG and Pharma also continue to have backers and brownfield FDI regulations have been recently firmed up while Pfizer and Wyeth merger in India puts more domestic competition on the cards. The first good sized shorts on HCL have appeared even as the Rupee remains ranged at 61-62 levels unnerved by the non story of steps for a fiscal deficit bridge, which from Reagan’s days seems to be again left to the market performance to cover, all expenses being important and budget cuts or clampdowns signs of ceding to another government

 

CLSA remains on the losing side with a seat on the fence and to us a tell-tale indicator is preferring Hero over Bajaj in these market conditions, most such investors and commentators that still prefer the Hero stock preferring to see themselves as waiting it out

 

Powergrid remains open for a great investment opportunity for retail. Just Dial ‘s great success will definitely rejuvenate stories like Prestige, Jubilant (Dominos’ India being its second largest market globally beating the UK) , Talwalkars and even Prestige which remained in most buy lists during the period when Jubliant was still seen as over valued

 

The Power NBFCs remain another isle of prosperity in the compromise between various market factions (opinions, nothing sinister) and with Bank lending revival meaning better traction for NBFCs and banks with distribution power, the banking and financial services sector may offer investors willing to jump in without waiting for decisions like New Bank Licences or overtly waylaid by the habitual topping up of PSU coffers by the government admittedly on time despite H2 pressures on the Expenditure side as it revises its divestment targets upward. India’s GDP reports had good signs with Electricity and GAs picking up 8% in Q2

 

PFC, REC, ITC, Bharti, IDFC and LIC (Housing) remain thus the favorite weekly and positional trade picks.  As mentioned sometimes earlier, Traders on the networks (Network analysts) have cornered on trader specfic plays that seem to be any good company will do kind of trades powered by ‘old hands’ but we do not have expectations from trades in USL, TVS, ttk , Wipro, L&T or BHEL at these levels. We would also prefer SBI get derated before it damages market expectations in sweeping strokes with its abysmal performance bells ahead in the next two quarters or even more. Adani is back in play with all the Adani stocks including ADANIENT, Adani Power and other

 

JP associates is a little silent as has become customary after the first lead of any new trend rally since 2008 but infracos look like getting back in the game hopefully enough for leveraged promoters to exit at fair value else the same can truly damage the markets later. I am not sure if trades in Siemens and HDFC (not the bank) are ready to dial in but Tech Mahindra would be a conviction SELL and i would not touch KPIT and Persistent but they seem to be ready for a big swing up

 

Oil prices will follow Gold’s euphoric comeback into the upper sphere where it starts hurting the Indi story soon, but may again remain weak because of the overall commodities cycle as Europe leads the way down and the Chinese recovery may yet again be short-lived without export markets, which also caps Indian exports in Copper Silver and non-agri commodities.

 

Cipla and Lupin would be good trades on the long side.

 

Futures and Options continue to see volatility trades in straddles ( Buy Put and Call on the same strikes ) but the Nifty seems to be giving strangles ( not Vol sells traditionally but profitable in a flat market) an equal premium so those not in the inner ring or actively monitoring terminals should  wait for better levels in the Banknifty series before jumping or sell Puts at 6100-6200 levels on the Nifty

 

 

 

India Morning Report: Nifty switches up range to 6100-6300, Is 6200 on the horizon

Anjum Bharti - 05
Anjum Bharti – 05 (Photo credit: Adarsh Upadhyay)

 

The Aside of the day comes from Network Analyst picks, with Sandeep Wagle who is seldom wrong on the trend change running with his bearish bet till 5950 which he had to exit. His buy picks have come in sleepers like USL and Kotak, both of which we think will not deliver much this year.

