India Morning Report: The rest of the week is bullish again

indiaGiven Pfizer and US Authorities continuing crackdown on drugs from India ( Pfizers fake drugs lab featured Ranbaxy on Bloomberg yesterday, 100M users (see ET)  did not vote for Ranbaxy and founder Dilip Sangvi definitely has an uphill task trying to convert his $4 B revenue acquisition of Ranbaxy into a paying deal. The price even at Rs 447 was probably a face saver for Indian Phartma as Indian pharma contitnues the quest for bigger stories in the $200 mln – $500 mln molecule categories and even more and the US generics story also relies on academia to cut the costs of innovationand drug delievry with and without Obamacare.

As of now however, prices of Sun Pharma continue their rally as Ranbaxy finally stabilises at 447 (offer price) and markets look to complete their pre poll rally with benefactor Modi piping up some hot Indian curry to Foreign investors around the world. Recovery in consumption is not converting to better Auto sales apparently and poll time spend also seems to be down witht he fortunes of the Congress known well in advance.

In Financial Services and Banks, the IDFC story has multiple positives even as the markets nurse a big bruised ego from RGR’s matter of fact disposition of other applications and the Infra Financing story for India inc seems to be back on track, the Indian welfare state a survivor of other political questions as BJP promises to bring back rural employment and education schemes.

Stories like Bharti and ITC are unlikely to lose because of the changes in Political fortunes while the Pharma and It story probably come under the scanner being at market peaks and the Rupee responding in the NDF market to more than inspired business inflows and remittances from labour abroad.

The movements in JP Power., JSW Power (Nasik and Maha areas arnd Jabalpur?)  and obviously Adani Power ( Amit Shah connection) are interesting and likely to be back int he limelight as news on the business channels remains on target for a big 7000 breakout and is safe for a 6800 score by far, markets continuing to test the levels after each 100 odd points of rise, studying the ramifications and choosing a select dozen every 100 pointswith shorts back in Kotak and Hero Motors. BHEL and SAIL seem to continue to be short favorites and their fortunes and that of IDBI Bank are unlikely to be affected by market direction now.

The best derivatives strategy remains to sell puts at this point for probably 6500 levels on the safe side, markets likely to signall enough if the breach below 6450 levels in 2014. Buying risk may seem tobe in, but new investors are likely to be priced out by the constant rain checks and risk buyers from early 2014 will continue to be rewarded till end 2014 if they stick around.

JP Associates is unlikely to move upop from 56 historically a support for the stock as it continues its tortuous strategy of deleveraging its listed stock

Bank credit growth remains steady at 12-13% and deposit growth continues to outpace, leaving the changing GDP target forlorn at new higher levels and the GDP performance for 2014 and Q1 2015 unlikely to hit above 5%

Market highs around 7000 levels are however already justified by continued double digit earnings growth by top performers.

 

 

India Morning Report: Nifty futures still above 6500

Infy is available at 3350 in case you are looking at gaps in your portfolio. The twin shock to Sun Pharms from the US FDA however, broke the proverbial Camel’s back, big sharp falls in both together taking ou t the bulls hopes ( as i n fact the bulls ar e in no particular hurry) Probably from the stock specificness of the new rally in both the Dow and the India Nifty, above old highs and resilient to most investor breakdowns a fair smattering of geo political uncertainty laying the groundwork for such tests of both indices in the last few weeks, that now the indices are called by a set of unrelated stocks, not part of any index necessarily and sector led predictions still valid independently as also to  a certain extent stock specific upsides.

Downsides and new buying levels are likely restricted to the bad news dozen, currently the set including just Sun Pharma, Infy, Maruti , L&T, even Hero and a couple of the last week’s  weak entrees like Tech Mahindra which would also put traders in a likely soup.  shorts do continue in infy but one wonders if anything more than 3200-50 levels on the low side are possible. It is probably also a reaction to unrly traders looking for a fllight to quality indepeendent traditional favorites losing a lot of times in this rally with the short traders

HDFC, HDFC Bank and ICICI Bank for example continue to nestle new levels and find no dearth of long investors. SBI could have more traders like me waiting to pounce on the fresh chance for shorts to below 1300 as its NPLs are not done. Bharti like others has been able to raise quick debt this week and IDFC with the Power NBFCs remain a good story , fresh longs waiting for the couple of bad ones to play out as they are pure trades on fundamentally strong ideas and potentially unlimited longs would not change their current levels ( unlimited institutional appetite ) unless the trade wanted a clear push and will likely compelete to 128-130 levels

Fixed Income Markets will likely find a day between today and Tuesday to factor in a little more good news of the CPI and IIP scores before responding to policy day’s volatile hopes with a strong top in rates under 9% as rate cuts are  ruled out. The MCX and NSEL slugfest continues in the background, as decorous solutions to the problem seem to leave some unsatisfied yet. FTIL and MCX promoter shareholding has been redenominated as Public and a rights issue is in the offing, the book building sentiment showing in these parrying moves. A deal to sell down that holding of FTIL and MCX is still a long way to go

The Astrazeneca delisting seems to have finally seen the right levels for the stock as the last rally in listed shares starts , heightened hopes marked by FIIs holding a big block of 15% in the stock. ITC seems to be a t the top of the range and a trade from 342 to 325 levels is likely. Despite today’s defensive buys investors should avoid Titan, ttk or Jubilant Foods or even aviation picks like Jet Airways. Bharti on the other hand will see buying at thhese levels of 300 itself and not recede much beyond 290 levels at worst

The market rally will likely continue if not this afternoon then on Monday afternoon with buys firmly holding on, with better than any other rally’s chances of retaining permanent levels as the market bottom has definitely moved up to an even 50900 – 6000 ruling out further cuts int he select stocks that have created and added fresh demand in this rally, markets having carefully shucked out PSU banks, construction and other leveraged plays with no fundamental performance locks on them. The Rupee can move back from the Friday’s 61.50 levels almost immediately

Crompton Greaves turns out to be headed for the chopping block, a potential sale likely to bring in a good uncertainty for investors in the stock. PE investors like Blackrock who is strong on issuing debt to promoters trying to tide over the bad economy are already providing fresh debt to the Avantha team

In other Unlisted business, we are a little fogged as we cannot determine what happened to the FIPB meeting on March 6, to discuss Braun and Destimoney among others. The sensitive handling of the Election Code issues had clearly seen there would be no controversy regarding this meeting despite impending elections

Commodity investors (HNWI) are unlikely to be able to return to longs with the slump in that sector heightened after a half hearted attempt by gold and Oil early this year.

Investors should continue to pile into longs in their choiceportfolio including scrips like CESC, Arvind Mills and Jubilant Life ( Looks like a quick trade can get buyers Arvind at 135 -140 levels)

India Morning Report: Markets will breathe easier at 6300

Many market commentator see further moves north as highly unlikely and it does seem markets have done a fair bit already including the choppy start to 2014 as buying overwhelmed short trades. However one does not see any of the selected scrips losing much from current price levels. The Ukraine crisis fade had much to do with the afternoon bullishness and fresh buying will be allowed at lower levels in most of yesterday’s increases. Pharma and Infra trades may yet break out again with Pharma yet to take off, Cipla the ‘only’ big positive trade continuing to dominate sectoral picks. IT scrips finally yielded ground with HCL falling a few notches as market spine trades keeping interest in the stock finally seem to have exited the ‘always trying’ bellwether

New affordable housing targets in China as US and China complete their budget exercises point to the realities of the new post crisis economic melee as US Arms spending takes a backseat and China continues to increase its Defence hawkishness and faces increased executive flight risks from the Smog. Australian GDP gave the Asian markets much to cheer pre dating a secular return of investors to Asia even as China is finally deprioritised at some bigger investment houses

At home, one is still foxed by the marginalisation of LK Advani in the BJP as frankly NaMo seems a little banged up for the big job and AAP is well, a one issue pony. ( at best a canard) The fate of General Elections also thus has to be separated from that of the markets as India’s residual growth and any strategic direction will never be delivered by the Legislative arm given the state of our politics. Inspiration may be missing from the Executive or the Bureaucrat/Technocrat nexus but there is still momentum for the populace per se and India remains the best bet in global equities in such confusing times, making do with a much smalller stock of FDI for it knows its limitations. Our advantages in the English language could compare to an additional factor production given the dominance of Services and along with our expertise in more intricate subjects of the business management disciplines , we can well fashion as many competitive advantages any corporation needs to win globally as required Rajnath Singh returning to Public service will be NaMo’s other card but Congress and SP have got no leg to stand on even as the issue of the State’s division holds extreme potential before it also becomes a BJP manifesto dashboard line item.

And Nitish finally replies after 6 days on page 17 (TOI-Blr)

Seeing as NaMo’s other credentials being weak are still the best bet, Nitish finally gatecrashed onto national topics, catching his favorite Paswan in his horns. Meanwhile,  NMDC has corrected more than 17% and apparently has stable lows at 110 levels to allow further accumulation post the new CERC regime in progress with the 2014 guidelines. The Power quartet had a great start yesterday as expected and may strengthen the trend in the Power sector going forward even as cyclicals try to start back for the longer trek to the top uninterrrupted by market momentum taking the index for a roller coaster ride, including the Energy infrastructure stocks and the powerful Consumer staples like Bharti and ITC which arenot going to retreat in the bull scenario while remaining a defensive bulwark

Private Banks remain the most important component of India Bull portfolios with YES Bank leading the charge yesterday and Kotak taking a breather in the secular run. ICICI Bank and HDFC Bank continue to capture market share on and off the bourses from the embattled SBI and BOB pointing to the limits of an upward move in a side like PNB even in this critical move for the bankers, as PNB continues to show good profitability

Nadar is finally offloading HCL stock as his offspring looks to focus on the Education and philanthropy sectors even as both listed and unlisted Tech  and Outsourcing businesses battle the problem of employee commute in a society where broadband connectivity is unlikely to bring any solace or a formalised structure for the telecommuting options. India thus, retains one of the greater habits of managing to jump over bigger social potholes and non lasting technologies. ( in practice i guess with cities = potholes 😉

VIX trades apparently careened over from 15 levels itsel fin Tuesday trading back to mmatching US Vol levels at 14 as the Ukraine issue was wiped off investor tables.

The Great Indian Premier Tennis League Auctions

In other unlisted business, The mega sports franchises era continued untethered with Tennis joining the ranks of other popular sports making a commercial comeback as a four location auction saw  Mumbai grabbing the top three in Nadal, Djokovic and Andy Murray at $2 million each ( less than $2 for Djokovic and Murray)

Ecommerce has enticed Walmart to India too, even as PE players move on to above par valuations after a year of job cuts and enthusiastic middle/senior management recruitment at Management school campuses and Amazon opening its second FC in India in Bangalore

The Dell Foundation makes a return to Indian shores after the Gates Foundation confined itself to outright charity in limited indian programmes. The Dell foundation will be backing a BOP Private equity set up Intellegrow.

ET also headlines India pharmas second attempt to break into higher market shares in US generics in Complex molecules that could well go to the PE companies given the investment required and the uncertainty of time horizons ill suiting listed companies like DRL or Lupin.

Aviation revenue miles are likely picking up in the final month of Fiscal 2014 and Fixed income markets also likely to accelerate demand led price increases bringing down yields as Crude becomes a bear trade and Indian currency moves up on redenomination of the dollar forecasts down for the year in 2014. Policy Day in two weeks is unlikely to be busy for the Reserve Bank of india though the Central Bank may choose to exercise a rate hie whence the yields will come back to 9 levels before investments make a mark in the Indian recovery still flatlined below 5%

 

India Morning Report: Did investors buy into the Rupee last week, and the Suntory deal

Friday’s  closing rushes on the Rupee trade could be just another chimera as the China miasma refuses to scare foreing investors from China and other shallow EMs renamed MINTs. China also reported an improved Services PMI implying the trade situation could improve for it and its partners including Aussie, USA and India. However, things overall continue to look bleak for global growth as dependent on legs of growth in China and Europe.

Europe has been importing more, however, esp as Germany probably focusees on its own consumption for a small break after a Target imposed halcyon end to 2013. Rates are likely unchanged in Central Bank announcements and Global liquidity reprieve trades, may be ephemeral at best as Yellen returns to post snow recovery prognostications to hopefully continue along the same taper gradient $10 Bln in each policy date.

However, not to be confused by the Global Economy’s internecine interactive brusqueness, the India trade remains a leader for the Global benign trend continuing in Equities and HY debt this year and is likely to turn in better performances on the bourses than any other.

The 4.7% GDP score was not so bad except that it included at its best form, not more than 6% contribution from Services. As expected, Agriculture did not continue an extended rebound from Q2 and thus contributed to an overall disappointment for policy watchers with Governor RGR still on the edge of another couple of rate hikes and CPI close to plateauing out at a high 8% itself

Radico Khaitan is one of the bigger winners as the Equity trade in India opens to new bull scenarios, we choosing to watch after every 100 points as traders fill up the gaps and bears might give up most of their extraordinary gains in the following 6 monthsas they take each plateau of waiting for more investors as an inordinate sign of weakness or overconfidence having nbrought the hcicken count home to roost

Volatility remains at an extended low and the PCR below 1, implies one should batten down the hatches as most price levels on your choice investments would carry very little risk on sold puts . SBI and Maruti also proffer extraordinary choice to traders that need financing and are not selling puts ans positional shorts in both continue to dig for lost Mayan Gold, making it at least a year or 1200 levels before they exit with profittaking trades.

JP Associates may be out of the index but is a great plus trade ( opnly post redenomination of the Nifty) while Adani Enterpricses catches supplementary caucus support from the Adani Port bull trade. GAIL may still not make it to mainstrem positional trades or transition into a defensive but we reccommend buying the stock with IDFC and YES, while ICICI Bank and HDFC Bank individually will carry the Banknifty, PSU shorts making the Index tradea patchy non performing long

Foreign buyers saw $2.2 Bln in gross trading on the NSE itself on Friday. The return of bank investors and trading rooms including StanChart and HSBC to the bull trade on the Rupee, counld confirm secular up trades in Asia even as China gets ready for a currency depreciation battle. However, first order of business would be to observe if equities can keep up with the smaller selling that remains part of the trade in the first half of the week as markets start the series at fresh new highs of 6277.

The Sun Pharma and Hindalco trades should catch fire by the middle of the week in that scenario as mainline picks remain good for the goo but new buyers may not get them at better levels . Bharti , ITC and Bajaj Auto continue to hold strength in the consumer investments story and Services PMI returnign tot he green likely for 2014 means aviation, trade and tourism could critically support the good guys from here. The LIC and ONGC/OIL buys for BHEL and IOC are confirmed but sectoral trades aer non existent on either side. Pharma’s big week returning to substitute IT is the one certainty and not an immediate bulltrade so more consolidation is likely this wek esp if the Pharma trade does not kick in. The inevitable short trade on Hero as it yields ground to a bad February sales data will only land blows till 1850 levels as the news f the recovery should kick in the sector after new excise reduction and recovery in buying from March

India Morning Report: (Closed for Shivaratri) Markets hoping to be tested again at 6250 in the new series

At 6240 levels the market achieved yesterday itself, another round of consolidation is due for the markets and with the second round of investing in November having attracted Passive fund investors while the active foreign interests remain bought in, Indian markets unlike China batting on euphemisms and an opaque economy non responsive to new stimuli, India will retain most of the bull interest as it proved at 6000 levels and then two consecutive bump ups in a testy 2014 start .

The March F&O series may see more active Foreign interest returning, but it remains to be seen if markets can continue from here. In any case, markets will increase the propensity to remain flat and one suspects the new correction that laziness induces next week, may be short lived till a volatility of 18 is reached before deep corrections are completed in individual stocks closest to heavy overvaluation, namely the SBI, BOB and other PSU Bank trades among others

I don’t believe India’s increased short term foreign debt situation is causing any fresh payment problems as Oil has decidedly planned to start a bear trade globally and in India and hot money or NDF mispricing does not seem to have the desired hook on the trend, as markets might indeed get a positive pricing kicker from the NDF markets on the currency as long as Oil trades lower and a commodities bearish cycle licks in across the broader spectrum , esp those in demand in China where domestic production has not only suffered but been officially deprioritised.

