India Morning Report: Les deux ex machina, et vous? Les fou de cirque n’est pa!

In singular, it would be the Ghost of the machine or the fool in the circus. A market of course has more than one of everything. Apart from that there is cricket too, where India turn a win opportunity into a clarion call to stay awake

Markets ‘jumped’ overnight to 6080 levels at the close, with US markets closed on Monday. The VIX trade is back again, 2 weeks from expiry, ( though the last week in Indian monthly expiry is usually the busiest in contrast to more deeper US and European markets that trade weekly expiries and expire by the Friday for Third Saturday in monthlies staying untraded the last week as most of the busy series are in the “next” month or new weeklies.

The banks are back with a bang but the Bank nifty trade is a good strangle range pick , even a sold straddle will give you a decent range (as Ashwini reccommended yesterday) as PSUs and SBI get exchanged out for new buys in ICICI Bank, HDFC Bank and Yes. While one is not sure of Kotak, PNB definitely has enough detractors yet despite the great performance with controlled NPAs and fully provisioned balance sheets at begin of year allowing improving provisions while releasing profits. That means PNB might again be a buy after the big run to 550 levels is cut on profit-taking.

I”d try a short in Kotak and let you know what happens. IDFC, Bharti  and ITC are great picks and starting from the bottom of the trading range while the Power NBFCs are ready for a move as well.

Bajaj Auto gets first mention on the Excise giveaways from PC’s last presentation, which was technically just a Vote on Account.

Excise Cuts on SUVs and Medium and Large Cars to 20% and 24% mean the gains in market will start for all automakers including the listed Maruti. The markets preferred Hero management coming out after the excise cut, but with Hero also biting a lost mandate for a grip back, Bajaj is still better off with Egypt exports hit by the import ban meaning less than 100K units to be recovered from the drop in excise duties.

The Indian Macro is easily the best poised for most fiscal adjustments to be burdened at this time and the VOA optimism could well prove to be PC’s gift to the parent Congress party in its new roles after the Elections as a fiscal deficit target of INR 5.3 T is not a shakedown or bleeding optimism in the projected Indian Balance Sheet. The nominal rates of growth at $1.10 T base in FY13 we assume may yield $1.26T and $1.44T targets for FY14 and FY15, that may very well be any other number at the realistic 11% nominal ( achieved in FY14, LV-CNBC) and 13% in FY15. However the 4.1% target look daunting esp as Food subsidies have been duly increased to INR 110,000 Crores (1.1T) and Energy subsidies understated at even INR 650 Bln (65000 crores) with INR 850 Bln scored in FY14 after the deferral.

A great Fisc performance thus at 4.6% will be greatly rewarded by the markets esp that includes INR 2.46 T and INR 1.8T only from Tax revenues but shows 100% achievement of Divestment (INR 400 Bln ) and Spectrum sale targets (INR 600 bln) and the new government make the usual drop down ravines for itsel fin beating the other government’s VoA, before trying to dump comparisons in the new Budget post general elections, All inall, not a great day in parliament for the new government as it would never sound better than boring humdrum in the whirring engines of growth that have to take over this year. A last note on India Macro stems from the continuing dissociation of Investment levels in the GDP at 34% from the true investment which has barely just hit 5% growth and mostly in the Consumer areas. Unconstrained Bank lending continues to remain available in India and interest rates are likely to continue down from here at a fair rate, allowing Fixed Income portfolios a bigger boost

There however is no comparison of the difference between any remaining expectations on Infrastructure investment in India and real participation to any other subject to kickstart India’s new millenium story, yet to begin after in stalled in 2009 and infra funds have to prove versatility in financing the new projects still blamed on bureaucrats or the Congress. None of the private cos as the markets have shown they realise, are in any position to take new project debt into these balance sheets at GMR, Relinfra or JP Associates and conventional bank lending is not the answer for them

Kejriwal and AAP brought the AAM AAdmi back but failed in their mandate by leaving from the aisles before the start of Act I.

Energy cos are getting the best possible deal with INR 1.1 T in payments despite the deferrals with more than INR 800 Bln already paid out , so they should have already been discounting much better levels, at least 250 for IOC for example as the fiscal did see a consistent unburdening of the energy infrastructure and a more rewarding marketplace, even as the Power regime gets more competitive

India Morning Report: It was Kotak meeting its maker again! (6250 again, naturally)

Thus the market turns south from 6320 levels though there is nothing to bother the market much.