 

USL sell off of Whyte & Mackay while being a cash boon to the debt on the Balance sheet, is still a sentimental stab in the heart for that scotch brand could well have created that elusive broader market for top of the line alcoholic beverages in a market addicted to imports at usurius prices, showing in profits in the F&B  in the Hotels segment

 

Meanwhile, Compatriot Mitesh Thakkar has been better endowed switching Sandeep’s non run scoring cap ex giant hope L&T with BHEL and I think also his TVS Motor was better switched with ”

 

Philip Capital (USL defender but long term buy on the stock, not short or intermediate) also had good FMCG picks and though Starbucks has opened in Bangalore, one thinks the same Longer term view is true for their FMCG picks including Tata Global Beverages and Dabur. Ashburton, despite the India specific commentary seems to be an index based fund across EMs and India

 

Sun Pharma is back in the bull basket of traders with an announced buyback being the post election surprise and the Bank Nifty has settled in at 11k marks probably gathering shorts, thrown out of Nifty in a big lurch on Monday. The Cairn buyback is bigger news but with outstanding results still away, one may not get the bang for the trading buck there

 

Markets have hit back as of yesterday and the new 10-yr bond trading has immediately rushed yields back to 8.7% in the morning, Rupee revitalised to 62.3 by 10 am, showing the potential untouched as markets took the yields of an expired bond so seriously, it was probably to the extent of a ‘not funny’ slur on the extent India deserves to be labeled a Fragile Five member ahead of Institutions making fun of the Tapering business on networks. US yields will rise and the Taper will not happen so soon, all that has happened in between is that Janet Yellen has been confirmed and she does not think a $5 Tln balance sheet can say Taper is a bad idea. The Rupee propably making this entire year pre taper more a challenge test (agnipariksha style)

 

NREGA will be a nice hit to Election pandering ‘in-throne’ incumbent as BJP struggles with a cause and high turnouts could indeed be another factor for Congress to weakly hold on to in making a comeback election happen. The media dissing of Congress can still hardly be ignored despite the survey technology of the wipe being more than 3 Fridays old

 

NREGA wages will be increased based on recommendations of a committee led by India’s Chief Statistician Pranab Sen

 

Yes Bank was bit by the regional bug in a sudden switcheroo by the markets on the Banknifty, trading still at 350 as it seems to have showed its Punjab hand in picking up the Title Sponsorship for the Indian Hockey League. However, they would still be a national brand, as would be Field Hockey as Zed comes back to bowl the Pakis out on South African soil. My generation is probably not the best to assess cricketing talents of the new look South African, Aussie and English teams either as they all look uniformly weak in the deluge of fresh faces, making West Indian whitewash by India a mystery incomprehensible. Also, Yes Bank may have not given such a signal to the markets or such picked by them, this being an erudite observation only to my eyes as I equate the game with a certain neighbour of Delhi in the north nor Yes staying bak with the media team push of the game sponsorship.

 

The Energy trade seems to have finally hit GAIL and the other LNG stocks as Oil stocks enjoyed a big relief rally on Monday and one last month

 

Big is back in reckoning in banks with ICICI Bank showing more uside. I would also recommend to continue trading upp in ITC, IDFC and Bharti. Bharti is singled out today leaving Bajaj Auto breathless only for the day as Bharti gets out an ECB card from its PR team before the final date of the Spectrum auctions, where they have certainly won themselves a near value for money tag in the relicensing forced on the huge Indian market and avoided a lot of unnecessary expenditure if the CAG report had indeed come out on the winning side.

 

Meanwhile Lehar follows Cyclone Helen on the Eastern coast but the Seemandhra and Telangana GDPs are pretty much safe, except for the large scale destruction of seafaring life and human villages near the coast .

 

The Sugar trade is a lost cause, the volatile commentary not helping the midcap stocks with limited contribution to India’s humanitarian and Western Export which hold the key to riches and a better CAD till 2019 when the next General Elections com around and China would have found a new normal it has ‘founded’ last two-three years

 

 

 

India Morning Report: Is 5600 the new 5000? Rupee is holding 65-66

With the  Rajan effect crystallising over the India investor skies, a new definition of India’s winter seems to be up as global liquidity withdrawals accelerate availability of funds from the exodus fro US bonds and a small portion is likely to start trickling back sooner than one would think.