Indian Fixed Income Markets seem to agree with Governor Rajan that CPI may not trend lower as the Governor sets his sights on an ambitious training target program for inflation thru required government diktat to support the Urjit Patel report. From all signs, however RGR is a pragmatist and given that India will anyway continue under the spectre of high 9% bank rate scenarios, additional rate hikes may actually hit more targeted spots on the consumer inflation , but banks are unlikely to have increased transmission of the available liquidity to the broader markets in terms of reducing extraordinary deposits and increasing effective velocity of money as the investment cycle awaits other signals. RBI also completed paperwork on CDS issuance in Corporate paper ( IG and HY) while the market continues to look for th esecular India pull to deepen India’s debt and Fixed income markets

Expiry 2 pm trades on Wednesday had not seen a sharper cut, but the markets could easily turn any new 6250 positions of sold puts into short interest could have tanked the market back below 6200 levels to watch for as expiry otherwise is a dull newsless affair, the above discussion being mere undercurrents the markets have faced for more than 2 years now. Markets are closed for Shivaratri today

Energy cos, like the OMCs retain a default rating of BBB- . Sahara promoter, Subrata Ray got a rude shock on the delivered judgement yesterday as the court issued him a non bailable warrant and ADB signed a new road project in the backwaters of Chhattisgarh.

India Morning Report: Foreign Interest steps up to confirm the boom to 6250

FII buying, now adding debt segment purchases over the last week follows on a 10-12 session consolidation in the current play on Index Option hedges and Stock Futures bidding they have initiated as a class. At this juncture the trend needs further confirmation too and borrowing on the same strategies would make much more sense in a secular trend, strengthening their overall importance in the market as they are indeed the larger players right now, the DIIs having taken a counter-cyclical opinion as always to balance the steed and likely not buying beyond the coming 6250 levels.

Even if the DII opinion does change for all investor classes buying together one needs to remain watchful and the markets will continue to strengthen their skew towards rewarding longer term investors despite the volatility at 14 levels, an extreme low for the Indian markets and all increase in volatility negating any good part of volatility. I.e. The future of the stock markets is now interlinked with all trading margins being defined by shorts and all long gains going to investors if we just look at the definition of volatility and its reward for risk.  A new Liquidity index in the Derivatives segment of the NSE consolidates price trends across the 15  most liquid derivatives underlyings and the index is now 6 months old.

Trading longs again probably negate all their advantages with a backing of almost ready to be shorted posts like L&T and SBI, which is the reason I brought in this more technical discussion for the morning Report readers. Markets open near 6200 levels on the index as markets broke out of the bear hold by breaking 6100 earlier last week.  To fess, I was still hoping for India to prove Good volatility and I would warn others  naive enough that this is not going to be so in this rally.

PNB will likely respond easier after the call auction ended as SBI investors back off and PSUs including larger entities like Bank of Baroda remain short fuses. Banknifty remains mildly positive, lending health to the trend going up and consolidating as India outscores in the Gloom quarter of 2014, down apparently only 2% compared to other Global markets and Dow having a nice return back sustaining a comeback as snow fades away in Neverland, USA, USA continuing the dream recovery.

TCS is due for a rally but Infy’s rerating looking to ride up to 4000 levels seems to signal the coming badging of the sector as a passive defensive again with the Rupee making a comeback

HSBC global results were a great comeback, though analysts following the stock did not expect Q4 to flip globally into lower revenues and while the bank remains the bigger player in India and China, it is focussing on the UK market comeback this year, UK also having ducked the continuing gloom in Euroland.

In other unlisted business, reusing quick reports from Trading Economics, FDI inflows are expected to continue to be a strong $2 Bln a little over 50 times lower than neighbourly flows into China, but in terms of Western FDI , that number is much more equitable and ocoupled with a domestic market and domestic depth in India makes for a more Economic bang in the Indian recovery seeding which now strengthens into consolidation.

Ford is ramping up its small SUV production for Export markets this year in Chennai and Nissan and GM may be forced to follow earlier than usual in 2014 itself if the global markets have indeed completed a overall cauterisation of their expectations of a bullish recovery breakout.  They have earlier over stepped in 2010 in equities and frequent breakdowns of recovery memes since 2012 have indeed made such prognostications more cautious , lending more credence to them for investors hoping to break new ground across Global opportunity.

The G20 Australia 2014 remained a hub of big activity last week. Despite the almost fully ‘denatured’ (pardon the pun) irrelevance of the G20 ( compare with a technical irreverence like applying the law of diminishing marginal utility here, and I am on holy ground) , RGR did force the conference into adopting a aggressive reconciliation towards supporting global monetary policy coordination and the Rupee has responded strongly this week. Rajan said , “International monetary cooperation has now broken…”

I like this definition for India’s new apolitical elite, used for RGR (link): impeccably credentialed , elite.

Meanwhile, polls in Delhi confirmed AAP holds sway in any new election. Modi’s claim to India seems to be weak at the point of Gujarat vs India Inc and if Congress does consolidate around the thoughts of a Jairam Ramesh (IBN Live, Sardesai interview) it could have a real chance of at least getting the right issues to coalesce around in the campaign for the General elections. On separation of Telangana and Hyderabad II into separate states, J Ramesh reminded the editor that State reorganisation is an unqualified mandate. I recommend that the word juxtapositions apart, the only way Telangana becomes a reality and the reform beat maintained is if the issue is indeed followed up quickly with active voicing of the cause of breakup of UP, the monstrous state with 75 districts and 800 blocks. Also, yes Economic development in TN and Kerala have been equally promising if not better than the Gujarat model and this could definitely weaken the economic bloc coalescing around a non sartorial, non erudite Modi who seems to be potently  walking around with a foot in his mouth as much as Rahul himself. I believe Advanu would have been a better choice for BJP too. And Congress , waiting to welcome an even younger lot with Rahul who may not all be able to pull off tags of ‘ able administrators’ make it a  ever extending churn block for India Inc ready to forget any hopes of a consolidated political establishment as the Open democracy treads the path to a Top 3 GDP country by 2050

The US mid terms similarly could still turn out to be a facesaving exercise for the Democrats reeling at their lowest ratings just before the mid terms and the chances are about even to Rahul Gandhi actually coming back to lead He will probably take a back seat from Parliamentary politics if his party does land rights to the Opposition benches.

India Morning Report: Markets retain new bullish memes (again to 6100)

Markets will close above 6100 again but later afternoon sessions may see more enthusiasm as good economic data could be followed by expected passive investor moves and new EEM flows to show likely coming trends.

HDFC Bank is up and out of the 600-680 move with new targets to probably near 750 levels. Banks will expectedly support the next upmove too, ICICI Bank having made up new routes to at least 1030 levels, probably 1070 A look at some fund portfolios , interestingly shows Axis is indeed out of favor and Infy in a different block of memory unlikely to provide any traders with gains or hedges as it corrects to 3600 levels. Apollo Tyres, India Cements and JP Associates added open interest yesterday as main trends broke tin the nifty drop from 6150 to below 6100 levels. Sree Renuka stake sale does not seem like a trade at all, being a long known and expected unloading by the promoter. Open offer is apparently at a discount but Wilmar is immediattely extinguishing debt worth INR 12 Bln. Bharti is a great buy again in positional trades from 295 levels. Bajaj Auto will likely continue to 1950 levels for a stab at a quick double (century) The Adani Port move you heard today is so true,its the INR 80 Bln JNPT contract.

Japan is celebrating a bullish candle early in the morning as Chinese manufacturing, along expected lines, brushes near contraction levels. Fed minutes from January showed the Fed agreeable to  changing the unemployment targets and thus somemembers eagerness to discuss increasin gthe short term fed rate will likely be ignored as markets start up after a 5-10% cut since the new year. However on the flip side for India, the risk of an inflated Oil bill has increased. External Commercial Borrowing Markets are open for India Inc to increase disposition from, the CAD averted, but the small packet of Coporate External debt, now unsettling India policy markets. Fixed Income Markets and Currency markets would recover from yesterdays dip as the recovery unfolds into a more tangible item of import than just hope traded by domestic equity and consumption markets. KKR is also providing transformational capital in a new (presser in ET) bid, that could soon be emulated by SBI and ICICI as restructured assets hit a new high in the banking system.

A new endeavour at the Central Bank could see proposals to accept some or all the changes reccommended by the FSLRC. The recommendation, are likely to further aim to bridge the gap between Private sector growth memes and the larger PSU counterparts with capacity building and skills development (HR) guidelines

G20 is up later this week, IMF taking the opportunity to underline that currency concerns remain, obviating any choice of policy leadership for India at another G20 edition, India the easiest dog to put down in the revolt of the EM manger. ( twisted, yet really twisted, paraplegic choice and execution of simile (not stimuli) The Ukraine Hryvnia, the Korean Won  and the turkish lira are likely to be the largest exceptions not part of the mainstream in G20 trades and will be dominating the agenda, not to forget the Singapore Dollar which remains a unique economic substitute for the whole block ( try a whole fat analysis) and mexico a member but likely to stay silent too as Australia lead this round (2014)

Jet Airways’ loss in a sedate Airlines quarter, even as its etihad deal now hangs fire  at the Compat ( like the CCI but just the Appellate Tribunal) Jet has loans of INR 104 Bln as of this quarter, hardly $1.7 Bln but apparently 7X of the other nearest competitor. its market share is now less than 20% as it waits for deal approval. The INR 2.85 Bln loss a INR 3.60 Bln deterioration from its year ago profitable quarter, leaving unlisted IndiGo the winner with Sale and Leaseback economics still leaving maintenance bills manageable and the airline scoring on all the busy metro routes. Air Asia is likely to change that if it is allowed to fly. That would be concomitant with changes in regulation allowing all these Indian fliers to book international routes without a track record’ compulsion(Two dogs in the dogfight, Indigo and Jet, why are others even flying? – significant business case and consulting win with free markets allowing portfolio rationalisation).

And as Facebook found its Twitter-alike acquisition for mobile messaging that paid its promoters $19 Bln, India media look to another expat manager in the pile of 55 employees for the India story and there is as usual one solitary reaper, digging away in that bee hive(ant hill)

Kiran Mazumdar Shaw has taken stewardship at IIM Bangalore as Chairman of the Board . IIM also recently saw a new Director joining back from Boston University ( Sushil Vachani)

In other unlisted business, why wouldn’t a new Pharma business story with unlisted Capital or a PE try to fund a great Pharma business , not from a decade old Pharma attempts in Hyderabad and Ahmedabad but elsewhere. Cost of Equity in India is no longer that cheap as the Pharma market still offers unique advantages to scaled businesses in Export markets and domestically, while current entrants are likely limited by the $500 mln market for each generic molecule,a similar cap for the domestic market too, based on a limit to branded volumes in each drug. The model would definitely be more Chinese if it happened but it could really expand the market opportunity both at home and in the US and Europe

How about new moves in the big retail pie, which despite its propensity for political disaster, is still available in at least 4 states. One reason, hitting continuing entrepreneurship as India stands on a big comeback, holding India back would be the virtual withdrawal of Foreign banks from India, assets now down to 7% of the banking system, esp the unlikelihood of a public markets led such revolution makes it imperative that the easy flow of foreign capital to India be capitalised on.

India Morning Report: Vote on Account does not offer anything by definition

Not to be dismissive of other efforts to research quantised discernible notes in the market, we have beaten others hands down with the preciseness of each sentence seemingly in a complicated human language. And we are not artificial intelligence, just something more  populations can understand. However, that is all a predilection of becoming  part of a deluge unless we can remember the basics. Like 6100 yesterday, 6050 today and stuck at 6250 again. Or for the currency it is an even simpler, 62.50 and broken till 63.00 now returning to break 62 on the upside, waiting to break till 61 to start a trading move in that dead market Foreign investors pass by with just a tenth of the allocation to the China which would be enough impetus for investment I guess.  That is adding the currency noted going out of circulation bringing in additional thicker statistics streams of returning investments instead of churned velocity without disposition, which remains the only unexplained flow for many developed and EMs. Meanwhile India posted a latest velocity of another 12.5% and growth of 4.9% kept WPI ticking under at 5.5% , inflation at 8.8% (and still high to merit 8% rates for the RBI policy (India’s Central Bank)

Now to get thru the market open again, HCL Tech is done, L&T is not coming back so soon, having clarified there si no better financials in the old heavy pipeline they keep carrying in New Orders. However, the note of caution from Kotak does not translate into a correction in the markets, as it is a known flaw, using subsidy deferral on the way to an improved performance and as we have always maintained to PC’s weaker arm, its not anything to forget to talk of.

Banknifty is at 10,250 but their seems to be a dearth of substitution for older SBI folios, because SBI has to go down to 1250 levels ( broader guess) bottoming out near 1280 ( our estimate – not to be confused with the statistical mark of MLE). HDFC Bank is up and out of 640 levels but no 645 it is..Pharma should not have been a defensive trade, esp as Bharti and ITC remain powered on apart from the IT scrips which can keep current levels once HCLT returns to 1400 levels. I have faith in ICICI Bank surprising in the post speech trade if India’s Financials are surmised as feasible, though it is just necessary expenditure for the six month period going forward and the Macro economic review has already been celebrated. A smaller gross borrowing figure for instance , may not be possible as that may be the only accommodating flag for the noise of governance to come. Also it would be a shame in my mostly moderate opinion otherwise, ( cooked to become the mainstream o-pin-onion like other examples of better business leaders than the half cooked Modis and Rahuls of today) if PSU banks join in the rally just for their survival has been noted by additional Capital for FY15 in this month again confirmed in any allocations. YES Bank and IDFC remain mainline (first leads) not for this bull segment but for the secular bull cycle that remains.

Nifty i s actually having a hard time at 6080 and will not drift down but 6100 is the new bear dominance levels, mostly because the media presence as Citi explains ( in that elusive to understand bid for retail investors here) requires reusing old hat ( from this trend) and the market tone is still as 6250 the normal would have been but that is a likely illusion in the distance, with markets using the distance again and again to tone down , letting shorts bound them up and show the futility of expectiung an overnight renaissance in the Indian Fixed income Markets. StanChart in the meantime has sell side macro posting the VoA precursor on ET Now since AM, looking at Government freeze to show the numbers.

I’ll leave that unedited para  in, just because I have things to do before I come back to edit it. It is just a Morning report. I may not be writing in the vote on Account speech or the dictum,

The markets may not break down, mercifully, for lack of reason to celebrate, a not new feature of beating down equities at their own, esp cognisant to those who bank promoters accounts and promoters’ who play their equity to death in a monetary degrowth, which now runs an extended life with a defined taper even with a reduced nozzle draining out the dumped in steroids, in the recognizance that US was critical and that most of excess liquidity remains excess. I wonder if one coming from my free markets background can make enough morbid adjustments, but one knows one must to explain how taking care of the trifecta is not done by just that phase of liquidity and now by the withdrawal of the same. One does note also the 16 mln unemployed uncounted in US estimates when declaring a successful 6.5% unemployment statistic from the same.

I like Crompton Greaves for the capex trade, old Mid Cap plays will be sideline for the 2010 IPO brigade in most cases. The fisc will score the most points when it reports a positive surprise. The FM should not aim for FY 2015 without thinking up options and should look to a fat target as we have probably over reached in the current fiscal itself. I would even let him off at a 4.5% target and that will not get BJP any further advantage.

Post Vote On Account satisfaction, Congress is going to be a quick disappearing loser in the elections, BJP winning it however would be disturbing not to India’s soul, cause there was not any in the conventional modern world definition of it, but it is can only be a rude awakening to India in a few years, however growth will churn in any government, because of the strong basis on which we stand up and shout for more, and the bureaucracy , the technocrats ( non outsourcing) and Private investors / Business will remain the agents of  this growth. Bank lending will never be a constraint and there is no wishing away corruption. One can even learn the vast cycles of it in local, regional and International Sales processes, and is not a equivocal nodding to suffering , nor a socialistic bite of suffrage that will make it the topic at the corporate dinner buffet.

explains: in the middle above is used as colloq/sms for explanations

India Morning Report: Agricultural subsidies are a Global Constant, bullish trend remains

U-Car 2014

Sugar Export markets ar unlikely to ruffle any other segment of the market as the issue of agricultural subsidies was settled for good in the latest renewals by Asia and EMs led by India and continuing noise on farm subsidies are likely to be brushed off by most including customers of Indian sugar. The government has approved a INR 3.3K subsidy for 4 mln tonnes of Exports of sugar in February and March.