Kotak’s mid afternoon tryst(just the 9 month report) could not shake off the market assumption that Kotak’s business is all but done and that does not bode well for it in an unbanked India Q3 results showed a grand INR 35 B in fees and INR 34.92 B in Net Interest Income yet again, not counting minute variations. Adding insult to injury, where the bank almost categorically does not expect to grow any of these businesses were the unravelling NPAs on a small portfolio

Improving NIMs at Kotak are heartening and CASA is up 22% on year. The split of the Advances column is a heartening reminder to others like Yes and Indusind evenly split across Corporate, Commercial and Retail (INR 20 B) and NIMs are much better at 4.9%

HCLT in the meantime has hooked up with CSC for Application Services Delivery centers in Bangalore and Chennai. SAP continues to explore India in the mid market Enterprise space with partner innovations. IBM recently sold Daksh back to local operators

Korean GDP releases later today will probably again reset India’s FDI expectations. Bank Policy Tuesday may appreciate the inflation correction and the increasing deposits in India’s coffers coupled with Government Borrowing turning out better than expected. Foreign Reserves are hardly comfortable but higher than usual allowing RBI to spend a couple of Dollars last week (January 5) on exchange adjustment. Bank Credit update will continue to show better growth.

HDFC , Dabur and Biocon may keep viewership glued to trading software and TV releases again. Arvind and Tech Mahindra are among the fabled Volume Breakouts of the season but we won’t be looking at them till FY16 as the model and the Distribution kinks for the former are still suspect. Aurobindo Pharma has post announcement made the splash on news count into hard stock price increases and will likely hold new levels. Biocon , if you believe in a generic thread of Indian Pharma , could still be the Indian Infy/TCS depending on your version of the morning coffee.

I am still buying IDFC and YesBank. Power NBFCs come out jst before their results break or in 2 weeks as the rest of the breakers are in town with M&M Fin joining Volume Breakouts today before earnings. CESC also sees a higher clip of returns on breakout. no Zensar isn’t making it anywhere..Lupin is still bussing up and let me know the others, it’s busy season outside the markets. 6315 was holding at 10 even with the Kiwis in trouble

Network Analysts or Gang of Analysts will do better with Lovable and Page Ind(no pun intended) as the scrips move into gear after the post ipo run meshed with a consumer rush and a dearth of supply in good stocks in 2010 . Prestige , Talwalkars and JP Associates are good for l.t. accumulation. PVR hasn’t wound down so the pie for I Sec finally broke out of the clouds and will keep growing (till it rains burgers and purple juice?)

Cymbalta apparently is a Torrent Pharma revenue which posted a good INR 10 B revenues yesterday. We haven’t captured its jumping fortunes earlier, Torrent Power sharing an equally unique business advantage in the utilities space (serving Ahd and Surat)

Davos streams on cnbc and or Bloomberg(us) could have well waited for saturday programming or the interview settings could have been suitablly upgraded from luxury breaks to business interviews for those at work

At 11am, I am shorting BOB, the 6300 calls are so cheap the 6300 straddle is the BIG WIN(Ashwini/etNOW)

India Morning Report: Why exactly is IOC available so cheaply?

Of course, Infy will lead the bullish breakout on the Index, and the profit prognosis again at a Cons INR 28.75 Bln is much more to look forward to than the Cons Revenues of INR 130 Bln but the dip in Revenue growth , braked to 0.5% on Q2 Dollar data is still probably excusable. The jump from Infy to the Earnings season that starts in earnest next week.

However, IOC is as expected delayed on the divestment news but mainly because the Oil ministry got the fangs to file a dissent note as the Energy co’s price has slumped to lower than 200 (on the average of prev 6 month closing prices) There are many benefits to divestment and in fact a bargain such as IOC at these prices would be an investor bonanza par extraordinaire. BPCL (up 7%) and HPCL(up 3% probably) gain on the news of the delay but the question to who are the agencies involved in muting the price performance of India’s best navratna after ONGC remains important to answer unfortunately for the BJP fueled markets and the outgoing Congress government

The Delhi Power audit will also ensnare Relinfra as it owns 2 out of 3 Delhi Power distcos with more than 30 mln subscribers and three-quarters of the Peak Demand. Delhi takes in a huge 7.5GW of Power Capacity of the installed 130 GW nationally but the share is much larger in utilised Power capacity

The Pharma companies, the other beneficiary of India’s global largess in currency trading, will also be busy making aggressive deals in the US Pharma market while rejuvenating their domestic Pharma businesses, with Torrent and Auro completing deals this quarter in Elder (domestic) and Celon.  Lupin delivered another USFDA win along expected lines with Twynsta generic being allowed to both Lupin and Torrent. Fresh buying is impossible even in Lupin, Cadila ( 850-1350 nah?)

The market is not really ranged and while Infy may not be able to envelop all India expectations ever again at the start of the results season, it still clears most markers impeding a new rally post earnings. Bank earnings deliver the second infusion of realistic optimism on India Inc in a few days when the upward edges of the range are exected to stand up to better levels. Meanwhile Infy should crawl to the top of its 3400-3650 range benefitting the rare speculator who punted positively for them , most having to square out written calls, even as the markets face resistance offered by such shorts and Infy sets the grounds for more positive surprises down the line with NRN back at the helm. The changes in the Executive would be the easiest to explain.

