India Morning Report: The “growth-inflation dynamic” is getting flustered by the rates

English: The Classic view of Saving & Investment.
English: The Classic view of Saving & Investment. (Photo credit: Wikipedia)

While the equity markets are back from 6000 levels making up for those missing trading days last week, starting the week at 6150 levels, an ongoing investor conference revealed the likely India bull among banks getting the short trade for not being able to lend in Europe. CLSA Chris Woods asserting that the challenged growth inflation dynamic has not stopped inflows into the country. Similar assertions from Barclays in the morning, who quite track to our Top dozen picks as revealed in the last two-three months (previous trades though in very similar scrips are NOT ACTIVE) underline the fatality of Indian policy as presented to the new generation by Foreign investors coming to India at the bottom of the global cycle.

As we have written before India could well find a way like the Phillips cuve in Keynesian Economics to survive n the high interest Economy, but those waiting for a revival or reveling in China’s continuing misery would have realised by now that India having chosen to jump rates in October is now intractably going to ride up the spiral killing off any motivation for investment growth from the bank rates while the rate differential continues to press on the ECB borrowings and increaase pressure on the deficit. One way we still think, out of this spiral was to learn the importance of holding rates and a HOLD at 7.50% would have done the trick. India’s diagramming in the investment /Savings trade are rather inelastic on loan fund supplies or demand in the main stem however and so growth will go on.

However, in the meantime, WPI has hit 7% and so there will be more rate hikes not impacting the residual growth GDP. Rest of Asia struggles as well with Israel cutting its GDP scored in September to 2% and the Oil economies or Africa the only refuge for high growth dependent Capital businesses. India with or without the Modi-nomists has done precious little to ramp on to the unaided infrastructure growth and is barely getting back to fiscal discipline with ratings still stuck in the 80s mode regardless of reform. The etihad $450 mln + investment in Jet including the 24% stake has taken agan crucial time off the managements available turnaround strip an India Inc is also running out of time stuck at 5% growth levels, now probably locked in till June 2014 without an escape hatch

JP Associates is a prime example of price negotiations being a sordid affair in India, Manoj Gaur doing well to hold on to deals on its Cement plants and others despite the markets probably looking for an even better price on the sale. The rresults showed again continuing growth without improvement in the CEment business. Monssoons good impact on grain and thus any residual impact on lowering inflation is again a sordid wait seeing as it is unlikely to stop the farmers or traders from spiraling up our food prices for the time being. CNBC 18 did a good focus spot on Pharma stocks in the morning, and they are doing well in this cycle, including Cipla and Lupin, the still funding trade stocks and IPCA it seems has rerated to 17-18 PER multiples. I hope they have a new drug or corporate news on the horizon. Again on inflation FinMin so can’t do anything about imroving supply lines for agri in this nation

ITC is finally back up again from 310 levels itself and is a good trade. IDFC is done till the election frenzy despite the Fin Min noise for infracos which unfortunately are still running their family businesses on the margin trade of their own stock. Network commentators have underestimated performance potential in Yes Bank and overestimated it in State Bank. The Maruti trade though is back as the Yen spirals down(up) into the hundreds again for a likely couple of months, taking care of the whole quarter

Automobile expors are doing well again so JAnuary will be quite a celebration of the tough times with Consumer Staples (Non discretionary, food and other FMCG) able to avoid pressures to reduce margins and not pass on input costs.

Last but not the leas, we are not issuing more Buys on Tata Steel but it remains a Biggie on the Buy lists and those deciding to take profits with the Domestic institutions at 380-90 levels will likely be deprived of the real cream on the cone.

India Morning Report: Is that the big breakthrough to All time highs?

Questions of consolidation have changed to ways of finnagling the new target for Nifty though Domestic institutions keep selling as on Tuesday and not many found reason to miss the India Morning Report yesterdayas we probably cowered by the repeating of underperforming by ICICI Bank to expectations today decided to skip the report 9 strictly for personal reasons but no one would believe me)

ICICI Bank has also not outperformed though it belongs to a sector where PNB has managed to underscore recovery with jumpo profit growth and profits of INR 13 bln on NII of INR 37 bln ICICI Bank would likely out score ¬†them by Q4 itself in NII terms and did by no means perform badly though PNB’s beating estimates is finally carrying the banknifty into tomorrow’s new series. Expectations of high volumes in F&O expiry are likely to come to pass as TV18 yesterday itself reported a 44% rollover in Nifty futures into the February series.

The first 6300 targets from domestic broking houses have sneaked in and we are thinking more in terms of markets managing expectations as necessary without losing 6000 or 6100 in the Feb or next series and then steaming past 6600 is likely the plan but each is more defensive than the rest and it will be our recommendation too.

For one, policy execution has not improved, another, people could actually believe and wait for an up rating of the sovereign in the background of the current roadshows by the FinMin and thirdly the main perpetrators of missing NPAs coming back to bad debt like Allahabad Bank will be reporting pretty bad numbers as All bank reports today a 40% decline in Net yoy to INR 3 bln

Important reasons otherwise for keeping expectations hedged would include the importance of having a welfare budget for Chids’ Rahul and congress (UPA) and NaMo’s ‘threat’ to quietly come over to the center and rule which would likely spark off an important after reaction in India despite India Inc protestations of support with industry in Gujarat likely to be seen as a big positive for his candidature

ICICI Bank has reported a better NIM of 3.07% improving by 7 bp over last year and also sequentially keeping its new NIM targets alive and might even guide much better ranges Chanda Kochchar has hinted at in the last 3-4 quarters

 

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