Of course, India’s battle with Export competitiveness is past most winnable battles and we are just increasing our tendency to be a worthless ( in terms of premium) commodity exporter, as is the wont of most resource Economies as well with far more disastrous Economic consequences like Brazil and Indonesia.

India will never be confused with the likes of the same despite setting at 4.5% and 4.9% growth in two consecutive years of GDP growth and a 25% decline in currency repeated twice in a block of 10 years, a far mitigating circumstance than Brazil or Turkey’s Economic history and one could have also included China in that list but for the almost independence of policy and execution in a democratic form of government.

India equities maintain a bullish trend ( to 6100) as a cognition of far reaching reforms did barely enough to pick outstanding dozen or so large Cap companies, usually more than enough for any broad market to survive.  The missing depth cannot come overnight and Investors are more than satisfied with the new crop of 2010 IPOs in the Consumer sector including Thomas Cook now dealt with, and Page and LL continuing older trends. That also means scrips like ttk , Titan and others that do not represent the broader market will not recover interest and those with very wide off the mark correlations to sectoral growth will not be propped up despite weak governance and order book issues at L&T and BHEL. Crompton Greaves trade is likely to sustain as the Investments and Capital Expenditure segments of the GDP stay in focus.

The Rupee started early yesterday catching the advantage of depth and domestic markets back to the Indian Debt and Equity capital markets, as a US long term bond auction also registered a new faith in reduced tapering promised by the Fed, allowing Global investors following the risk money to come in without the wait and watch chip reducing their participation

Citi is betting this will transpire in India having come out on the CAD front after extended delays and qualifying others dependence on Foreign debt skewing the CAD dependence factor, however it likely to be secular Dollar dependence worries for such resource Economies which will again qualify India ahead of the “EM Basket” and China as well in this year, though on a smaller order of magnitude of FDI flows.

I would also think the Tata Motors bull trade is vulnerable to falling off sooner. However, immediately Cipla’s results have extended the trade in both Hero and Tata Motors apart from individual stockpicking decisions.Cipla reported margins that are 600 basis points lower.

India Morning Report: Pacified by US liquidity, markets gets on (to 6100)

The Nifty is up 25 points in morning trades, taking a 6090 clip to test the 6100 levels though new buyer interest is looking iffy. Selling and profit taking orders have topped out however, and Banknifty has resumed a positive bias though a trend is yet to form with the PSU block moved aside, the index being a traders” delight esp. with shorts on Kotak pressuring in house support

ICICI Bank is up 2%, HDFC Bank is in the middle of the 600-680 range strong as ever. Tata Steel continues down, renewing its correlation charts again with Ranbaxy even as the Steel sector’s fortunes have brightened. China’s remaining the question mark has likely provided long term investors with exceptional opportunities to accumulate at a stable price band.

ITC is looking like evaluating 325 marks anew for a new rush as it is safe in being a bull scrip but there is no current trade in the scrip. Bharti as expected likes 300 levels pretty much for keeps except a small downside risk to 290, and informational marking of the stock is likely to show up more often from here.

Bond investors should be interested in this Bond market but again, a short term spiking of yields is likely even after docile 10 month trade data. Gold and Silver imports have caught up to almost 2013 levels at $1.72 B and noise demanding removal of curbs has likely increased on the Central Bank. Trade deficit for January kept the $10 bln average, but the good story is that Exports at a healthy $27 Bln (26.75) are a significant improvement after being tied to a non growth $25 Bln mark and Oil imports are under $14 Bln again. Going forward the natural impetus to India growth is likely again multiplied by a continuing dullness in Oil prices and Dollar inflows may well continue headed home in the 9% yield scenario beating a few HY options a s well

Investments promoting Indian GDP growth do not look like having grown past the 5% mark. IT is buoyant on 2014 prospects but headroom is limited except TCS, well corrected for a move back to 2300 levels. I would have thought FY16 Estimates would show the gap being overestimated currently by the market at 14 multiples or thereabout (FY15 multiples are near 17)

Other Emerging markets are likely to cede to India again in 2014 as Janet Yellen looks to fine tune the taper design with a smaller cut in inflows going forward and Stanley Fischer is confirmed as Vice Chair.

Indian Media sector is probably looking a little tired at the bottom of the cycle, with IPL advertising revenues likely to exceed expectations in an overseas edition. However, in unlisted business, more gains are accruing for digital movers as E Commerce is currently buoyant with PE funding.

“Winners Curse” by Goldman Sachs analysts gets a popular break in the media for the coming price wars but the auctions process over the last 2-3 years more importantly showed businesses do not overpay for such commodities. Auctions lasted 6 days as of yesterday’s reports for INR 600 B inflows. Investors may take hope from Sustainable pricing at Bharti having lasted 2-3 quarters surviving on minutes and ARPU metrics. Both Idea and Bharti will be formidable to beat in Data for newcomer Reliance JIO which apparently has bid nearly INR 30bln adding reports in the ET on total investments. Vodafone , as a 100% business make the foolishly high premium move again to start off The Hunger Games

Maruti may be ripe for fresh shorts again in the Auto sector as exports volumes increase at Ford, GM, Nissan and VW. The markets would be increasingly straitjacketed on any up and down moves till the Vote on Account announcement and are thus more likely to be a volatile move on announcement, esp when the expected :no action: status from the FM is construed as a big disappointment.

 

 

 

 

 

 

India Morning Report: IT’s missing pizzazz, Auro Pharma strikes Cymbalta gold

Courtesy: BioSpectrum Asia

While the markets renew interest on Friday to get ready for the battle of wits at 6100-6150 levels, Banknifty has moved into gear with good boy PNB ceding its additional upside from 550 levels and SBI continuing down near cracking below 1500. Private Banks see Kotak going down too with Marico and Godrej losing the barely viable Western(Maha/Goa) branding attempts , consumers rejecting being shortchanged as a way of life. That leaves both ICICI Bank andHDFC Bank with YES and probably Axis but for its NPA woes. Aurobindo Pharma’s wins were mostly likely for the gains in Cymbalta and that’s a big molecule to crack.

The Foreign investors however bite into its market pie despite a 10% indicated gain at the open. Jubilant Life is also returning 3% at the open. In Banks, as desired by the broader markets BOB and BOI have also been shucked out, though the turn of events has apparently got Ashwini and proprietary traders’ older generations into a tizzy in the markets proactively readying themselves for a blood bath monday

Bullish picks in YES Bank, ITC  and Bharti continue to plough open interest as short interest is extinguished in droves before a new bite. Shorts were down 10% in REC even as PFC stole the limelight with great scores , unfortunately pushing the Powergrid story to the back. The Power and other infrastructure stories thus remain orphaned by the impracticality of raising larger equity or single entity debt for the mega project financing requirements of India Inc and specialist Finance like IDFC instead gets more important not less.

PNB remains a buy, Axis will probably continue down with BOI, BOB and grandpa SBI. The correction in Power Finance is probably understandable after the big gains overnight. Ambit Capital again agrees with us on the rate cuts remaining in RGR’s coat pockets to conjure due braking for the inflation express.

Bajaj Auto is back again but pairs would require new designs probably mixing Tata Motors into the trade as Hero exits a long term bear view on the stock. The Bajaj Auto story as pioneer however, much awaited by shortchanged Western region industry, is definitely back with a bang along with banks, with performers in banks waiting to be rewarding after marginalising of the Foreign banks in the Business and Consumer sectors

MNC Pharma will probably get into this rally for more than spectator gallery participation. The Infotech trade is unlikely to be back though opportunity for shorts in the sector or on the flip side for cadgy immature ET reporting in print is probably extinguished (opportunity)

Spectrum auctions, unlike reported yesterday have indeed turned out to be an exercise in budget restraint , bidding well for the Indian Telecom sector as Vodafone returns as a 100% owned business. Total Bids have still brought in the desired INR 500 Bln per budget targets and it was a big ask to have completed successfully with the prudence now reflecting in Telco strategies necessitating the delays in the process where Government was on the verge of bankrupting telcos with its greed.

The Gas companies will be on the good side whatever happens on Monday and some bad boys like Jet Airways have probably bottomed out while midcaps like Talwalkars, Prestige, LL and Page continue without breaking even as Pizzas break speed with Pizza Hut taking back 30% growth on completion of capex spends in new restaurants.

Thomas Cook and Sterling remain a bad story post merger with lots of work to do including printing restated financials, probably still required once the combined operations on board. The IT clawback is a temporary mirage and the sector should be avoirobably hiring plans will be postponed again as the Visa sanctions come back owith immigration reforms on tap in the US

If indeed Bear on Monday , one should retreat into Auto and stay invested in quality stocks identified here over the last year

In other unlisted business, Twitter results serve as warning to those assuming bigger volume pies from the SMAC crowd, the social space inherently low value except for big advertisers and Corporate Business with Facebook and Linkedin

Look ahead to a grand theater attraction as Disney’s Frozen takes the world by storm and ESPN after global success proceeds with better redefinition in India as well. Time for someone to get another update from Aubon pain and the QSR ilk?

The rupee is trading consecutively improved levels at 62.30 and yields are still hoping to cross 9% apparently though if we start angling for ECB debt we could score tighter spreads and renewed growth could indeed be aan easy story again for India Inc

India Morning Report: There is no hope trade in sight

But I’d say keep accumulating as the indices break through a critical 6000 mark. Many blue chips, like in global markets offer extreme value in buys even as the speculative trade fails to take off on a delayed recovery.  Gujarat’s downfall over the small matter of a receding poverty line not helping the cause of the markets rich BJP is a puerile coincidence for the markets, but correspondingly there is no Congress faction left in the markets to buno the tanabana, Markets selling the stable BJP proposition backing out for an increased negative momentum(undesirably sharp)  on the downward side

The IT trade coming into profit taking for the almost first time except for a pre results redenomination, there ae buyers out there who are ok with the premium on Infy to a low 3475 market price and HCL Tech is good for a move of Rs 100 or more. Thus if all sectors move together like the Tuesday open, markets could see almost unheard of hlevels receding to 2012 levels no longer required by the New Dolla r prices. That also means these exits will cascade the Rupee even as it holds at 62.50 to 63 levels , that being a new fresh level for the currency. However it is still possible that with DIIs coming back as markets sell off that the gradual sell off can indeed turnaround and complete the prophesied ( by certan others , also old hands) pre election rally in India. The sell trade on ITC will likely never exit 290 levels an such picks abound with limited downside even in the correction which will confuse buyers into making losing commitments so a wait and watch is necessary. F&O markets return back to index only specials and i the downmove is to be arrested by Vols at 14 this will be a small enough move, but that is unlikely leaving vols (India Vix) ranging between 14 and 16 till the first buyers return whence new VIX levels would only see increasing volatility

However as we were stock specific going up and DIIs look for bargains to pick up pieces, there are gaps in how the markets will rebuild momentum most buyers holding on to prior 2013 selections including the new Aurobindo and Sun Pharma trades( a great defensive for mopping up your prop liquidity) in IDFC at 90, ICICI Bank almost ready at 930 levels ( the next levels are around 871), Yes Bank ( bottom at 267 will likely not reach the same so accumulating should be ready  – like a dark pool premium),  Bajaj Auto, ITC, Bharti and no – not ttk and titan currently as there is much more going down in that specific market despite the penchant of the self funded margin traders in our domestic brokerages like Angel, SMC and Centrum including the overlap with commodities wealth accounts. There will be no dlf trade north, none in Jubilant foods, titan or ttk and none in HDIL or unitech much later. Axis Bank’s orphaned again being misused in the prior rallies, leaving nay of the F&O speculators heading there at great risk from those targeting their brand of stupidity after getting on the right investments. Trading as a game may try not to suffer though sharp bear phases and quick bull recoveries are not ruled out with brokers and traders living the cricket dictum of well left alone even for great value picks in Midcaps The trades are mostly in Spreads, Bear spreads in your choice made by buying Puts at the just OTM (ATM-OTM>= 0) and selling a lower put to part fund the trade. Bull spreads, which wold be due n a couple of weeks, go bought Call just OTM (ITM-OTM>=0) which reflects better liquidity as well and thus better premiums, and partly funded by distant OTM Calls ( nly one or two will have  tested and liquid quotes where you do not pay excess liquidity spreads)

 

India Morning Report: Predictably rational in the face of regional panic

Coulda’ Woulda’ Arvind Mayaram FDI, Note extinguishing before 2005 (25%) and others

While Goldman Sachs may have repeatedly missed good calls for the search for a political establishment in India, India per se knows better, discounting global EM troubles with considerable ease even as the Rupee inched up to 63. India should also probably try and make a bottom for the markets around 6200 itself, correcting SGX Nifty in those regular moves every year as EM withdrawals again translate into a wonderful opportunity for the second half of the year and India leading the hopefuls in market performance with fund investors probably again going to China and other markets just for rueing the missed opportunity? However that may eventually turn out, the Rupee faces considerable pressure and the RBI policy , a non event as expected, would not definitely reduce the pressure on the Currency. The worst culprit would be the deficit ridden Yen, apparently stimulus itself having lost momentum after month 1 last year having never come back. The second month of a huge trading deficit would imply that BOJ’s encouraging monthly perusal of the Economy just encouraged bond investors into JGBs and they are going strong for now.

There are not really ready funds/positions that can be withdrawn in this rally in India that apparently not just broke stride but flattened all kinks in the new year. Seriously for those feeding the panic though, Ranbaxy? buy trades? honesty now..Similarily failing countries facing high risk of default only count Turkey, Ukraine and Argentina, Venezuela and before that Brazil and Russia having recently faded from trading memories , dataless on India without trading in its bonds counting to CDS data yet, Korea similarily trading a very liquid 70 bp

Sensex is safe at 20800 levels and the Nifty safer at 6100 levels but that is almost totally out of the ball park if and only if markets are actually waiting for Foreign investors to reward India immediately for behaving stoically, which hoefully will not be the case when we close the week on Friday. Global market commentary should see those countin gHousehold debt abd Card spending in sovereign leverage counts receding again in 2014 but Student Loa mounds remain avalable high peak panic buttons back in the US.

Meanwhile Indian cash equities should continue to see accumulation, we still continuing in IDFC, Yes, ICICI Bank and ITC, Bajaj Auto and Bharti. GMR and infracos continue to deleverage and the rising valuations may not be able to bail them out before they complete that deleveraging extending the government’s troubles in looking at Public Private options for financing infrastructure, ever falling behind. The fiscal is already expected to come at 5.4% and is likely to improve from there, that unfed hope being snuffed out in this move on the Rupee( as expected , Turkey and some other currencies have already followed double digit losses after the yen refused to go back below 105 ( to 110)

Tickker updates before 9:30 am include Glenmark not revising guidance (debt at $500mln) and launching Crofelemer and all of Goldman’s merrymen could muster in their five years of India sponsored India bashing was to shuck out one Opto circuits from te ile, having bought 26% stake in the same.