The earlier expected recovery cycle threw up banks, infracos (IDFC, Power NBFCs ), ITC, Bharti  and Bajaj Auto and others in FMCG and Consumer Goods sectors and more or less they will make the bedrock of larger EM portfolios with or without MSCI index dependencies. Metals are good for this cycle and Tata Steel can still make it even if Global demand does not respond the way it is expected to recover in the end

Weightage maintenance is also in play and at 5600 levels that means sizable new buys fr funds that sold just a week back. The volatility till yesterdy will continue to affect timing of new investments and most invstors ahve oodles of time to play out their vaalue and growth leaders in the portfolio .

Now did I hear someone mention Rajan has to perform? Rajan would not be credited with bringing individual accountability to the RBI’s various senior officials but it is happening as we speak and Rajan hmself would know difficulties of thinking of implementing structural reform before May 14 decisions are out for India inc. The rajan effect itself was really areiteration of everyone’s agenda since 2000s , and the currency responding after controls on speculation were lifted is the unnoticed vote of confidence for India as a destination. ECB funding should be proceeding on A+ paper and equity QiPs

 

India Morning Report: Rupee at 66, GDP Growth at 4% and Interest Rates at 9%

Unknowingly for those of the common Indians and even market commentators across long term and sort term watchers, India has again stabilised around rates at 9% and The Rupee after a 23% move ( which was completed in a month) finally pulling up a notch of two at 66. Interest rates are at 9% and the markets bounceback on Monday Morning seems actually sustainable.

The earlier volatility ending stops at 9% rates and 4% growth were ofcourse around quarterly growth lows, Markets and Central Bank almost decided on a bounceback on the unfortunate low, but this 4% pitch seems to be likely now for a whole year of growth concerns at India Inc.

Again markets did show resilience in responding to the new Oil Swaps on Thursday with equities stopping the down rush at 5400 itself, but there is no forward momentum now except as EM weightages again cause money to flow back into the same selected investments which popped off selling because of reduced value causing weightage overflows on EM equity portfolios.

A war has  been averted though Assad Bashar is o n the loose in the Middle East and Indian Oil is still at a minimal risk from the geopolitics of the last surviving dictatorships in Oil.

In sectoral terms as ET data would like us to believe, interest isback as much in Textiles as in Banks and Finance companies. IDFC and Banks will lead the show from here ofcourse andas Ambit Capital suggested, it is still a little early for interest in Autos but it will eventually happen for FMCG investors. Chinese Shadow Banking woes could affect the slightly positive outlook from here for Exports. It’ ood to see the Banks having started te day at 9200 levels again on the Bifty (Banknifty). It was a bad month for Autos, Exports and the currency but we already know that.

Again, rage of motion at this time could just be crimping up on the 50 share index as at 5500 it has broken down just last week and that would mean this stabilisation could have engendered a big fall but for EM inflows returning in a couple of months.

No, the hike in Diesel and Petrol prices are of significantly less positive value than the shutdown of fresh investments in Exploration and Production ( see a list of Projects from Reliance which need Government investment in today’s ET) and similar non events in infrastructure more tough fo India Inc than the Food and Land Bills progress, though the markets’ are not disappointed

For the Agricultural shot in the arm in GDP calcultions, a reminder that our expor markets in any agricommodity are not price incsensitive and have mostly shown a declining share of Indian exports.

 

India Morning Report: State Bank of India results scare, IIP for June -2.2%, $12.27 Bln Trade Deficit

Taj Mahal, Agra, India. Deutsch: Taj Mahal im ...
Taj Mahal, Agra, India. Deutsch: Taj Mahal im indischen Agra. Español: Vista del Taj Mahal, Agra, India. Français : Le Taj Mahal, à Âgrâ, en Inde. Русский: Мавзолей Тадж-Махал, Агра, Индия. (Photo credit: Wikipedia)

Banks growth constraints from old and new NPAs came to be the most heavily landed blow again with INR 150  Bln in fresh slippages to 2.8% Net NPAs and a 5.5% of Book in Gross NPAs for India’s largest bank as markets at 0.9 PCR look to bottoming out with 5500 Puts still popular and Futures encouragingly becoming short hedge currency again for Institutions.