A problem of plenty as I use images from Google with the syndicated image burner feed disappearing from WP?? 😉

The RBI governor would be probably hoping that the month end policy becomes a non-event considering the positive mpact just from holding rates and the challenges from inflation growing by his side. BofA’s Axis Bank ugrade may still be too little and too late as Axis battles NPA spam with PNB , counted for its days with the PSU crowd

Indices should not see a meltdown thus at 6150 and you should get one bang out of the score if you sell 6100 Puts getting cheaper by the minute at the open and even 6200 ones. If you cover them do cover them with buys in the OTM range(buy) at 6700 ( assuming 6500 in  a close future top of the market ) The bottom of the index range should thus become more volatile funding the shorts glued in to the market bearing down for over 6 weeks now but they will probably tire out this time, Vol allowing a long-range upside on its own nevertheless as India VIX continues to ride low on a stuck to the tea leaves recovery, which will still trend higher and not lower like in China

India Morning Report: Bharti Airtel improves India offtakes, pecking order unlikely to change for markets

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

 

The improvement in EBITDA to 31.7% obviates the other stream of bad profits from Bharti and one can wait for the stock to become available under 280 but the reassuring move from 275-330 is well safe as the dust settles down on another quarter on sharp cuts in reported profit again likely affected by one time items surging thru the global major’s rupee balance sheet every other quarter. Within, Telecom Bharti remains #1 in new customer acquisition data for March as well close to 3 million new connections in mobility and revenue increases seem defined upticks than Tata and rel Comm’s occassional blips into civilisation before going back. ARPU is no longer an orphaned series at INR 195 per month. The earlier quarter ARPU was at 193 and probably year ago as low as INR 188

 

Bharti’s INR 60 B Africa revenues too count for a major incursion into India’s new favorite FDI market since 2008, gaining FDI volumes close to China’s push FDI in the dark continent. One has however capped that $15 B investment as resource sectors apart , tales of stability and consumption in Congo and Somalia are more the exception than the rule

 

Brand India in the meantime relies again on infraco fund infusion but as election years go, this one may still be counted as one of the more peaceful with rare positive excursions by FIIs and outside India analysts into the country even when news from ECB and Fed remains critical to the direction and size of funds flows in the markets

 

Banks have been subdued for the Bankex and the Banknifty trading lower from all time highs in ait for an opportunity but some components of the bank sector indices are still likely to head south and negate the just aborted psu rally on their own steam as the difference within the PSU herd also shines and the threat of new competition makes the private sector bans stampede the rural consumption markets faster and grow back the consumption story still going strong in unbridled double digit CPI series for both rural and urban. IIP services data follows on Friday and as it would compare across US, Europe and China, it may well define strength for India inc.

 

Manufacturing R&D as a business segment has reached $10 B in India from more than 200 captive units of global majors, while pharma outsourcing is likely to regain captive strength as wwelll in light of the affordability linked rulings in Indian courts. China meanwhile is a real physical threat knocking us on the borders in its own inimitable ‘sleight of hand’ show on Ladakh and Arunachal borders showing up the importance of increasing defence allocations and arms spending while the Freight corridors and even the NMP supercities of Dholera seem to be threatened by the lack of movement on Land reform bills and external funding

 

 

 

The Delisting trotternama gets investors again!

Investors expectedly got blindsided by companies choosing not to buy back and delist their India subsidiaries even as stocks crashed in Honeywell on news of the change in plans. The stock run up had more than something to do with the correction and the decision and is a common conundrum for many MNC arms in the country not wanting to continue in the listed subsidiary business model but cowered by the price of delisting for the less than 15% stake in many cases that is priced high in expectations of a block buy back

An ET stat compilation of date shows thomas Cook, Kennametal, BOC, Sharp and Astrrazeneca already showing strains and having probably arrived at a new management decision crashing prices on the local exchanges bringing back the buy back option for those unable to envisage a further stake sale here it  is more sizable than the 1.43 nmln shares required to be put in the OFS by Blue star and may again skew the probablility of an OFS.

The regulator SEBI is unlikely to further  stand by patiently as  the delisting stories have been coninuing for almost 10 years in many cases as the FDI regime has become more open on business models espoused by Wholly owned subsidiaries.

One foreign bank also listeed in India after the crisis broke but banks have been avoiding creating a new risk silo for India , neer licence operating only CIB franchises and avoiding retail business altogether

Bluestar and Honeywell are pricing their delisting Offer for sale in the markets to get the stakes down to 75% removing them from the target delisting universe.