We regret Karl Slym’s death as reported in the Morning headlines. Stay away from F&O baniding of the index and the 6000/6100 puts are no where being fully priced to write/sell safely

Bank Policy Tuesday would likely show india flows an economic condition stabilising with a health Liquidity position and no threats to the CAD with WI likely to fall again post policy on ag gained from the Vegetable price drop in November

Glenmark’s up 4% on 10 am trades (featured EarningsTalk/cxotalk on ET Now)

India Morning Report: Gold Loan Norms for Muthoot & Mannapuram, Infy at 3400

Markets at 6200. Nothing would seem to have changed during our 2 day break this week, but for the fact that markets after declaring tiredness have found the will to come back to 6200 from a dip , probably to catch some Deliverable trades in the wind down as the Shorts get their day but most are bought into the 6000-6300 range. Option ladders have given way to Bear/Bull spreads and cheaper strategies of any combination in OTM Calls ranging a 6200 with a 1:@ ratio call ( from namesake Amit) with 6300 ( neutral on cash) or  a similar strategy on puts at 5900 (ITM) sold to higher Puts bought near the range as the markets are not excessively bullish (6100-6200)

Meanwhile, true to last week’s draw ins to our short list, Sun Pharma and Lupin/Cipla/Aurobindo have taken off/ are ready for a big run discounted for the weakness of the rupee being their marker as the Rupee is at the bottom of the range at 62.1-62.4 alternately. Divis’ is a great pick and Cadila is still in but some market movers would put Glenmark on watch with profit booking in place. Ashwini is off Jubilant Food again for the same reason maybe, but he is trying Jai Corp today I managed to note. Aurobindo is still good but I fail to understand the hankering for Ranbaxy again with promoters from Japan raising the issue of misinformation and misgovernance publicly

In the Zee vs PVR vs Eros /BIG and the rest again I find the PVR cosmopolitan equation still daunting and Zee the only balanced out performer despite attempts by Sun TV and the sports czars like Sahara and Kingfisher. Private Equity has a chance to prove itself again in India in Entertainment, Media and Education, the Y sectors but as of now has come out only in select E Commerce venutures in over a decade

Muthoot and Manappuram would be great plays even after this first CB. As per the new guidelines, LTV has been rolled back to 75% allowing both to lend more on existing accounts and having also gained the RBI seal of approval for moderating portfolios.  Disbursals are still by cheque for high value cases ( Same INR 100,000 benchmark) Apparently Ownership Affidavits have specifically recommended by the RBI as NBFCs probably pressure customers /claim troubled custom for original receipts for Gold more than 20 gm

IT firms would probably end the correction as Infosys result day is now key with Infy at 3400 levels. Both Product platforms and Consulting have failed to take off for the new no. 3 of Indian IT. However buy in select Mid cap ventures ( for the same tired reason, MindTree is still an in) continues as the Rupee story has unfurled. The smart correction to 3480 may be safe but the range remains between 3420-3480  and any new rally pre-results would likely be sold back to these levels. Similarily the short on YES Bank (Mitesh) may again fail as Banks manage to boost their share outlook on Private sector and credit performance in this week after a very dull prognosis again prompted the pick by Mitesh Thakkar (TGT: 340) and others. YES will still be a good buy and IDFC is again available at 102 levels so both should be bought into at these levels. YES commentary would be key as Indusind retail portfolio gets colored by being mostly in the sharply down CV sector. ICICI Bank may not keep the elevated 1050 /800 levels in earnings season this quarterly review but will remain higher and be guarantors of Indian performance both in markets and in the overall Economy with IIP and GDP rates still subdued and inflation a big part of the continuing growth imperative

Except for trades on exceptional earnings and sell on news, select stock picking remains the order of the day, going into earnings season next week.  Infy for example will suffer if the promised margin expansion of 100 bp and higher guidance for the full year is not delivered with or without commentary on taking out the Executive council from the company’s governance model. Bajaj Auto may see new highs as it remains important in portfolios with new picks in the other Bombay car/auto maker M&M. Bharti and ITC continue to see some exits but have more or less become nerve centers of a trading move despite the expanding dichotomy between Mid-Caps and the Large Caps

India would be happy enough with $30 Bln stock of FDI in the Calendar year 2014 as well and marekt expectations do not include any redefining execution elements into the stolid infrastructure story nor any PSU ETF can bring bank PSU investors or the BJP euphoria in a hurry. T2 has been commissioned in MIL in time howeevr, taking capacities to 40 mln passengers per year, while KIA is already expended into T1A with an overall capacity of 25 Mln pass per annum. GVK in the meanwhile , tries the land monetisation plan first at MIA while GMR continues to consolidate international and national bids ( Hyd and Bangalore) in it aviation subsidiary, the only post MRT/Metro good news for the sector now four years into its relaunched modernisation drive, where BJP assumed it will get the mandate to do better, but it looks likely that the electorate saw it was equally impossible before the Election mania picks up (after the Vote on Account).

(Anyone wanting to edit the Morning Report is welcome to formally request myself and email the direction/editorial choice parameters as well as the time constraints)

India Morning Report: Energy cos can rise despite Export parity?

Graph of the Gross Domestic Product GDP (at Pu...
Graph of the Gross Domestic Product GDP (at Purchasing Power Parity-PPP), per capita, as a function of per capita Toes. Year 2004. Data available online at http://www.iea.org (Photo credit: Wikipedia)

Here are the numbers the Kirit Parikh committee is dealing with. Export parity is going to impact GRMs by $2.30 per barrel. However, other things being the same (KP) we agree with Quant broking that Oilcos are the major drivers apart from the metals in the new bull run as 5750 settles in after F&O unwinding (hopefully). Quant Broking also reminded us of the important fact which markets latched on to in 2005 and forgot in the melee on the Dollar and the depleting growth rates since.

BPCL has managed to keep a very low price to Book multiple I would add that it also has a better cost base though the numbers have to come from a research desk hour. In reserves according to Quant, BPCL scores upto $200 bln in reserves wich allow it to be a god enough for portfolios even as the rush is already on in IOC on the strong Dollar. BPCL is es superior in btter ROI diversification thru available capital and retail distribution not available to IOC

Coal and other weak Corp governance stories keep falling through on easy catches by incoming investors avoiding a bigger standoff not unlike the Vodafone GAAR standoff in the same President’s times. admittedly, India’s unsuitability has become a more understood variable globally. However we stick to the view that it is still a better non OECD destination than any other BRICS or other markets including China and the Turkey s or Russia and Brazil with obvious fiscal holes that cannot be equated to India’s intractable sub 4% minimum

Again one on the flip side finds the idea that Maruti and M&M can thus be sold on the idea of expanding rural markets laughable though HDFC Bank would be a good idea , eve within auto loans if not for its overall rural and small town breadth, even as PSUs continue with their traditional problems.

Real estate inventory levels are scary and the market (working) definition of real estate as a market whose asset prices cannot come down because of along other things costs and commitments already incurred, make asset bubbles a fertile ground for research even here despite a healthy domestic consumption share and lower incidence of flipping with potential for more salaried young upper class buying better homes than anywhere else except China’s metros.

The other is the big solution of the CAD which has suddenly hit the saffron wannabe ET ( probably because it hates FDI in media or being stuck with sick company notices like the rest of the Indian newspapers)

Though the inflow rush is obvious, the lowering of invisibles in the import bill, the imported services, may not be good for the Economy nor a reason to not know India and would take a lot of time to uncover in terms of components and future trends. The traded deficit contributing so well that the Credit Suisse forecasts or others of just $50 Bln deficit including the public planned target of $70 Bln are both scary in their matter-of-fact-ness as well. The coming rush of export growth in the period to March even as Advance tax receipts fall and SME portfolios at SBI hit large NPAs would only disclose more skeletons in India Inc’s cabinet even as one of the world’s deepest Financial markets seems to rely the least on Corporate product for its GDP

The Rupee however, has seemingly bottomed at these weak 62.80-63 levels an may well rise back to 60 when these performance improvements land on the commentary and analysis streams in just a few days after September data becomes available ( Right now Q1 data is being release for GDP and Trade on the consolidated quarter basis)

India Morning Report: The new series gets no welcome!

English: The Local Head Office of State Bank o...
English: The Local Head Office of State Bank of India, Mumbai Circle. (Photo credit: Wikipedia)

 

US equities are holding up as global corporations despite the mixed economy, find leaders finally surging ahead in Sales and growth at Ford, Starbucks and eve Amazon. The net result of this might be bearing on India too as weights might shift back in favor of the big rush in US equities to counter the initial down impact to growing interest rates. India’s results already destroyed by Dollar moves even as exporters fail to catalyze on the new opportunity with current goods, the markets that have been and continue to support higher values on the eigenvalues of growth seem to want to give in to pressure to develop the fangs required for a big equity move north more than bearing south.

The Banknifty corrected fast to below 10500 after Thursday and thus is spirited for a north move but has probably squeezed the wrong bull or two which remain the important bearers of Options liquidity across global markets, writers “capitalizing’ on the lack of buyers with prices quite out of subsumable range factoring in their safety in higher prices, that refuse to let markets and VIX become an enabler to trends.

Apart from these silent trend breakers, that usually provide no barrier to any defined move, markets are getting bearish just from the wait. The policy announcements today by being in the continual mode will further drive the north move in the Banknifty and ICICI Bank, probably HDFC Bank better than most, and even SBI and PNB whose results were no disillusionment of its backers, SBI and other PSU banks continue to shock most headline followers through 2014 and 2015 as they continue the long drawn process of declaring their backed up system NPAs holding out media hope of starting the up cycle all the time thru at least December 2013. Forex reserves are down slightly at $279 bln and China order activity is the slowest as Asia starts the week in deep red territory. The Rupee could not hold north of 59 levels and still holds negative risks south with trade deficits now proving to be crucial data points for every dollar north or south counting in days of plus and minus moves of significant size(30-40 Nifty points) or in flash corrections on either side, worrying economically intelligent traders even more into a flat dropping market zone.

The Jet move up takes Indian aviation firmly to Air india – Kingfisher axis of south south on governance as the FDI proposal cannot be corrected enough for the desperation to sell out to etihad. Investments from the comfort zone is probably non existent and new FDI will come with too many strings of control the situation of Telecom and now aviation sharply negative portends for any robust escalation of FDI inflows

Credit growth has turned positive and 14% is a good start

India Morning Report: The Apple does not fall too far from the tree

India for old times’ sakes again proves IMF, Brady bonds and Latin American Economists wrong, going it alone with currency curbs as more visible Asian and even Turkish economies also try to get back the democracy equations into their control matrices and China parrumpums down the road of domestic consumption. Net effect for India, at least in Brazil they can afford three years of Bread and two years of rice for about four bus fares and /or a ticket to  World Cup Match from the new popular stands at spanking new stadiums. The G3 have each other to fund but India first has the poor to feed and then the loans to make to urban dwellers for auto, house and pretty much everything on EMI except the kindle which unlike the Blackberry will actually never take up with Indians

However, the new interest rate regime is not done with just upended 10% short rates in the overnights and the kingdom will get more expensive even as credit growth comes back and markets give into a little bear now and then to mull over the water in the wine that is their domestic production and consumption, waiting for investment to come into the Economy.

English: Logo of ITC Limited
English: Logo of ITC Limited (Photo credit: Wikipedia)

The higher rates as we discussed once earlier in 2008, could actually keep the domestic economy chirruping too, but then it is not going to be that long lasting because even if repo rates start going up because there is no growth and private credit growth slows down much from its barely 20% levels we would not get to long term rates beyond 9-10% to the eighties when these were a habitual 15-20% across shor 3 year and long 10 year maturities and are still the norm for consumer credit outside auto and home loans, currently apparently giving another cause for markets to expect higher rates for corporates and even banks Or maybe the EU still has what we want despite being a dying market (PMIS actually crossed 50 on the upside this month but markets are shrinking not growing) and like the EU and the 1% jumped British we might adopt 50% tax rates to get the right liquidity for the right causes. We would still not be a banana republic.

Back in the markets these above are probably not even water cooler/vending machine or m&m talk as results look like as we said, india maintaining those few precious growth stories that make it a well run, academically productive, encouraging for services, lean mean welfare fed growth machine.

I for one, liked ITC results though markets will ignore for another week its INR 20 Bln FMCG sales growing at 18% much like it earlier chose to ignore paperboards and agri business growth which also continue to be drivers at ITC while its asset management business (hotels) continue to be stable at INR 5 Bln and the bread and butter tobacco sales have just underperformed growing by 13% instead of the expected 18%++ More than one business school campus in India is looking at a gift horse in the mouth this year venturing into 400= batches at Ahmedabad, Calcutta and now Bangalore and Kozhikode too but then thats just the suspense kiling everyone.

Coke, Apple, Starbucks have already reported their June quarter performance globally and they will continue to vaunt(flaunt) their India investments in the hope of rightly placed analysts and commentators to catch the drift of their global potential and the flows that have decided to come to India at the “fag end of the recovery” ( at the begin of it in India) and will stay the course.

Yes Bank, Indusind ( esp with retail growth) and Kotak will survive the high rate environment and force growth pretty much par for the course and as we said it is foolhardy to expect ICICI Bank to fall from 940 levels but the likes of PNB could still be the weak chink till the trading equation metabolises the right values for a bigger rally cup. Jet may be as good a s gone from India but its FDI plan which will never see Indian inflows is probably the last gate allowed by Indians in the promise of the world they live on electronic channels and the internet broadband and should not pass muster with regulators allowing real FDI proposals to burnish the brand into local populations and etihad can stay the course in the knowledge that it alongwith khazana (Malaysia0 and Maxis, inched in through the small gap in India’s regulatory armor till here

As of now the Rupee is maintaining 58 levels and the indices have moved up after slipping to 5900 ina directionless market but we are infact recommending bullish trades but not for a quick buck in this market, still precluding any money for the bears/ shorts at these levels as mos stock levels reflect deep values available to buyers. Remember, there is no new outsourcing business coming from the developed world. Thats all there is to share.

Bank Results season (India Earnings) : Yes Bank starts back from 390 levels despite overnight straits

Yes Bank covered a lot of ground after publishing results yesterday, as the Net Interest Income jumped 2 in 5 on year or net profits increased more than 10% sequentially on INR 0.94 Bln in Investment gains on bonds /debt . The NII of INR 65.9 Bln was sufficiently larger by our benchmarks as the bank remains one of the few posting robust gains in Fee Income and advisory income including retail charges as at bigger brother HDFC Bank, the lines have gone relatively stale on such income in the Indian scenario.

Other Income was INR 44.2 Bln looking to equal contributions from NII going ahead as is the wont of this income stream in robust bank models. While private banks set quite a standard for robust corporate governance without due transparency in such old habits in Indian Banking a s a consolidated other income figure unexplained, the reforms in banking would still have covered more ground than it is internationally. the higher interest savings led CASA increase to 20% at the bank is still miles away from reaching an entrenched player status but that is just a n indicator of this bank’s potential to grow faster and stronger than the ICICI Banks and the HDFC Banks.

Retail assets remain a priority  at the bank with total book still ahead of other “midcaps” as Kotak and indusind dependent on corporate treasuries ( variously wholesale deposits/short funding linked to the usurius 10% = call rates pushed by RBI’s interim policy) with assets of INR 612 Bln

The yields, cost of funds a dynamic provision coverage shared by the bank(click here) continue to reflect the continuing profitability of the bank’s model and its relative closeness to NBFC models in vogue, currently trying to reprocess themselves as banks but the existing players will settle up much higher in any status ranking of the candidates yet remaining a respectful outsider in loan syndicates and loan melas

 

India Morning Report: Markets watching the airlocks at 1.30 PCR

Русский: Дорожный знак 1.30 "Низколетящие...
Русский: Дорожный знак 1.30 “Низколетящие самолёты”. (Photo credit: Wikipedia)

The Put Call Ratio, never an independent trend saturation indicator per se is nevertheless impeding most new buying in the Indian Markets as a higher PCR indicates the highest levels of puts sold and comparatively a negligible strength of written calls to initiate a downtrend. Given that the banks have recovered the sentiment to 11200 levels though, the unique topped up situation will continue to walk a steady tightrope for the markets at this point because unfortunately  traders are sunk for short ideas except for targeting the private banks again even as the perfectly engineered ride up to the market has left value in most rivate banks and in most blue chips.