SBI has managed a NIM of 3.49% this quarter and investments currently denominated in low yielding CP will significantly buffer the margins to end of this fiscal according to the Bank resident’s statement defending current results (ETNOW). Auto Sales of 131k cars and less than 11.5 mln two wheelers as MUV/SUV sales plateau and trend down in the last bulwark crumbling for the 12 months are just part of the degrowth in the economy as a whole as May IIP was revised downward to -2.8% and June IIP came in a -2.2% showing degrowth of -6% in Capital goods and taking the April June quarter to -1.1% , negating any growth from the rate cuts before the rate clamp shutter down business in July , August and probably September

Consumer durables have been double digit negative in both May and June degrowing 10.5% on year in june with non durables up robustly another 5% allowing them to improve inflation. Better news from trade with a lower import bill from less than 3 tonnes in Gold and Silver imports each makes a crawl at lower CAD possible as also more controls return to the Economy after 22 years of reform under Manmohan Singh

Dabur and other FMCG could return to strength given the consumer non durables sales upticks and continuing robust inflation in the categories even as input inflation subsides. a 9.64% CPI does not discourage category leaders HUL and ITC also from continuing to improve realisations even if the Rupee completes its move only beyond 65 levels

ONGC results were bearable though the markets are unforgiving for the iNR 200 Bln quarter as realisations are likely to remain near this quarters $40 a barrel than last year’s $45 levels and the coming investment uptick within the week could see Oilcos picking up the slack after abig fall as well and oil purchases down for the second successive month will stress the trade this month for sure.

English: Manmohan Singh, current prime ministe...
English: Manmohan Singh, current prime minister of India. (Photo credit: Wikipedia)

 

India Morning Report: Markets to follow up another uptick from 5680

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

Markets are not closed today or tomorrow and muhurat trading times should therefore be announced tomorrow. National Spot Exchange had a special session on Dhanteras and the Commodity markets will have a similar one today. Fixed Income markets are flat and SBI had taken the sails out of the Rupee and Equities on Friday. Of course the Rupee market has had other reasons as Asian economies find more Dollar buyers and a rising oil spike confirmed the strength while the AUD, CAD and even the EURO could trend back into confidence this Monday and start the Dollar off on a sleigh ride including the bump on Black Friday and all the way into the Holidays.

The Diageo deal for Sorghum beer or the much closer to heart challenges on the FMCG play of ITC in non tobacco businesses are not likely to stir the market but most houses could be wrong about the latter as the brands are well set up and the Indian market will find a likely bigger window for ITC brands than HUL or even P&G with the connect established. The Indian Hotels deal or the Suzlon Repower disconnects are still mendable but unlikely

DLF and Unitech are unlikely failures this year and will continue in the same vein so they are futile unless the sector jump is more broadbased and as of now similar tagging besets Reliance Infra and GMR Infra. Ne bank licences are likely to see a good move int his rally to 6000 especially as YES BANK and IDFC look to make their mark as blue chips from the Emerging winnwers and they will attract larger investments per se. The HDFC Bank vs ICICI Bank war will be back in  2013 and is likely to impact this rally as the PSE banks become non entities after the SBI non sequitor on performance and the disappointing news on NPAs so eagerly awaited by China detractors and wholly unexpected in India . These are unlikey to flag ‘tail events ‘ in the respective markets in Shanghai/Hongkong and Mumbai/India

The Rupee could be looking to cross to the threshold of 55 but definitely loses steam at the 55 mark and may be prepped there for a rush back to below 54 Gold ETF buying pushed Sunday price to 31600 in Sunday trades in Mumbai

