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

 

 

 

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