Bajaj Auto at 1870 is hardly compensated for its Margins of 18.65 and Hero Honda is no longer overvalued. Reliance is again hardly left with any steam on the upside but with investment eigenvalues in India rarified Himalayan peaks, such stories are hard to come by for India and will unlikely get short interest even on their Q2 results day when they report barely coming back to /staying at normal profitability levels ina challenged environment. The INR 44 Bln sales at Bajaj are only bolstered by the new rupee and so also for petroleum cycle bled Reliance as oil starts going up after a barely 6 month breather to importers like India

Manmohan Singh did a great job holding 8 channels to task while inaugurating the ASSOCHAM session today morning, taking of true reform ably effected in  energy and the rupee levels helping export volumes 9 again, without discovering that direct relation to be not more than a fond hope anymore) as commodities continue to sink globally except for Oil, led by Indian exports of Cotton and copper also losing value and market like its exports of Tea Coffee and anything else non Gold as the quality is exactly what the buyer did not order, good or bad

English: A rectangle 270x180 pixels which has ...
English: A rectangle 270×180 pixels which has an aspect ratio of 3:2. (Photo credit: Wikipedia)

Me, I was even thinking it s saturday all morning and the markets are virtually closed..ET’s report on July currency trades this Monday..

The data shows that average daily volumes for currency options have fallen by as much as 79 per cent for one of the exchanges so far in July, but another bourse have witnessed a hefty drop of only 35 per cent.

Meanwhile Raymond and Indian Hotels are not going to be traded derivatives from the Octoebr series

India Morning Report: Rupee still juggling the trap mechanics as water boards up

HDFC Bank
HDFC Bank (Photo credit: [s e l v i n])
 With FDI pronouncements unlikely and more than $170 bln in debt redemptions due in FY 2014, the more policy makers dither on shoring up FX reserves with bond offerings the more the risk to the currency from flat international trade and eager money flow watchers finding it a tempting investment with a small investment and a big payout in percent returns.

However, it is today (and just today’s trade likely) only that the lackadaisical equity moves still risk a big rupee downside as equities are sustaining a large 6000 level in light of the real reassessment of Indian prospects as a flurry of GDP downgrades continue. The cyclical reinforcement of this downside risk aka in Latam and east Asian examples of the past is unlikely as equities are strong and the depth is likely to see the markets after a good show by HDFC Bank yesterday and a likely par for the course from TCS this morning.

Though longs would have to wait for their time , further shorts in this market esp on the banks are unlikely to bear fruit. The money market investments made through mutual funds amount to an expected INR 1.6 Trillion and the Central Bank has immediately provided a reserved window of liquidity for these mutual funds to a sizable INR250 Bln as redemption pressure resumed on Monday/Tuesday. Yields hit 85 on Tuesday market open in the short term instruments but rbi lending to banks is at a minimum of 10.25%

With Foreign banks also reducing their footprint in light of Global Banking regulation of Capital and ringfencing, which exactly are wholesale players in India in the non PSU, well managed banks!! HDFC also reports today and axis a 4%+ margin again on its retail portfolio strength

India Earnings Season: Bank Results scared by the Rate/fx tuple (HDFC Bank Q1 FY 2014)

HDFC Bank 

HDFC Bank seems to have flashed a pretty good 26% NII on the wires for INR 44.4 Bln from loan spreads that remained a natty 4.6% in the quarter. The Loan book and Deposits have grown over and under 20% respectively to a book of INR 3 Tln each. The NII seems to be up 3% from the linked quarter in March. the bank’s NIM reporting was bumed up by new rules for apportioning of usual expenses employee pension liabilities and some commissions. Last quarter’s Fee income at iNR 1 Bln is likely static as profits came in at INR18.4 Bln adding to INR 18.8 Bln in April

The markets however do not seem to be rejoicing as the insurance FDI question is moot for the player with Standard Life and IPO plans both not firm for the bank. Yet, the markets continued sppoked by banks fixed income portfolios letting blood at the 100 bp move in yields from the 1 yr forward to 10 yr and at least at 8% + and rate cuts batted out of sight even before the FX scare by the Central Bank rushing into four such 25 bp cuts factored in barely 5 meets since March 2013

Recast loans are almost non extent as in Q1’s figure of INR 3 Bln and Non performing loans are as low as 0.3% of the book at less than INR  Bln from the wires

 

YES Bank on the wire?

YES Bank reports next week on Wednesday  and has been singled out for this rate move’s aftershock while

Indusind, when is it a good enough scale as competitor

Indusind reported a huge 50% jump in Net Interest Income at first glance from its new off take in retail lending finally trickling in . NII hit INR 6.80 Bln for the upstart and operating expenses moved up 5% over March at INR 5.08 Bln. Fee and Other Income was up 30% or nearly INR 1 Bln at INR 4.71Bln , Income before Tax rising 45% to INR 5 Bln over last year. Indusind has also brought down net NPAs to 0.2% and the gross NPAs at 1% of its rapidly growing INR 500 Bln book itself up 60% i the last 5 quarters. The ROA of the bank at 1.83% will be counted a s low for its still rudimentary book Bank reported NIMs of 3.72% on its retail book

India Morning Report: FDI flows bolstered in 13 sectors including Defence and Telecom

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

Pending Cabinet decisions, Parliamentary Debates, Ordinance and Laws

A welcome decision was announced to increase FDI limits in state of the art Defence equipment to 49% from 24% through the approvals route and base cellular networks in Telecom to 100% from a 74% currently removing an important roadblock in the plans of Global Services companies to enter the lucrative Indian market which created unseemly compromises in corporate governance and issues of under priced auctions. These two sectors can see immediate fDi commitments  The decisions were pushed by an ebattled PM and Economist Manmohan Singh likely to be singled out if the UPA fails General elections in 2014

The reforms initiated yesterday, unlikely to be rolled back in the long term except for political opportunism by new governments were long expected and remain important for India Inc, even in sectors like power exchanges, commodities exchanges and Stock exchanges where the existing 49% limits have been brought under the automatic investment route.

Importantly, the long-standing increase in FDI limits for insurance to 49% meets private insurance companies requirements and the sector looks for IPO issuance in the next 2-3 years with heightened participation from investors adding to solvency ratios and potential new business underwritten in a market growing at a double-digit CAGR

The removal of brownfield pharma projects from 100% automatic FDi stands as Ranbaxy reports a new FDA strictures at an Indian plant

The rupee will likely continue to trade above 59 but there are unlikely to be further selling pressures on the currency at this point though the depleted FX reserves and continued demand spiral for Oil necessitates careful watching

Banknifty was under a lot of flak from RBI intervention yesterday but will likely have bottomed out at those levels and those short during the day would have to close out without recourse especially in the DEivative markets as the thinly traded contract that creates the highest tradable volatility correlated to market directions depends on large discrete moves in the options trading its direction and as and if strangles were formed late at 11200 levels they would suffer from the positive semivariance similarily as the bear cut of double digits on individual private bank sotcks was much more thant he losses to the banks from the Monday/Tuesday interest rate shock event

India Morning Report: Markets steady, India facing uphill task

Bajaj
Bajaj (Photo credit: Chandra Marsono)

 

The Indices opened barely in the red after a dull week of Economic data . Trade deficit reported under a $10 Bln for June as Gold imports were blocked out but Inflation on CPI climbed back to 10% in a precursor to fuel inflation expected now to climb back from a barely settled in period of less than 6 months as the drop in Oil is destroyed by the 12% depreciation in the currency. The depleted Forex reserves are already a qustion for the Rupee and the negative IIP for the month is unfortunately unlikely to give confidence in the comeback. Consumption being defeated, one is not sure of the reasons for continuing retail inflation with foo inflation at 12% leading the charge currently.

 

IIP showed a more than 10% contraction in durables Production index and negative growth year/year for non durables as well. WPI for June has also come in below 5% again And while monetary policy will be challenged by the prospects of inflation and depreciation , consumption is actually flling making infation an easy target to even prospects of deflation in terms of sentiment continuing negative in the economy. Investment is yet to come back to the Economy has become a challeneg desite a Forward FDI policy esp for Defence and Telecom on the cards.

 

Auto Sales are down almost 10% on year at 139000 cars and 55 lower for two whelers and though markets continue to treat Bajaj and Hero equally one can see performance for Hero worsening in the war with erstwhile partner Honda in the market and Bajaj has maintained euanimity in shares and market segments nonetheless.

 

Unfortunately apart from the results of this quarter one also does not see further uptick in Exports immediately. Banks despite the low 13.7% growth in Credit for the month of May/June remain fairly healthy in the selected layer as we have pointed out here and Bank  Nifty remains a great pick at 11600 levels markets keeping value priced in line with the economic sentiment

 

Last week, the India Morning Report could not be posted and the same may not be available from Tuesday or Wednesday till the end of the market week on Friday when the trade data and CPI was posted. For JP Morgan and Wells Fargo results refer to advantages.us. Indian Banks report this week and we will be covering Indusind’s results of last week later with YES Bank performance

 

 

 

India Morning Report: India regains investment preference in Asia, builds on 5900

English: This picture has been taken at the Sa...
English: This picture has been taken at the Satya Bharti School. It shows the education system and children’s life at the school. (Photo credit: Wikipedia)

Markets had a choppy week early on in India but with selling having refused to resume and Asian markets keeping a comeback worked into the numbers meant the Dollar indices poised to jump at 83 going into the next week. In thus phase however Dollar may again lose the tight negative correlation to Asian equities especially again in India which has managed to climb down the volatility beanstalk while steadily gaining 50 points yesterday and another 50 points at open today.

Many out of favour scrips from Metals to the yet to be prioritised realty are now at their technical support levels meaning they will mostly support positive moves ad may even lead one out of 5 days in the positive next week. .The jobs report in the US morning will of course propel the Dollar but the likelihood of that momentum taking down Asian markets has receded with the yen keeping counsel near 100 and Asian automakers not seeing tariff barriers in the US traded away

Oil prices are unlikely to continue north despite demand led reductions in inventory in the US as refineries remain underfed and the Egypt tensions are resolved
Banks are poised comfortably at 11250 levels and the Banknifty straddle has worked wonders in localising discounting for bad debt PSUs to SBI and BOB among the still expected to perform members of the Index . Thus further PSU bank attrition of business and bad debt spirals will unlikely stop the rally from taking root in banks next week and ths leading the Indian Nifty 50 back to 6000 levels albeit for a trading largesse. Pharma sector picks like cipla and Lupin continue to have much to offer and trading down in Sun Pharma may ot have large index effects ( expected as exports are succeeding at competition) iT scrips are much in a bind of low profitability even as immigration reform fades away and 12% in Rupee depreciation fails to make earnings forecasts positive ahead of next week.
Bajaj Auto, IDFC and Powergrid could be good picks at current levels though RBI signals have already discounted PSU applicants for bank licenses including PFC. PTC is also dong well without a banking license to its name and REC may trade to lower 190 levels but is likely a good pick at these levels all on their standalone performance and undiluted by the market added momentum in June for Banking preference. YES Bank is a great pick at these levels and supernary promoter interests are unlikely to be material to the bank’s professional management as is the prospect of 100% FDI in leading lights in the sector. Telcos will probably get 100% FDI approval sooner than later and Aviation’s experience with Jet Etihad is likely to remain positive and accretive to value ton the whole. Lupin’s pipeline of 100= drugs continues to underline the block profits in generics witha low barrier definition of blockbusters and no big stories in the us market nonetheless and similarily with Cadilla, Orchid and Stride Arcolabs.
More importantly consumption winners heading for no man’s land ( Trading at lifetime highs seen mathematically breaking new ground with positive momentum trading) with ITC, United Spirits and eve HUL and Bharti likely to head off the “no investment” led dull prospects at India in story, expected still to be worth much more 6 months down the line. While HUL has shown already that shorts were wrong, once results expectations are correctly warded off by Telco promoters sunil mittal and co, Bharti may also be seen in the light of its quasi global brand and investment expectations and thus gain from reducing debt on new investment rules in fDI and in required infrastructure debt accounting

The Rupee thus is free to depreciate but in a small range around the 60 mark.

 

India Morning report: Oil signals treated as critical sell levels for the Rupee (This week in Asia on advantages.us)

English: Graph showing Indian rupee and U.S. d...
English: Graph showing Indian rupee and U.S. dollar exchange rate from January, 1990. 日本語: 1990年1月からのインド・ルピーとアメリカドルの為替レートのグラフ。 (Photo credit: Wikipedia)

An old adage for the market, it is now a repeated phenomena in the global markets for India to retain the dubious double distinction of heralding global commodity lows and be cornered by the slightest sentiment building in Oil. The day thus is a weak barometer but may soon gain ‘tumbling’ significance for global currency markets as the Rupee will be decimated to even beyond 65 levels if Oil rally does gain strength.

However as it is unlikely to happen for now, long investors may not be able to leave Indian shores before it eventually does, giving the upper hand to hot money flows as opportunities run out with the Yen at 99 and Euro also not facing new substitute demand, yields going up from global lows in various central bank auctions in Europe throughout June bringing short term rates to near above 0.5% and even closer to the 1% mark from momentum extrapolation(as will likely show)

The Indian Rupee has been closely pinned down earlier in 2009 and lack of buyers remain its “new” worry in global trade share increases as Yuan manages a smaller volatile range despite an equally suspect recovery path due to a paradigm change from South east, Coast Only development to a more homogeneous spread as legitimised by a 5 year plan.

Back to matters at hand PSUs like BOB will probably lead the bank indices down even as most new banks will make likely a good sector lending structure possible in the higher spending towns and villages of India that have kept Rural CPI apace at double digits till now. Muthoot’s Bank may indeed be a new kind of entrepreneurial venture in banking as long as they meet RBI conditions and manage not just the minimum net worth cap but raise the bar for fellow new anks to the desired but not contingent levels of INR 2500 crores of $400mln and even INR 10000 crores or $1.6 bln whnce an opportunity the size of India may be deemed fit. This size of course may not be ready on day 1 but should nonetheless be planned to those levels with capitaal lines tied as was behind the uccess of private insurance in its infancy in 2000s

100% telecom FDI for India thus might mean in an indirect way, better days for Oil consumers even as demand returns to the US market after a good 6-8 weeks in yesterday’s reported data and are critical for the market to retain 5750 levels on equity indices. ITC and Bharti remain on the up and up in block deals for FIIs or even program trading where such volume is amenable. Yes Bank might see another block of additions by FIIs as it exits a RBI ban on foreign investments and has quite some potential before reaching the allowed 75% levels currently in the sector HDFC/Bank prognostications for a 100% FDI in the sector linking its scrip fortunes to the same may see thus a longer gestation period till the new government is in place in 2014 and indeed starts picking up the courage to forget its pre electoral hang ups with FDI if any

 

India Morning Report: India needn’t have worried about Fed pronouncements

The only island of yet positive GDP growth with near 0 domestic investment, India could have easily ignored Fed pronouncements overnight but instead as the currency fails to find any buyers fell through at least two credit buckets in a single sweep with the Indian Rupee progressively targeting a 60 mark twice in this week and Oil imports continuing to drag the CAD warnings to future quarters with General Elections admittedly not recognised yet by the market as the proverbial ‘blinders’ to any further cognitive thinking and not many options left on the straight and narrow

The FII investments year to date are unfortunately a never before $15 Billion and the debt market continues to see withdrawals. Yields hit a circuit breaker as the old 10-Y bond was trading aat 7.57% and the tracked 10-year yields have hit 7.37% and will be moving north to track the new Oil bill expenses from here

Coal India Limited
Coal India Limited (Photo credit: Wikipedia)

Though markets would like to believe LIC is standing buying against a whirlwind of sales in equities as well, the situation is much easier in equities with the 5750 breach in the morning probably still the last move of the index south if indeed tomorrow markets recognise that it is much the status quo for India Inc prospects in the entire schema developed by liquidity flows and Europe’s demise in the last few years

Deep cuts in Foreign ownership rich stocks target private banks with ICICI holding together a motley crew of foreign investors and telcos barely surviving with the new FDI proposals lifting the cap to 100% by ordinance. the SS (S2 Analytics), Angel Broking and Ashwini Gujral comebacks today were effective I in particular paying attention to the Coal India short by SS that  should yield Coal India to 260 levels Also BOB may breach 600 but may not have further downside and Cipla and Lupin shorts should be ineffective as also further shorts on Banks despite the new market levels prognosticated to 5100-5300 levels by the Bears who finally caught a break after paying hefty carryover and I am still buying the banks, IDFC and Bharti and ITC for the bang on the upside. Jet Airways is also running the thin rope easily almost on predetermined lines to switch agreements on the Control issue allowing etihad powers commensurate with its 15% holdings.