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

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

 

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

 

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

 

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

 

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

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

 

Monday Monday
Monday Monday (Photo credit: soonerpa)

 

 

Monday Trading strategies – India October 22-26, 2012

HDIL
HDIL (Photo credit: Wikipedia)

 

Festive week bodes well for expiry as markets open dull in trade and spectrum buys or the prospect of refarming existing spectrum do not put undue presure on the surviving retail lifestyle stories of Idea , Airtel or London listed Vodafone

 

In fact indices have come up well since markets opened in the red pre-expiry and the vacillation could be a unique opportunities for all investors Left Behind in the July August scrimmage to load up on Indian festival savouries and McFries from traders’ favorites JP Associates, HDIL and new bulls in ITC (FMCG story) to more “Bombay Club” M&M and Bajaj Auto in their new Asian/Oriental winning Forms

 

TCS results were uniquely dismissive of margin and volume issues for the coming success stories of Hexaware and Geometric and the ongoing wins in Persistent as they pander to demand for firmware. MindTree and HCL were the only losers in the Infy/ Cognizant wars or as HCLT would like you to believe they actually grew profits despite the currency wars they lost for 19 crs at MindTree and 65 Crs at HCLT

 

That also brings back as we said last week, winners from Cement and Textiles supporting the north pointing directional pillars for the next few days for a rally and 6000 a clear target for December

 

However, watching the F&O series for volumes and not the directionality of the bets or the propensity to risk in OTM puts or Calls for bullish bets is critical to that 30-50 points a day nifty move till 6000 comes. Lack of clear Volumes in F&O despite new exchanges and a clear bull in the Rupee keep both Equity and Currency segments under pressure as funding calls become directional shorts on the market.

 

Bharti Airtel Lanka
Bharti Airtel Lanka (Photo credit: Wikipedia)

 

After KFA’s oblivion and on good results on the weekend, JETAIRWAYS, INGVYSYABANK and INDIAN BANK are likely to bring back investors into the Indian markets even as other Asian markets start getting competitive interest from fresh bank liquidity and interest from Europe

 

 

 

India Morning Report October 12, 2012: The Correction Continues Into The Weekend Close!

Also, India Closing Report (October 08-12, 2012)

The 5650 mark holding, markets see saw with two up days on Tuesdaya nd Thursday and rejuvenating interest in South East Asia and China with Chinese banks agains ppushed into increasing credit outlays at lower rates.

Portfolio investments in Inida have shown interest at current index levels between 5650 and 5675 and as expected rerating has seen knowledge of internals coming tot he fore with the JP group scrips making a late rally since midweek leading with JP Power and JP Infra but more pertinently, superior stock selection showing in Dr Reddys Sun Pharma, Bajaj Auto vs Hero Motocorp and even Maruit Suzuki. Healthcare uptrend continues with market expansion and 30% plus growth in Healthcare sector moving more investments to the sector while lowering hopes in Consumer Discretionary and Non Discretionary (FMCG)  leading to more movement towards ITC and Baja Auto and the returning bulls in Jubilant Foods as Yum foods plans for India and that of P&G find few listed companies for the bidding consumption wars.

The Power NBFCs incl REC and Powergrid (plus PFC and PTC) are on cue for the SEB Bad debt while SBI’s derating on 25 stock of restructured debt staying to cause heartburn even as sector scrips from NBFCs, M&M Financial, Bajaj and LIC Housing taking up the slack and ICICI Banka nd HSFC Bank moving into position for bumper results. Infosys seems to have avoided the Friday morning rush to prove its results on the investorate and the weekend will get busy rerating India’s old numero uno in GDP contribution, the IT Services and offshoring sector.

