India Morning Report: No Taper and Nifty on to 6100 levels

A rather unexpected reticence by the Fed, allowed Global markets to uncoil their expectations of a taper and the Indian Rupee opened at its best price of INR 61.5 today barely hours after the announcement. the shorts on banks disappeared overnight as did the opportunity in depreciation lit IT with the Banknifty finally moving 650 od d points to above 11000 today and the 7% increase in ICICI Bank to 14% in Yes Bank possibly still allowing steam in the rally to 6300+ levels and a long awaited rally in the banks with the liquidity measures likely to go away. (what if there’s no taper?)

Apart from the bigger damage to shorts on Banks, the rally has caught most by surprise and thus some may wait out for lower levels to start again, but stopping market enthusiasm at 6080 levels itself is likly to fail with the momentum of the event generated uncoiling allowing immediate 6300 levels. Also the taper remains on the horizon for the US Fed as it tries to tackle the question from a new structural cap to growth in the US and the  Rupee may be allowed to break below  to erase the damage since May

F1 Australia Grand Prix - Thursday
F1 Australia Grand Prix – Thursday (Photo credit: Wikipedia)

Indian yields are back to 8.16% levels. ITC and  Bharti have continued investor fueled upmoves at 350 levels, while Sun Pharma and ONGC and the Energy companies rebound to 2010 levels. Investors also found the chances to get back into Hero Honda and Maruti, both of which may easily by rejected later for Bajaj Auto in the Auto/Two wheeler sector

The Rupee might close a little lower but above 62 till 4pm and in RBI trades after.

India Morning Report: The Rupee, it counts 62..63..64..65..66..67..68

English: Cumulative Current Account Balance fr...
English: Cumulative Current Account Balance from 1980 till 2008. (Photo credit: Wikipedia)

 

Fixed income Desks at Banks of course would like others to believe everyone was trading the 9.5% -10% range probably but closer to the market after a small tweak in SLR and the confirmation of lack of MTM losses excet for the 5-6% in AFS, desks returned to trading 10- year yields between 8.33% – 8.5% and the OMO tomorrow may revert the auction yields to same levels after the 12.27% auction on Monday. The FOMC was crystal clear in its depositions as seen in the minutes that the markets were in for a leaner September and so it will be, will be as Asian currencies suggested in the morning before Indian markets opened. . There may not be many trades at the 64-65 levels even as the interlinked ‘100% plus’ correlations pushing the volatilities out have receded esp with fixed income yields above.

 

The lesson for traditional Economists and probably our Chief Economist C Rangarajan also that the Indian Economic Cycle does not really lend itself to the trade deficit being the Consumption Gap. As one might see in this year’s turn of events in June itself, the drying of consumption had absolutely no relation to the high prevailing CAD which is more directly linked to Investments in the Economy and Savings, leading from curb on Gold for lower deficits till such imports uncoil again and jump the deficit forward propelled by high Savings and zero investment. CPI again showed that Non durables will be able to transmit pricing shocks but all is not well with Millers as they pay for pampering farmers in UP across successive state governments.

 

Energy Companies lead the second tier of the rebound stocks as Bharti and ITC reach their true value at 300 levels and metals lead the banks to improving cognition of the market ( witness Banknifty at 9350, though the 9600 mark was reached and lost as if in a dream) There is actually no way to call a bottom of a currency where nothing is bought and domestic consumption is so independent of imports. And the Dollar will stay strong thru September from the looks of it. So, 70 is just the mark they can see right now probably without pooling selling interests across the dozen odd active desks that at least follow the currency. Linking that to NPAs may similarily not work because the stock of Private Dollar debt is mostly fresh and definitely ss than even $50 Bln despite all the new issuance. If old models were to be followed, the irascible Oil market’s considerable control in price increases is all but lost and Rupee could eve start rising back but that is no longer a valid reason for anyone to hold as a single seller could control the market till even 80 levels and Export volumes are not corresponding to increasing import requirements

 

 

 

 

 

Happy Thursdays! Another toast to Global Duality

Happy Thursdays is a weekly statement fromt he Advantage zyaada house and almost always includes a comment on the latest India inflation figures, watermarks for market related statistics globally and our rare direct comment on global markets’ direction including facts that make us sing together..It usually show up unsung ot me too, so get busy using it now..

That’s the sarcasm right there. In the pop of the title. As you chew on total global correlation with a 0.97 correlation and more in September, and 0.7 in early August, some might be excused for thinking a basic increase in the knowledge of the markets all around and thus gains in terms of tranparency and reform. However, that is not the case at all. The sensex tanking today was a sign of globall correlations nearing one but we are decoupling as we speak as inflation draws lower on food at 8.8% but fuel persists closer to 14% for the week ended Sept 10 As primary articles tick down and India becomes the harbinger of i in inflation globally it would stablilise in India at not much below 8% while crude prcing irrespective of the “Dollar Economies'” giving up after hearing of another ‘stimulus’ The reaction to the stimulus in global

Flag of the Organization of Petroleum Exportin...
Image via Wikipedia

markets will be varied as OPEC now gets to price itself out of a depression for its own, ‘US stays at its lowest growth levels with consequent 20% unemployment and Europe deals with new strife and gets used to a regular shrinkage in its production whether at UK and Germany or the GIPSIs

 

Yet right now, everyone was listening to the same, almost stupefied, wih a not so material and much expected Bernanke speech and mini – program somehow making the way clear for everyone to see the bleak future in its totality without hope. So commingle while going down and better have a differentiator worth its name on the way up , because nations like people are all alone..

Yet righ now, everyone was listening to the same, almost stupefied, wih a not so material and much expected Bernanke speech and mini – program somehhow making the way clear for everyone to see the bleak future in its totality without hope. So commingle while going down and beter have a differentiator worth its name on the way up , because nations like people are all alone..

The Fall of the Berlin Wall, 1989. The photo s...
Image via Wikipedia

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