Also despite the FDI in retail, one suspects most of the domestic investment has already been predated in the new bout as Walmart was already a back end partner and many others arrangements also have not sported fresh investment and thus this marks the deeply worrying sign tallying with the bears that indeed Fresh Domestic investments and thus fixed Capital Formation has yet to find any viable grounds or sources. However, in our final analysis this has all been discounted and equities will not see any money leaving after today’s cut making anything like 5600 impossible for the markets to fall to and even if indices fall to those levels it would not be linked to actual investment withdrawals of note and scrips already selected on the long side will not be impacted.

 

India Morning Report: As we said it, so did the market bid it

The Rupee found no buyers again at 57.70 and had no problem taking the bottom end of the new range at 58.75 today in the open stymieing buyers fromcoming back into equities. The run on bonds has added another $2 B odd in the week since as Bernanke’s announcement widely expected to bring in concrete plans pivots the markets worldwide, especially those already recognised as an island of value and ready for the QE withdrawals like in India.

 

As we said the lower volatility of Indian Fixed income markets especially after better liquidity in the month of may ensures that India markets are the first to be exit in debt but the investment stock for the country would only grow.

 

Equities maintain poise but idle lower after the weak Rupee triggers minor exits. The due noise on changing FDI laws however is unlikely to materialise before the General elections and any consequent optimism must also wait for tier 2 and detailed surveys bringing back the incumbent government’s chances of making it to UPA 3 though it is almost certain that Modi will get extra votes for BJP for being an able governor.

 

The stable range and the ready ‘stock’ of short positions on the indices and banks enables a stable return in this series  despite global volatility receding. Trades on Infy as mentioned on CNBC18 are pretty safe with puts of 2300 (till expiry) and maybe 2400 ( for a week) But I would say sold calls on 5800 are ready to be taken out and should recede back immediately by end of day short calls on 5900 are already the ceiling of good straddles in the series. 595 should also get more positions and risk/greed might also make a run on the 5850 calls possible instead of a complete exit from 5800 series. Afternoon turns are usually a great read with Aptart India on both CNBC18 and ETNow and Mitesh Thakkar and CK (ET Now)

 

Value of Indian rupee as per dollar & pound (1...
Value of Indian rupee as per dollar & pound (1980-2005) (Photo credit: Wikipedia)

 

Angel broking like SS (CnBC 18 )  continues to show signs of smaller capitalised players’ frustration with Bulls’ holding the markets bu t there are enough players to not make this a local vs FII bokerage war as at this rally cusp DIIs have started buying. SS in the meantime has moved on to better trades this week with bullish picks back in a majority opinion reducing rsk for small traders. IDFC had  anice breakout on rumors of its banking application and outside banks Bharti, ITC and the banks remain strong. Mitesh Thakkar’s strong rush for Bajaj Auto is something that jibes well with us as well after M&M. Late chores made this report a ittle delayed to remember the other interesting morning pre open and 8 am jabber. Also the OMC moves completely sdestepped us and we would still think they are great buys at new prices. And the

 

 

 

India Morning Report: Chidambaram kicks off mmtc 9.33% divestment

Banking District
Banking District (Photo credit: bsterling)

MMTC might be a success but the market is not putting much score by the Fin Min /CEA appearance in the media today while Banks have finally given way after a 45 day wait. One notes the posit by market makers that value retention by the select scrips already counted as good is not doing much for wider portfolios as most had treated this climb as the milestone before the rally and not the rally itself and does no in any way would have resulted in  a bubble.

Also the Rupee being stronger yesterday, the overall month long move across currency and equities seems to be trying to compensate the news view that India has survived the move in Asia as was the norm in the oughts or the reform rich period before that and has somehow become a threshold for Emerging markets portfolios as and when dictated by the once a year or fewer occasions of a rupee correction and is unlikely to again preclude the fact or erase the sustenance shown by Indian equities as a class because of the depth of our markets even as Nikkei, Hangseng and Korean markets lose heavily on each currency move because of the less than dozen companies going around for Korea at least and the richness of fixed income portfolios one can safely assume in the bigger markets in Nikkei and Hongkong

The Stanchart reference to inflation risk however remains misplaced as Oil prices are still very unlikely to trend up again

However, staying on the mundane market data for the daily report, Indian equities are losing all expectations of political stability and any positive rally till september as the year’s second half will offer first hope of growth or economic performanceThe import limitation on Gold in the meantime does not impact MMTC plans in Gold and thus strengthens the public channels for Gold trade in India ahead of its disinvestment exercise

Meanwhile FDI flows in China, India and Brazil have been more robust than any other class for all global investors even as Russia scraped the bottom of the barrel bringing the BRIC average growth below 0 for the year. Markets in Asia will continue to lead exits but as the speculative portion from India has been wished away almost immediately, not much move south in bonds or in equities remains and as can be seen in any current charts, Indian yields are down in the same 5 week period and will continue to trend down for the year. Banks, ITC and IDFC remain good investments as also Bajaj Auto, all mentioned except ITC having lost their share of speculative investors / price premiums already.

Shorts on Adani Enterprises are well placed while Gujral again has mentioned buys on Lupin and Cipla / Lupin are real return stories of 2013 from here as Sun Pharma finally pays out 805 of its cash for the settlement with Pfizer/Takeda

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

 

 

 

India Morning Report: Markets regain 5900 levels, short trade not on

English: Implied Vol. Surface
English: Implied Vol. Surface (Photo credit: Wikipedia)

 

Aftera small skirmish/face off in the morning trades as was likely on expiry day, the volatility smile of the May series was intact with high ranges for out of the money calls and puts and shorts bowed out of remaining scrips before noon possibly. Markets are stable at around 5900 and are celebrating the Jet deal, Tata Global beverages also getting neww found attention as it consolidates thee first year of results of Starbucks and probablyocased the kind of innovation and looks for global scale forced by its jv partners and global coffee markets. P&G global results yesterday showed the importance of innovation and BRIC growth in consumption stocks and India remains an important global destination for consumption industries FDI not just in travel and financial services.

 

FDI, Media and infrastructure expansion and perhaps a stable polity make guessing capital market priorities an almost daily habit for the multitudes but investing funds and managers fail to expand the footprint of the profession while retail investors get knocked out for scale, leaving pronooters speculating on margin an important riceboll weevil infestation in the Indian wealth crop, clearing of which is still dependent on monsoon dusting of crops, That is where similes end up when coffee conversations about the market try to replace in depth research. M&M Financial however seems to have cottoned on to the diversified growth tenets of a NBFC and bajaj finance firms too are pretty surefooted led by their last insurance investments.

 

Jet is likely to cross a near 100% retunr at these levels to four figures but that time frame could be six months or even six years whence it will cycle thru another multiquarter negative round of profits based on the cost of oil. Rupee trade is stong ont he upside and the banks being pilloried for having reached levels at which further investment is foolhardy are still purveyors of both value and more than 30% growth and as long as exit targets are available in IT and defensive sector stocks should continue to be staple of portfolios

 

Rollovers are likely to be subdued and if that happens there could be an entry opportunity in this market around 5800 levels after the new series trades in earnest next week. (ofcourse if these ‘scheme’ is indeed adopted along with the 24% stake approval for Jet, Friday trading could still have already set base levels for the May series before markets start the new trend direction next week but as of now, Friday would be dull and rollovers sparse

 

 

India Morning Report: Unfolding Political Drama alienates Capital investment opportunities

English: Map of the British Indian Empire from...
English: Map of the British Indian Empire from Imperial Gazetteer of India (Photo credit: Wikipedia)

 

The surprising and unfortunate saga of the returning bout of political stability that landed last week has caused India inc some serious heartburn as market mirrors waning confidence levels of corporate India which was looking at raising cheaper money and deploying into new industry and infrastructure this year. Though observers still stand on the sidelines trying to peg Economic forecasts to the agri output as monsoon season also prepares to make its pronouncement and the comeback in core metal and mining sectors will be long lasting and is already underway.

 

 

The consumption cuts after a brief comeback in December January are almost inconsequential as global equities will correct and even out only some of the withdrawing Emerging market ETFs with India being a safe haven yet for equities, valuations at 5600 pointing to an almost extreme low on current profitability set to improve in the last quarter of the fiscal. But the 10 year  yield is already nose up after having forced the RBI’s hand and is likely to land near 8.1% another 14 bips in the next month or more. Japanese capital investment flows are probably striking Asia again with Myanmar starting Rice exports to Japan after a good 40 years and that is good news to the region strapped solely by Chinese FDI. Though unrelated, the India story will also depend on these FDI flows as its own Corporates battle the post rate cut bad scenario.

 

 

Further relaxation on FII investment limits in bonds are only likely to bring in more investments in the 3-5 year horizon as precious MTN products become a possibility to increase available choices for those evaluating Indian company CDS’ in the Asian trades. Indian ratings could improve in the next 5-7 years if such depth is indeed possible as another batch of QIPs though distinctly less than the volumes from Indian ECB in 2009 and 10, remain likely in 13 and 14 banks and infracos being the hitherto winners. The steepening curve in the meantime as India’s long term yields falter and demand comes to shorter maturities could infact be a boon to low lying infra SPVs as their structures shift to quasi one year rolled over paper and trap sub 5% short term pricing of debt. Their overhang of 30 year debt continues to be a big rating concern and government is likely to be unable to backstop more of it.

 

 

The political uncertainty in the meantime will only bring Nitish’s Bihar to the fore in the governance camp and DMK itself will be softer after the change in Foreign policy stance. Our own UNHCR confrontation on Kashmir, long hidden might still get political ambitions strewn but on the whole Capital investments will withdraw to a wait and watch mode in India 8 months before due election unevenness could have otherwise been expected to strike India inc’s investment habit. In the meantime, markets offer attractive valuation opportunities with most identified sectoral leaders including YES BANK, IDFC and ITC holding on to new levels. Jet has struck another wet lease deal with Etihad to channelise its quantum of investment adding the Brussels routes to the Heathrow parking spots already in the sale and lease back with Etihad.

 

 

Stanchart’s prognostications for the Rupee may have hit a rough patch in their own term forecasts but JP Morgan and Deutsche Bank sell side units continue to invest in timing the Indian recovery with other foreign brokerages from UBS and CIMB to CS itself still holding local expertise in sectoral mid caps and even banks. Helion and Samir Arora ofcourse stand a little more guarded in light of their closeness to these political forecasts on the nation but they and other India bulls remain exclusive specialists, a breed strange enough for its loyalty as is India’s own secular growth rate still nose upward from 5% last year.

 

 

 

India Morning Report: Week opens on a buoyant note

English: AXIS Bank
English: AXIS Bank (Photo credit: Wikipedia)

India Morning Report: Week opens on a buoyant note

Despite the run on BOB due to the herewarned jump in NPAs at BOB  and AllBank, the correction in others tracing the trend in BOB like SBI and Axis Bank are unlikely to fall through and banks like ICICI Bank and Yes Bank are likely to be strong bets for this move in February though the pre Budget rally’s happenstance coud be discounted by the end of this week and the market stuck at below 6100 levels.BOB’s NIMs have fallen on quarter by almost 15 bp though they are still 20 bp better than December 2011 at 3.08% and are likely to be hit by a falling knife as at Allahabad bank even as PNB and SBI walk out in the guise of reduced provisions,

The Solicitor General’s resignation might be a significant blip ont he horizon for India baiters and because such a category is waiting in the wings, the intellectual discussion around the government’s decisions pushing thru new ordinances that led to this falling off are likely to be muted and ignored as India Inc and investors look to firm policy moves in the wake of a wasted 2012 for India when it should have been coming in to prominence for its Economy’s staying qualities and instead was largely ignored despite new FDI invitations in aviation and retail

Banknifty is likely to start a new move from 12600 (12654 at 12 noon today) and probably has at least 10% to offer even as ICICI Bank’s opening gambits helped the bankex and banknifty realign losses from weakness in SBI and BOB post BOB results The bull run in DLF is a red flag though and might sour the uptrend as IDFC is rerated down with no moves on Infra financing in wake of the Fisc, though an untenable assumption, being a driving force in irrational investor minds. Reliance Infra and other Anil group companies however would be at the forefront of the markets vertical climb if it happens anytime this week.

For rivate Banks atleast the turn in the economy signifies the rush for CDR is over.

India Morning Report: Standing on a vertical ride at closing..

NSE Logo
NSE Logo (Photo credit: Wikipedia)

Does not leave much to imagination or prescience after the Nifty travelled the Vertical Flights of Fantasy to 5950 levels before closing gong struck at the NSE terminals and the soon to be public BSE that the markets are a settled lot in the morning and a final big correction is being ramped up in commentary to a big killa round hopefully over 6100 levels .

That means the Nifty and the exchange has another big weekly move  and probably not immediately next week though looking at the eagerness with which the House of Elders vote on FDI brought to profit taking it is obvious the wait and consolidation has been a long one even for FIIs or as some mention, most of the floating stock is yet gone.

In true indian market fashion I can duly see without undue overanalysis that it leaves opportunities like Jet Airways and Orchid Pharma ( as it negotiates with late lenders like IDBI Bank) for a grand capital appreciation burst. it also shows that markets have matured to the virtual exclusion of retail players though US markets can still claim to over90% retail invested in equities , but one guesses thru discretionary and non discretionary forms of institutional and hedgie managers.

As mentioned yesterday, globally alpha is back in vogue meaning India is likely to remain in currency and the market has thus that upside led by players like YES Bank and other private banks wwith double digit growwth left in this rally for them and other blue chips for the mass of your portfolio to settle down with.

Ramesh Damani looks to be in good form as always making the next level of case for a big correction for indian / DII buyers after the likes of Ashwini and SS failed to get markets to see any worthwhile correction in the meantime but it is probably time to see some institutional buyers move or rather churn their portfolios to the new limelight , even though they might feel like still holding on to Indian Pharma and even dabble in fiscally imprudent PSE banks on their indian panel’s whims.

Stride Arcolab continues its run it missed last week as Maruti and Baja Auto stay with Biocon to catch more idle profits on the take.

 

India Morning Report: And that my dear is how a normal consolidating market looks like..

Singapore Flyer
Singapore Flyer (Photo credit: chooyutshing)

 

Unfortunately, the last two months were not normal for the markets at all, with most shorts alive yet unable to close the deal and finally breaking the buck whence this detail of markets opening and staying around yesterday’s levels instead of retracing everything is the real consolidation thing which should invite cattle herders in droves to this overtly spiritually marketed FDI and portfolio destination. As mentioned other Asia destinations are not so active right now and I am not aware of the depth of the new market in Burma (Myanmar) which is increasingly going to be a Hail Mary target for unregulated PE money (Hail Marys work more often than you think)

Meanwhile another big IPO from China and a portfolio divestment in Thailand should be enough motivation for any serious Singapore business to rush in now before the Hongkong dragons take over Asia hub again. Right now they are increasingly becoming the Yuan market in more ways than one.

Back on Indian governance, it is better than most other Asian republics and yet resistant to a full hearted embrace for foreign investors but that apart, there are now lesser differences that matter than depth and liquidity of the Capital markets even with BSE and MCX adding to the mix, the first few months of multiple exchanges not marred by flash crashes or other exchange level black swans in any other developed market geographies either like London and New york. Shanghai, Sydney and Singapore continue to look for diversification of asset classes and business with others like OMX, Nikkei or the myriad European exchanges led by Deutsche Borse and for india the local FII market in Luxembourg which still provides some investors to the myriad QIPS though India does not play with 144A placements and jurisdictions as often anymore.

Ofcourse after a buoyant two years Emerging market ETFs are again fighting for share with High yield and sub prime business and also we do not get any new allocations evena s the larger chunks sunk in China weigh down anchor on foreign investors amidships and the high  5900 market isjust waiting for another news event driven buzz ( I don’t know how that what we do here is different from a flash crash really and we do not even allow HFT or any pother program trading to trigger off a steeper slope into the selloff!) when the retail FDI vote happens today or tomorrow.