Infy reported lower Rupee revenue growth with less than INR 100B in Q2 Revenues and the USD revenue or the Net Profit weakness did not help them. The bargain price of Infy questionably could be below 2000 and not the current 2300 as management takes over the dias with network broadcasters. EBIT’s actually fallen sequentially despite the good Rupee Dollar Conversion in the quarter A rerating of the annual Dollar growth in revenues ( constant currency down to 5.7%) acould not be balanced by increase in wages. 98.58 B INR revenues up only 2% sequentially or $1.797 B in USD terms down from conservative estimates.

 

India Afternoon Report: Sensex winds down to an Expiry Thursday

 

icici bank
icici bank (Photo credit: Wikipedia)

 

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

 

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

 

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

 

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

 

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

 

 

 

IDFC Recommendations off the mark!

Not that many are on the mark, being based on fundamentals alone and not able to find a fair hook on timing. However the FMCG and Health calls are fine as a sectoral calls and I disagree with both exits from ITC and ramping on new Henkel owner Jyothy Labs. Both recommendations define  a very different time horizon than the market horizons currently and this particular rally is obviously not a choice for the house.

Jubilant Foods and Titan shorts are not going to work for long either. the infra NBFCs in Power from PFC and REC to PTC may take a break here as well, IDFC could restart on the run from 137 or 139 itself and has stabilised by itself since the morning.

Quantum, strangely is better placed with today’s picks ( on the ticker) is it just RELIANCE?

UPDATE::2.06PM:: The Markets agreed with both and infact profittaking in ITC suddenly reversed in minutes of this post being published and ITC recovery main part of the run before the CAG report dampened Power stocks like RPOWER and IDFC itself came down after.

India Earnings Season: ITC did well again, why not enough?

Somehow ITC’s profit growth to INR 17.01 bln inspired the market to invest in its stable model causing a sell of fnear the usual 210-215 mark even though results growth is on call

FMCG business grew 25% while overall sales grew 14% and Net Profits 22.5% Growth in Agri and Hotels remains weak from management expectations Cigarettes also grew at 25%. Hotels revenue is 5% at 311 crs and profits at a 34% margin at 101 crs (1.01 bln)

Net Sales for the 9 months are at INR 181.71 bln or ($3.6 bln) with FMCG sales at INR39.1 bln or $800 mln up

ITC Welcomgroup Hotels, Palaces and Resorts
Image via Wikipedia

25% and Tobacco/Cigarettes at INR 90.74 bln or $1.80 bln up 15% only. Agri and Paper have grown to INR 60 bln in nine months or $1.2 bln

PBT margins on Capital in hotels is just 6% and Branded FMCG goods in the Foods, Apparel, accessories and stationery have not reached breakeven losing INR2.29 bln in nine months (PBT/Equity(Seg Capital) = -15%) Return on Agri in terms of Capital employed is higher at 30% and that on Paper business is a good 15%, leaving Cigarettes to be the mainstay of the company with a 20% return on Capital.

Happy Thursdays! Let’s forget inflation, aviation, consolidation and eternal damnation

And remember something else about being India. About being a nation of 1 billion cricket happy audience who were relieved that despite Marlon Samuels, Chanderpaul and the Bravo, we are still ahead 2-0 at home after having destroyed ourselves in T20 and in foreign tours of England

Also lets remember that Indian corporates own the Blackburn FC and I’d say even the Liverpool FC for all practical purposes despite no business for Stanchart in India after its stunted listing Also that Vijay Mallya’s sports teams are still the toast of quite the world looking at India.

Apart from that just that fuel inflation is now 15.5% for the week ended Nov 02, 2011 and food inflation is still over 11% and the Nifty tanked a 98 points despite the Primary Index going down from 11.43% last week to 10.4% to 204.7, Food Articles are at 199.8, Fuel at 171 (from 169)and Non Food articles at 175.9 still up after a dip in the food index from last week.