Coca-Cola: Millions to Washington Politicians,...
Coca-Cola: Millions to Washington Politicians, Billions to Invest in China (g1a2d0040c1) (Photo credit: watchingfrogsboil)

India Closing Report – Week Of September 24-28, 2012

 

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

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

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

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

 

India FDI Report (March 2012)

India’a FDI process received a tremendous boost in March after $2 bln flows in January and February, itself a fair score were boosted to $8 bln for March even as international media slips into a morass susing the Indian voice and using their ignorance of India to blindfold and then play with Economic Darts ( or half cooked $$art points).

Hamersley Iron 20 class locomotive at 7 Mile Y...
Hamersley Iron 20 class locomotive at 7 Mile Yard entrance, Dampier, Western Australia. (Photo credit: Wikipedia)

India is well provided with such munition for its unfriends starting with the 4% Current Account Deficit and the double digit depreciation of the rupee to the curbs on FX trade imposed by RBI since October and added to today with punitively enforced conversion of Export dollars to a local currency. That boost was also needed for the Rupee as it faces severe action by European speculators stunted by the lack of LTRO ritual and a drying up of business back home.

FDI grew in the last month of the fiscal and even allowiing for the fiscal end corrections if any in the tabulation, is still a great score considering that FDI in multi retail was never satisfactory after coalition politics robbed the Indian markets of a great expected boost in the Hindu new year. The $36 bln FDI in 2011-2012 is still below the FDI receipts expected when the Fiscal began last year before it ended on a low note, expectations of growth scaled down to below 7%. Asian competition from China and Indonesia apart, India still expects to see a boom in retail consumption and needs a lot of private participation in infrastructure. Telecoms and GAAR apart as they target specifically sensitive corruption and governance issues, Foreigners remain welcome and banks may not be the only ones growing business in Asia esp India in 2012 and later.

Routing of FDI thru Mauritius has been a special charm for the India story signalling to most Indians on the ground that jugaad is still the order of the day and hence the efforts by the government to re emphasise that india is not one of the banana republics or one scrip economies that Western investors seem to favor. Indonesian and ASEAN FDI story is however more freely linked to Chines e FDI into and from these Countries.

The March rush may be explained by earlier announcements, large ticket investments expected in Mining and Energy from BP and other global players. Rio Tinto is part of a diamond exploration project in Central india.

India 2012 FDI Reports – Curtain raiser

Though details are yet available till January, the rearly momentum in FDI and the now value equation in India’s Financial Markets has again meant renewed inteerest in India FDi though the buck stops at retroactive amendments and the recent clarifications on FII portfolio investments thru P-notes a s a measure of investor confidence. In the last three months of November, December and January more than $5 bln in FDI was reported despite the ongoing saga and domestic credit growth also belies expectations of a slowdown at more than 18% growth.

January FDI of $2 bln mostly Added to Services sector for $1.3 bln and Infrastructure construction projects of another $600 mln while there was also a solitary software project investment for $100 mln

That means there was no FDI in sectors like Automobiles, Power and Pharmaceuticals / Healthcare unless new projects have been added in February and March buit these sectors will also contribute further in FY2013 alongwith Financial Services and Transportation/Travel and the ongoing impetus in Infraastructure witht hte first two India infra debt funds, one with Citi and another with HSBC in play.

Ten month FDI totals have hit $37 bln and Feb and March would at least take it to $0 bln for the Fiscal.

India’s Fiscal Deficit in the meantime hit a few flood signages on way to INR 4.94 Tln for 11 months in FY12 from a INR3.68 tln for the full year in FY11 which was a humongous 68% of the Budget estimates against this years likely overshooting the Revised Estimates of INR 5.15 Tln CPI Inflation was a high 8.8% in /february and thus WPI will also climb from March and April risking the rate cuts planned in early part of the fiscal by RBI

So are P Notes in or out

CoA of Mauritius Français : Blason de Mauritiu...
CoA of Mauritius Français : Blason de Mauritius Deutsch: Wappen von Mauritius (Photo credit: Wikipedia)

Well, i understood it thus. There were first the Anti avoidance rules called the GAAr rules which were intended to catch those who benefit from the treaty in Mauritius without belonging to Mauritius per se , with a token presence not backed by assets or business i.e. Offshore investors. These offshore investors have been targeted.

Two, in the clarification on Overseas M&A transaction involving india assets, the intention is not to cover P Notes because underlying equities are Indian Assets. So that piece was unnecessary walk in the park while the trucks were running up and down and you could have all avoided the noise.

The real rule details would thus clarify how Portfolio and FDI investor would be welcomed and how revenue leakage from Maurtitus a s a treaty participant, which remains the key example, would be taken care of now that the new treaty signed has included only token changes at the behest of the Mauritius government. And no clarifications are available yet. We are looking.

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