 

 

 

India Morning Report: A tough act to follow!

The resilience of the markets is absolutely breath taking if you can let go of the greed of the trading tick and forget you could have created 10-15 more points in any move of the last 2-3 months. INVIX must be one of the most stable volatility indices needing some good data training over the next 2-3 years as it gets two distinct levels along 2012 and tries every other vol input inbetween except the limited market range, setting it independent of market levels which becomes counter intuitive after this length of time.

Business volumes on the NSE are holding and MCX equities seemingly will only add new volumes from its 300 registered members as and when they start with the same 1000 scrip universe ( NSE has 1600) . Chinese data was actually positive but the markets wanted to see a bigger difference and local shares continue to tank from 3 year lows in Shanghai /Shenzen.

The Thanksgiving anti trade in Asia and Europe will likely fade away till Monday when US markets open as traders await the big news from Europe and EC takes the weekend time to solve the big problems UK has with the budget. I ndia is now actively interested in these negotiations with its EU trade droppoing at the expense of others and its Trade GDP seriously affected by continued recession in Europe which it is hell bent on following up with large spending cuts on the EU Common budget and the slow dribbling away of the banking union while UK firmly in saddle strengthens its local EU trade in Spain, Porto and Italy

Bajaj Finserv morning interview on the networks was a great segueway into the stock but comes a little late even with new business premiums growing at 18% and Allianz interested in increasing its stake. after an almost 100% rise in the year. Like PSU Bank Capitalisation and Drug Price Control, Bill impact from  FDI increase in insurance is also likely to have been played out long before its actual play in the House and is unlikely to move the bulls or the bears sitting on selected positions.

The underpricing in Bajaj Auto continues to be a big surprise and Biocon is a good long term buy at these levels. Why are Orchid and Opto out of favor? One fervently hope it is not because promoters are hoping to be bailed out on their personal loans

 

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 Morning Report October 08, 2012: India Inc Waits For Real Reforms

 

Update: Some brokerages have already updated sharp shorts in Mid Cap IT but Hexaware could follow Geometric into positive

A downgrade from Morgan Stanley (RIL), an India on call report from Credit Suisse asking for reform implementation and eGOM’s easy billing answer to the fiscal deficit ( from Telecom spectrum) alongwith the age old Cauvery issue complicating mining ban and drought hit Karnataka’s problems contributed to the background against wich the inevitable happened yesterday. The Emkay event is not yet forgotten and DLF has paid for an ‘unraveling’ of a very public Vadra connection but the indices are still above 5670 and going back north today from the looks of it as the welcome corrections piques the watchers of the Indian markets from foreign shores.

A 2013 story train from us 

A title “Contemporary Banking in India” edited by Naina Kidwai of HSBC forms the bedrock of my missing gaps in the knowledge of all things local and as the author of “100 small steps..” takes the inevitable podium on thought waves, the growth of Tier 2 towns and NBFC based financial inclusion alongwith ECB avenues for NBFCs are likely to be ‘revived’ as and growth truly coems back to India after the bottoming in Q2 or Q3. However, the important thing remains to be that results in our deficit numbers CAD and Fisc show up as soon as possible and we move on to not just a buoyant Services PMI but take the Consumption story forward from the undeniable stamp of nondescript plateauing at $1 B for alomost every consumer brand in every sector int his country

The rest of them and reform

The final nails in the coffin for Kingfisher have arrived and the key issue likely to make the media strongly in the next few days is their wage bill which pays 13 managers 67% of their INR6.7B compensation costs. Foreign banks have made a comeback in assets from Citi and DBS while HSBC still has the strongest branch network and SCB inexplicably stuc k in telecom assets syndications despite having won with extensive outgoing FDI support cases including Bharti.

The reform, what exactly does one expect int he next few months to come back from implementation. Perhaps the real FDI reforms only and no GST , Direct Tax code or Companies Bill yet as it might need to be introduced in Parl again.

 

India Morning Report: And the markets realise the “limited release” reform is severely limited

 

The Epic reforms in Insurance and Pensions started off the day adversely affecting the existing Insurance plays from Max India to Bajaj Alliance and other likely as markets were still excessively optimistic of action despite temperin gof expectations over 6 months. The cleared Companies Bill ith a 2% PAT surprise “social tax” is unlikely to not add to the bottomline challenges for the Nifty 50 firms whch are ready to rebound in profit growth by next week when results start pouring in.

Q2 will provide more impetus to the running recovery board and then the inevitable reaction from higher levels as we come to terms with Economic armageddon as it continued from August and thus pretraces another reality check for the markets which will unlikely try to get to a reaction before the last week of the year.

Indian insurers have been relatively more comfortable with 26% FDI as that keeps stakes higher for them and thence control. However the 49% limit may be subsumed by FIIs with portfolio cash

 

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 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.

 

 

 

Late Morning Trading Strategies – An Update By 10 Am (September 17, 2012)

 

Markets have not gone nose up on news and thus are unlikely to go belly up by next week. As unexpected as it was and as fruitless it might be the sectoral runs in Aviation and Broadcast channels have been well left alone, the improvement in FDI regime resulting in gains of 3% (JET) to 12% (SPICEJET) in aviationa nd 3% Broadcast Cable companies. Sensex is up 100 points.

Holders will gain and it is not really time for fresh buying. The commodities cycles are quite done in the big run up of last month according to us but shorts dio not have a clear run in silver or Copper or even ANtural Gas. Crude should go higher but not ithout a not so shallow correction. The Euro at 1.30 is pointing to a bottom for the Dollar being very nearby though some European investors have again taken Euro into their fold, saving it to 1.36-39 by the year end (HSBC)

The policy data comes out in a n hour

 

India / Asia Deal News and Prospects

The Anna movement has fizzled out without a viable political color, NaMo and Nimo apparently not good for a national calling and Rahul Gandhi not coming out to take charge, the old generation moving on has also provided pause for those of us born in the 70s as more entry line recrutiting takes salaries , if any , to 20 somethings and no growth industry replaces againg telecom infrastructure stories banks amnaging to gro credit to NBFC, Real estate (Affordable Housing) and other services industries.

FDI collars for old sectors, new banks and growth calls for the pack waiting for work yet still snagging salaries at IPL linked marketing companies, erstwhile growing BPO and It companies or NPA hit PSU banks are yet a year or more away. Not much is expected from IIP data and Manufacturing Output growth data on Wednesday while Friday’s WPI data and that of FX reserves is unlikely to move decisively either, yet not be in the rut, WPI having improved for the last three-four months. European inflation data is likely to be worse today when most nations report than tomorrow when Italy and Sweden are scheduled to report while key South Korean, Russian and Aussie data speeden the recovery by the currencies against the dollar.

AT THE TIME OF THE LAST SUCH STASIS IN THE MID90s WE DID NOT SEE COCACOLA QUIT OR KFC INTRODUCE VEGGIE MENUS BUT MANY LEFT INDIAN SHORES FOR A “PAN ASIAN” PRESENCE and as of now the European Banks are leading the same trend even as their future stays inextricably linked to the Asian movers and shakers.

MEANWHILE Heineken’s Asian Deal has generated interest for real estate reasons as well, with the makers of Tiger Beer and F&N juices also owning the largest property on Singapore’s Orchard Road, worth 50% more than Tiger Beer’s sale proceeds.

Also Kingfisher has moved on from probable and hope ful to near certain death as it keeps the skeletal senior management onboarded at a cost of INR 675 Crs according to a ET weekend report.

India Morning Report (June 27, 2012) : Dollar loses steam

Prime Minister of India Manmohan Singh in Arun...
Prime Minister of India Manmohan Singh in Arunachal Pradesh. (Photo credit: Wikipedia)

Another of Dollar’s correction days is upon us easing the day trend for the Nifty qithin the flat zone and making the trading day verbose and Recommendation/Tip friendly across experts in market, analysts off market and stock market investors contributing to volumes of INR 2.2 T daily the last two days of nervous boundary wall smacking diatribe from fence sitters not able to get tv slots or investable surpluses before the last bus leaves.

The market will soon be back of course and probably not below 5000 but expiry is safe near 5200 than lower as Sir Prakash Gaba also confirmed on the first day when the policy action snuffed out many fragile hopes.

English: Signatures of Manmohan Singh. Top in ...
English: Signatures of Manmohan Singh. Top in english, lower in Hindi. (Photo credit: Wikipedia)

India PM Manmohan Singh taking over the reins may not change the situation on the ground but it is a material plus, the one on Tv making the posit for him being the Citi APAC MD, Pawan Vaish in end May in “THE WORLD ACCORDING TO CITI”.

The material plus from Sardar Manny taking over is in all the non political attempts filed over the last one year by the Plan Comm, the PMEAC and perhaps even the RBI to redeem the current situation which in various forms had come earlier for India Inc and which is why still sub 6% growth rates are unchallenged by India detractors who actually watch India’s ratings (including Indian citizens)

stock market
stock market (Photo credit: 401K 2012)

FDI got a big bonus with $5 B announced by Coca Cola over the next 2-3 years. It is already involved in social empowerment programs to cling to its early mover advantage and find ways to expand India’s stale but potentially rich soft drinks/beverages sector wwhere it enjoys 25% share thanks to an early recovery by Kinley as Parle’s Bisleri still manages another 25% of the fluids

The Global 5 by 20 program targets increasing the role of Women run businesses in its 100% groth by 2020 and was started in 2010

Trading strategies follow.

India vs China : ( A likes comparison) Chinese inflation ticks down to 3.4%

 

China Premier Wen Jiabao deliver the Report on...
China Premier Wen Jiabao deliver the Report on the Work of the Government at the Third Session of the Eleventh National People’s Congress on March 5, 2010 (Photo credit: Wikipedia)

 

While Indian inflation is likely to step out of the sub 7% mark on the wholesale levels to more than 8% following the retail index, Chinese inflation ticked up to 3.4% leading to a reaction in the morning’s Asian opening. Chinese imports were up only 3% like for India at $37.9 bln with not just Oil but in India’s case two thirds of the Diamonds and Gems trade shutdown and Gold and Silver imports are down by a third from a government increase in import duties. The tradedeficit thus comes to below $160 bln at the cost of over $100 bln in Exports according to the trends explained by the Govt official,  after the first month of the Fiscal at Data release yesterday

Chinese inflation easing further may not be a good thing as it also follows a drastic fall in demand consumption, the bulwark china is relying on to stimulate growth though outgoing Premier Wen Jiabao has been vocal in the last few months against the culture of imported consumption items in China. We felt more comfortable for China at the 3.6% mark for inflation in March as it was within the 4% mark and Banks though restricted by opportunity on Lending had still managed healthy Q1 profits

Asian Economies of India and China’s leadership in growth is a required element for the continued recovery in Western markets and limiting of European troubles though European trade continues to favor banana policies and non South Asian economies for trade and investment hopes. India on the other hand reported new FDI of $ 8 bln in March but the Exxport slowdown and the increasing inflation from the 21% depreciation in the Rupee  int he last six months will hurt growth and consumption with Automobiles sales in April already down to 4% growth or 235,000 units for April including Exports. Ford, Nissan and others would be increasing exports from the added capacity in their indian plants from this year

India is hoping to get a further $1 Tln in Infrastructure funding from private funds to quasi SWF structures sponsored by banks and government

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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

L&T Wins again!

The unlikely bidder and a past promoter of UTI, L&T thru its Finance arm L&T Finance Holdings bought up

Southeast Asia with Pakistan, India, Nepal, Sr...
Southeast Asia with Pakistan, India, Nepal, Sri Lanka, Bangladesh, Myanmar, Thailand, and Laos highlighted (Photo credit: Wikipedia)

Fidelity earlier yesterday. However Fidelity MF in India is just $2 bln Assets under Management so I don’t know why they wanted to move from INR 35 bln to INR 135 bln making them #13 if ET is believed. AMFI India apparently has reduced the frequency of AUM data updates a s have multifarious departments as India realises the direct investment options to foreigners are not just achieved by allowing them legally inside and FDI figures look like that of neighbouring Pakistan as mauch as us and behind Sri lanka and Bangladesh. (SOUTH ASIA)

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.

Where’s everything headed, then?

We as india writers have pushed out everything with insight in the last three four years, short of  the unworthy Indian infrastructure which could not attract even $100 bln in Gross investments yet with two debt funds of $3 bln each and some older established PEs like Macquarie and 3i and the Govt of India grants of INR 750 bln. Short because Indian Infrastructure sector with all the public enterprises involved is very short on the details and as it works without meaningful graft like the Telecoms, the Roads, Power, Aviation and Ports infrastructure continue to work with construction companies like our FMCG sector works with $500 mln brands from HUL, P&G and ITC and we are the wrong ones because we criticise something as if it was the end of the road for the sectors in each case and nothing else going to happen because it is not.

At least that is also what the Dy Governor of the RBI, Subir Gokarn seems to feel if we read into his new timetable to plan out Capital Convertibility for India. FDI in India has always been able to attract the bigger dollars irrespective of investors’ fascination with issues like the retroactive introduction of taxability of transactions and the impossibility of investing more than tokens of currency in our banking sector with restrictions of M&A or the recent failure of FDI in multi brand retail/ defence, healthcare and aviation.

The true problem comes in India’s cultural intractability compared to China or Signapore or others total rolling out of the Carpet for the bbigger dollar including the State sponsorship of the project, and not an immobilised set of half dozen land reform and Tax reform bills, and the Private state and comsumer acceptance of that way of life that the investment unwittingly imports itself with. Being open to cultural transfusion, this is a real anachronism always heaped on  the middling old politicians who could not run coalitions but it runs deeper as the next few generations will find out.

Probably what we need to bring in each sector is like the perfect storm, at least two representative investor in each such sector, like probably Yum with KFC and Pizza Hut and Tata Global – Starbucks and or Dominos with the Bhartiyas where there are unlikely to be any hiccups with all three biting the bullet and all government departments, consumers and politicians able to sell and compare. I would even aver that the 2g  experiment is still very much a success for the FDI story right now. A similar base exists in Banking where the world’s Top Banks are increasingly looking to Asia and India in particular to roll out bigger base staff or the magic wands that the local and global Harry Potters need to win the magical sorcerers over at state and center.

Whether it is International Quality standards for Highways or structured products in Banking, Indians more than other s are Comparison shoppers who like to think their Point-Of-View is appreciated and part and parcel of the product/standard unlike others who let FDI build a parallel Eco system, much like empty highways and cities outside Bejing while the Eastern corridor esp  around Beijing keeps cars stuck in Traffic queues that take three days to move from end to end, or even more

The simplification stated in that, is to be taken with the usual detailed quid pro quos and the details of a contract like bringing the capabilities to service rural consumers becoming a new reality for banks, auto and credit card and durables/discretionary sector plays from Pizza to That larger personal loan than the $500 on my Kissan Credit Card.

The miss India missed to nail down again

Rather to the detriment of the Indian purse strings which are a little stretched as always, we were unable to even attract real portfolio FDI in this current run on Equities, with $7 bln hardly enough for the kind of momentum we talk to. China definitely has the edge on infrastructure but more so and back on the same drawing board, it is our spin control and inability to adopt a senior group of such investors and give them what they want that is the problem why we at our best our no more than a 5-7% in the MSCI Asia index.

Indra Nooyi
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We need to cultivate mroe than the process and more than our seldom far out daspora like Sameer Arora and indra Nooyi / Vikram Pandit but more so, we need to sit with just one group of a dozen FDI and FII investor advisors ( just the latter is required with a commitment to bat for both FDI and FII) and not just feed them the public press but go all out to make them commit at least one fifth if not one third of their global investments to this new #2 in 2050 as reports mark our future growth. It is what the ASEAN and more importantly the Chinese have done right.