India remains a bastion of growth, cricket and Coca Cola 

I do not understand how India can practice any fiscal consolidation with Oil, fertiliser and food subsidies hitting it below the belt and crude at above 100, though the spread between WTI and Brent is down (in the US hemisphere, because of a new reverse pipeline from the WTI hub in the north to the Gulf of Mexico) and in here as the low cost transport channels via Singapore and some de-bottlenecking in the Americas below in the shipping routes (as far as I could get this)

The mood seems to be , even during the falling knives in the markets from 9 to 3:30, that I can see some with good value to hang on to, for the eternal sycophants there is HUL and Airtel scrips for the uncaring there is the dropping stock of Oil and mineral companies showing a lot of space on the way down, and for the IT friendly just a word of caution – there is no business there except for that from depreciation of the rupee and that is halted he(e)re at 50-51 for the quarter.

The banks are traders currency though, even at their best value in prices do not hold to positions very long and try and carry trades overnight though after judging wthether long or short helps..opening a position after 9:30  is going to

a. be in the other direction

b. lose your profit from the point it worked on today in market hours.

Happy investing!

G-Secs

India’s additional $5 bln FII limit should be exhausted by the end of this week itself, we need much more.  Also if you have been following my writings since 08-09, it is the time of the season when central banks are buying gold..if anything else is falling that one won’t and global trade will remain robust and on the up for US, China, Europe and India despite every other suffering knocking through..

Heavy Fuel

UB sold 31% of its Spirits/Beer operation to no. 4 Heineken and SAB Miller and InBev must be snooping around these small marketing havens(India/China) for growing the “footprint” of beer and fuel..Did I hear a nother offer on the table for KFA?

Growth in Coca Cola

Consumption stocks in the non-discretionary sector / food stables / FMCG non durables seem to be doing OK on sales though Dabur and Marico have fallen on the way. In particular praise and investments from Dominos, now one of many brands at Jubilant Foods, Coca Cola, investing $2 billion ( 20% of our defence allocation on the China Border across 5 years) and veen general insurance and healthcare businesses like Max India or fitness studios from Talwalkars

The Retail Lifestyle Champions: ITC grows prices, Foods and education in H1

Line results are in: EBITDA margins up .4% tp 34.5% as Net income grows to INR 5974 up 1.8% Q-o-Q PAT up 21% yoy INR 1514 Crs for a good margin of  25.34% Acc to UBS ITC lowered staff costs and inc EBITDA despite missing sales in paperboard and agri. Price Hikes in Tobacco would count for margin expansion the most to 300 bp from the June qtr

Rumman Ahmed at India WSJ writes:

Pre-tax losses at the non-tobacco consumer goods segment narrowed to 559 million rupees from 669 million rupees, while net revenue increased 27% to 13.41 billion rupees.

Net revenue from the hotels business rose a muted 1.0% to 2.11 billion rupees, primarily as the second quarter is a lean period for the hospitality business.

The paperboard, packaging and printing business’ top line rose 9.4% to 10.05 billion rupees, while revenue from the agricultural trading business rose 13% to 14.35 billion rupees.

ITC – Outperforming expectations
Though much more analysis is required before the company settles down in the second YV Deveshwar term and gets back into the new M&A game, The retail lifestyle star with good new brand launch traction since 2009, posted good growth nos.
Tobacco business has posted steep price increase at retail POP this  quarter  at 10% with more hikes coming after inflation lasted more than a year and input costs are out of whack. Profits of INR 1729 crs or $ 346 ml sustained the new non tobacco businesses

Still the price increases that ITC has taken will boost EBIT [earnings before interest, taxes] margins by 80 basis points, they say. Its cigarette volumes are expected to grow 7% in July-September,

Bank of America Merrill Lynch sees ITC’s margins surge 115 bps in the quarter.

Kotak Securities expects ITC’s cigarette division sales will rise 13% from a year ago, helped by a mix of price hikes and volume growth.

While the cigarette business remains robust, its non-cigarette FMCG business is also expected to remain on the growth track. Sharekhan expects the FMCG business losses will reduce 12% year-on-year. The Motilal Oswal analysts expect EBIT losses in FMCG will decline 16%, while sales increase 19%.

“Improved profitability in foods [Bingo breakeven in the first quarter FY12], education and lifestyle retail will drive the decline in EBIT losses,” say Aggarwal and Kapoor.

The Indian Consumer statistics | The Business of Capital

Manmohan Singh, current prime minister of India.
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There are stats for everything, from the days when it was The flexible indian Consumer, to The times in the nineties and oughts when he was the Durable Indian Consumer and now when he is simply the Tired Tired Consumer. With Rural spending growing 65% year on year in the Household Consumer Expenditure survey, we finally have a welcome report that actually validates why and where all the Durable goods companies and the FMCG ? Food majors have been peddling wares anew in the last 2-3 years.

Most consumer surveys are either pie in the cloud hopes translated into numbers like the TAM ratings much maligned yet curiously always ont he right mind maps..or on the other hand they are like the census making us rely on 2005 vintage statistics of durable sownership, even the wealth ones have no idea on month to month or even quarterly movements before turning in an annual update

The fact is the National Sample Survey led by both ET and MINT does show athe numbers for the economy, but as ET and mint chose, it could yet mean different things for different people. Mint argues we are still poor and growing on a small base in the hinterland, while ET argues we are in the middle of the revolution. Given distribution costs all discussions on moving to the hinterland are likely to be miore media hype for even the next 2-3 years as we have seen for the only viable distribtuion systems like e-Choupal and that women networked example from HUL/MFIs which really cracked up since 2008

ET

Urban India did better with the MPCE rising 68% to Rs 1,856.01 and prices, according to CPI-IW, rising 49.92%. The National Sample Survey, done every five years, was carried out between July 2009 and June 2010, covered 7,524 villages and 5,284 blocks. The data suggests there have been gains in real terms, as the rise in incomes has offset the rapid rise in prices during this period.

Mint

Despite the much-hyped rural consumption boom and all the social sector programmes of the government, the income inequality between the rural and urban consumer widened to 91% in the first five years of the United Progressive Alliance coming to power in 2004.

According to the 66th round of the household consumption expenditure survey released by the National Sample Survey Office (NSSO) on Friday, the per capita expenditure level of the urban consumer is now 91% higher than his rural counterpart, compared with 80% in the earlier 61st round of the survey conducted in 2004-05.

Mint rings truer to the heart in the first whiff, also with newspapers showing me the survey and having to wait 5 years for the next one, I pass on much more original commentary and analysis for the issue. A much in depth commentary from both, alas my advertising and marketing friends in the agencies do not get much from this even for media planning

Happy Thursdays! What else to expect..(Early Report)

HSBC in Kolkata
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Inflation WoW came out as expected at 11.7% for food inflation, 12.86% for Primary Articles and the consolidated number at 9.02% ahead of the unscheduled eGOM meeting for Diesel and Kerosene price corrections that will keep inflation up. Expectations are normalising to a higher level and in an hour or so the bank policy for the rest of the year may become clearer with the Bank rate 100bips above the Repo rate and currently at 8.25% (Repo 7.25%) likely heading to a above 10% figure andd more as imported inflation and the one carried into input prices squeezes profitability factors in yet bereft India forver waiting for new investors..This article will be updated later throughout the day

HSBC and Stanchart have come out as the only ones carrying forward from here being used to a Rupee Trillion of business assets each in the country. MoM inflation WPI figures had earlier come to 9.06% on Monday night and markets have started correcting from 5500, results a few weeks later probably accelerating the down move this time and the yield curve moving after the announcement further higher from 8.3 to even 9 – 9.5 % in the next quarter or so. Banks’ pricing will move as also for deposits after a couple of months if and when inflation stays at 9-9.5% and RBI makes a new set of more quicker baby steps just to stay on top till the rates start moving southward in 2012

The monthly inflation figure saw non Food core inflation move from 6.5% to 7% Month on month and base transmission is on to manufactured articles as car prices were hiked this week while FMCG / durables keep playing with their own retailer economy.

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