English: Vikram Pandit, Chief Executive Office...
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The mandates, and they are not banana republics or banana billtons any of them, just the mandates hwne given have been complete and thus the investors were able to roll bigger cash into the Taiwans, the Turkeys and even China, poor at $10 blna month in FDi and considerably much more in Portfolio investments at the low end of the cycle with local governments, fund management companies and despite pecuniary duties on imported auto which does not stop th others from brining int he big investment to China

FDI momentum for India’s growth

India remains the #4 destination for FDI worldwide way behind China as less than one third the rate of FDI

Armani Exchange
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hitting China. China’s FDI changed characteristic at the start of the crisis to a Services led growth in the Central and Western regions , moving away form the Eastern seaboard and even as wages increased at the rate of 12% per year it stayed in new Services areas and current enterprises in McDonalds,, Starbucks and GM continue to either grow or as in GM’s case battle new 11-22% duties but remian the dominant player in China.

On the other hand, India has turned away many in retail from Ikea to Walmart, keeping those planning JVs in the play for more thna one reason. Yet, Till November the eight months of FY2012 managed a $22 bln inflow

Deutsch: Moët Hennessy Louis Vuitton Logo Engl...
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of FDI, $15 bln having come till July 2011 and data for December and January incl LVMH and Starbucks but excluding Carrefour and Ikea still expected from official sources.

FDI in aviation allowed to Foreign carriers is yet to bvecome a happy event without a ready pipeline of bidders and local sourcing restrictions helped a couple of 100% entry decisions get shelved

English: Simone Singh at Jimmy Choo Bash. Phot...
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FDI averaged $2.8 bln, $1.7 bln, $1.1 bln and $2.5 bln from August onwards and likely stayed below $30 bln for Calendar 2011. China in the meantime crossed $110 bln for 2011 as FDI alone even as new exchanges in Schenzen paralleled Hangseng in size and grew business on the last remianing Indian bastion, the Equities Capital Markets, India’s natural advantage in a well understood global ecosystem lost in China’s sheer opportunity and advanatges of quick execution and operationalisation we somehow never wanted, putting the blame on the democratic process.

English: Logo of Ikea.
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Fortunately, India’s infra sector does not suffer from those bottlemnecks that much, except that the Land acquisition itself has been an issue for many projects and the Power projects in play already beat by non availability of coal and sector specific finance deals

India FDI: India superpower in application development (E&Y)

China

Even as FDI growth in China continued to grow Services at 15% and manufacturing at less than 5% , its inland provinces will soon get to be the majority FDI destination with the Eastern seaboard share falling below 50% this year.

This year despite teh statistics from the E&Y report the erstwhile no. 4 sector with 33 infra FDI projects is likely to become a major recipient of FDI in value terms thru dedicated Infra Funds incl the ADB-HSBC – IIFCL one

India no. 4 FDI Destination : E&Y

In India however, 146 Tech projects outbid the no. 2 industry in Retail and consumer as the single biggest contributor to FDI. For some strange reason India’s middle class/ consumer for the E&Y team stays stuck at the 2001 figure of 250 million even as it discuesses the Top 5 FDI destinations as those favored by Indian IT

The top five FDI destinations in India are Bangalore, Mumbai, Chennai, New Delhi and Pune. They attract 43 per cent of the investment projects, 34 per cent of the jobs created and 26 per cent of the value of FDI in India.(BS report)

Auto and Healthcare were also pointed out as key destinations in the E&Y survey released by india head Rajeev Memani


The survey also points that private equity (PE) in India has significantly evolved over the last decade. It mentions that 2,000 Indian companies were funded by PE in the last five years and $50 billion was invested from 2007 to 2011. “Despite the ups and downs over the past decade, PE has emerged as a very important investor in India Inc and with the long term India growth story still intact, PE funds continue to look eagerly at investing in India, ” says the report.

FDI hungers for India’s growing consumer markets – What are the challenges?

Baytree’s investment into Godrej consumer underlines the long pending second line of investments to be made by the Asian SWF in India and other growing economies of the region.

While Malaysian Khazanah has just changed its charter from a Energy rich SWF to a diversified fund and may be more interested in smaller/monopoly plays in smaller Indo China economies, Temasek continues to farm the big money in China, Singapore and India.

Korea will probably make its own surplus SWF investments but still needs some inward interest from other SWF funds while india’s Top 20 in the Private Sector have been a matter of considerable Interest for Temasek since 1999.

Temasek Holdings
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The use of so many subsidiary vehicles for Temasek however incl Cedar , Baytree and directly as well as the bigger sibling in GIC is likely to make governance complex however for the coming generations of investment from Temasek as well.

As more non staple entertainment products like Hollywood blockbusters have noted india’s liberalised market offers extreme challenges for inflation sensitive products and upsizing/super sizing of SKUs and price realisations there on. In such conditions, Godrej’s new structures are a tentative experiment and an early vote of confidence from Temasek must have been a long standing argument for the country managers and the Godrej management per se.

Neither Dabur nor Godrej are guaranteed any success, Airtel branded soaps and agarbattis may have a better chance even in africa ina few years as Proctor & Gamble with global brand recognition stays in consumer discretionary spends in its predominantly staples portfolio and remaining counted in super premium brands in their value Tide portfolios

English: Logo of Godrej.
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L’Oreal’s Body Shop chains and super premium men’s range have a better chance from the sheer profitability of their ‘slower’ product lines in the luxury market as India’ s penchant for super brands and luxury hotels translates into a supersized lifestyle premium “for those who can afford it” and thus its $1.4 bln JV with Lotus is a much more sizeable investment as Jawad Habib’s and Bounce like salons grow into the mindset of the new salaried executive hungering for a sumptuous weekend fare outside just dining experiences and mall entertainment.

Can’t read these men, Can’t read what us indians want women will probably welcome Oprah’s OWN on indian territory as these second line of FDI investors from global organised consumer industries from retail and media to consumer aviation and luxury automobiles are much better positioned to make real efforts to break into the India n market, their first line having blamed everything fromt he unhygenic Mumbai to government babus yet not really having the policies to blame and having turned around villages with a few dollars of investment .

100% FDI in Single Brand Retail, Aviation and Multi Brand FDI also on the anvil

As the drop in investment rate of more than 47% in both investment proposals (CMIe data in ET lead – ) and

English: Logo of Ikea.
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government infra project approvals shows up in negative cap goods and low GDP growth, the FDI saga is likely to be brought back to finish off positively for this government to keep the India growth agenda with itself.

An invitation to Louis Vitton, Cartier, Armani, Rolex and Ikea

The 100% single brand FSDI approval came through in the morning headlines, adding the usual 30% local sourcing rider allowing that sourcing to be from”Indian” providers” and necessitating the allowed limit of $1 mln( It could be $5 mln so easily if enough lobby pressure is applied) to be invested by the brands in developing such SME (Village industry/SMEs) supply chain themselves and there is hardly anyother option available for Ikea and others with the rider in place to develop such supply chain locally and/or limit participation to 51% and come in with a partner whence they can sell 100% imported units/itsems/SKUs for clothes/shoes accessories or furniture as the case may be.

Ikea for example would think of suppliers for joints, nuts and bolts where applicable/possible or some wood panels for specially introduced furniture lines ( highly unlikely!) or an apparel brand would set up finishing units as India is already a known exporter with a definite quality benchmark in fabrics/leathers/readymades or accessories

Multi brand FDI and Aviation FDI face state and coalition pressures from Mamta Banerjee and the

Election symbol of DMK
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designated DMK State Aviation minister, already facing tough corruption action in Telecom.

Overseas FDI by India reaches $45 bln

Indian outbound FDI reached a $43.9 bln mark in 2011 till March 2011. This includes the Q2 purchase of

English: This photo was taken by Nikhil Kulkarni
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Airtel Africa (Zain ) in 2010 in 15 African countries. It also includes the $3 bln and more purchases of Shale by Reliance  across Pioneer, Atlas and other shale owners in the Marcelus and other shale areas in the USA.

FT reports the Sahara acquisition of Grosvenor House as the landmark UK investment while M&M snapped up the SSangyong SUV business in Korea for pennies in 2010-11 less than half a bln, rumored to be headed for Saab from Spykar this year M&M scraped its ventures with Ford (earliest) and Nissan – Renault ( 2008) as it still produces the M&M Verito on production lines set up to produce Logan and Nissan’s India car to be designed by them.

Liquor baron, MP and Force India owner meanwhile is embattled in a fight for the survival of Kingfisher Airlines and Tata consolidating its JLR and Corus steel purchases from more than 3 years ago. Indian Financial services business never reached the required scale overseas either but carries a book of more than INR 8 Tln or  $ 160  bln in SBI and $3 Tln or $60 bln in ICICI Bank following on the heels of Chinese and US Top 4 with over $225 bln in assets each

India Fund Impact: Balanced Funds an ideal choice

While some public data has definitely gone out of circulation after the brakes on fund growth, availability of direct investment in mutual funds without mandatory commissions, such game changing regulation also coincided with the brave AMFI India’s monthly data not being available ( maybe my browser don’t work)

A year since we printed the monthly fund report, the new QFI regulation is also miles away from making a discrening impact on fund flows even as Cash market volumes pick up after a lean 18 months with current disparaging index valuations calling out value equations for many. ( that has an interesting take too, in last week’s post marathon)

Fixed Income offers a great ramp in returns too for those not on board yet, as markets correct yield in anticipation and RBI holds out, taking the rate cut cycle to all FY13 and then some as it is unlikely to be in a hurry to cut rate this time.

Gilts and Corp bonds up front offer good returns, then the unsuccessful floats asds duration management was never put on charter by our Fixed income managers and India’s unique opportunities from the inverted curve lost to many.

Yet the most opportune because of the inattention from investors is the Balanced Fund family. While Fixed income returns will likely be pruned in adjustments to the small amount of investors, some balanced fund regimes have the experience and the intelligence to deliver According to an ET report today, the amount of funds in this family with 40-60% equity allocation is a minor 4.5% of the overall india fund management industry. You could see a couple of fund launches in this sector but I suspect the first rush there is in general equity regimes. You could ccjust choose the Prudence Fund franchise for your cuppa choice in breakfast mornings~!

Food and Fertiliser Subsidies, No FDI, Oil bill and state elections

Indian Rupee Symbol

Banking and Infra dominated Nifty and Sensex was shocked into its monthly / quarterly ‘uprising’ from food and fertiliser stocks as fertiliser subsidies are intact in run up to the late yet dull and desperate Budget Report for March 15, 2012

RBI is under pressure again as MOFCOM forces all loss of FDI on PE rules regarding options to selll back to promoters. Such rin built options are attributed to 9 out of 10 FDI deals and are strongly objected to by the regulator and banned since September 2011. RBI insists such exposure with sell back options be treated as loans

Meanwhile the Aviation auditor’s report singled out the cash strapped airlibnes for “glaring deficiencies” in the safety standards was not a CSI style water borne success in destroying the sector. Thence the watchdog has changed chameleonic colors to put profitable indigo in the dock for “dancing around” with the rules

The UIDAI meanwhile has no hope for resurgence being out of funding and at danger of being chopped off in the middle of implementation again as budget parleys bring back other ministry’s demands for a parallel similar scheme out of various single data registers like the central pension organisations and the tax men The Oil bill has become hard to pay even otherwise with reserves accounted by Corp India’s money markets splurge abroad.

Kissan cards could get alignment as financial inclusion vehicles also counted as debit cards represeing a deposit account giving banking access to the 100 mln card holders. SUUTI will continue to leverage its assets “to keep liquidity for redemptions” and no other leveraging is planned says Finance Secy ont he tube ahead of budget. Also though unrelated to the budget only 7 out of 10 billionaires survived 2011 according to market cap recomputations by the “ETIG”

While the Rs 1 Tln extra borrowing ( announced 992 bln ) may not fill more than ordinary expenses,

200 px
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without buy backs swallowed by State PSUs, the spending of Rs 1.5 Tln on food subsidies already made this year and the new 1.6 Tln on energy with INR 475 bln planned for ONGC and a INR 100 bln for the rest of the producers  leaves another 1 Tln hole in governance even as Mamta stays centerstage ahead of elections in NaMo and BSP ridden UK/UP twith Punjab Manipur and Goa. UP elections will go on thru February.

India IPO: No retail, no gains

Even as QFIs allocation and direct investment by foreigners become India’s crowning glory, its IPO markets seem to have rutted into a big logjam ahead of action by SEBI to revise regulations for verificaation of IPO mechanics and catching 5 promoters and investment bankers for manipulation.

According to Assocham, separately the 26% FDI in Pension funds could add $166 bln in investments and management participation by established funds could also increase the local funds for Pension schemes by

Mutual funds in India
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an equal amount. The $320 bln odd would be 30% of India’s GDP and would greatly add to the 14% of GDP coming to mutual funds currently, another market which has plateaued early

The IPO markets could thus remain liquid but with a record of 2 out of 3 IPOs losing 50% of the investment, it is unlikely that retail will wean away from bank deposits and the great capital appreciation in Fixed Income as and when yields fall off the cliff and bank conditions are eased in a couple of months. Already yields are down 50 bp since November.

IPOs helped mobilise $16 bln in 2010 and only $3 bln in 2011 ( based on ET data, pg 9)

This year will again be a much higher amount albeit due to PSE divestment  even as buy back guidelines get finalised for this month

Securities and Exchange Board of India
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India Infrastructure: Changi gets in

Changi is also a Temasek/GIC investment of the Singapore government that wanted to prioritise its entry into

English: An aerial view of Parliament House in...
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india’s aviation infrastructure projects. Having lost 2 bids ( at least) with tatas in a JV it has finally agreed to buy 26% of GVK’s aviation business. given that GVKPIL itself is only worth $320 mln odd on the exchanges, the stake’s valuation of $800 mln for the aviation business should lead GVK out of a potential debt trap even if condition on syndication of infra debt is not corrected esp with respect to NPA considerations for debt to the sector.

NPA marking after 6 months, apart from its long tenure and thus unsuitability for bank books, none of which have stopped banks and infra projects from announcing financial completion and consequent delays in land acquisition, escalation of project costs and delays in project execution, even after operationalisation, ground results and financial projections are yet divergent as adoption of pay as you go by retail consumers is slow at best.

India’s economic contradictions show up, infra investment remains slow

Equities trading near lows, derivatives including the PCR has moved on to a low 1.05 showing that the down move in equities will be limited. However after Friday’s trading at 8.55% yields are already further down to 8.47% very encouraging to the RBI Governor to begin rate cuts in earnest  and there in lies another potential breakpoint for the market after policy announcement on Friday as rate cuts are unlikely to play into the Indian story for another 4-5 months., inflation drops well in progress otherwise.

Moodys’ and goldman Sachs ( Jim O Neill) have already sounded dire Forex payments warnings  with retail FDI having counted as negative. India’s fixed income exposure outside continues to look healthy with recent outward and inward transactions of sizable value completed per expectations so we stil have time to repair our outlook.

Apart from revisiting retail FDI , whence the six months figure of $20 bln in FDI could move faster in the

English: Logo of The Goldman Sachs Group, Inc....
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remaining fiscal, we also need to get our power sector investments going again. 2012 will be better for Fixed Capital formation as the new 5 year plan makes fresh proposed investments in its first year and briniging the growth imperative back could bring back the same additionally.

Fortunately, India’s banks are sitting on good capital reserves to accelerate credit where it is in the right stage whether for outward FDI or domestic projects thru domestic and International/PE equity. Infra structure projects’ longer gestation from the various Bombay Metro projects to the Harbor Sea link (Sewri) to be bid by Mukesh ambani and investors’ rejection of the same show the challenge ahead of us in investments in infrastructure as both fixed income markets and equities need to vcover short term returns to recover their higher costs for the scarce capital. 30 year capital can come to projects from private players only if longer debt is assured of better financial infrastructure apparently,else funding India’s $2.5 tln infrastructure gap and thus maintaining the growth imperative was well within our reach in 2011

Negative Gross Fixed capital formation after a dull 8% growth in the June quarter has skewed India’s relationship witht he credit agencies. It’s uneven relationship and the last minute slowdown when China is steadying ships is a confusing signal for the market watchers.

Unfortunately RBI cannot do much more right now except sing paeans to the success of inflation being in control

We are not alone in the slowdown nor we ever had any reason for our equity markets to be so optimistic in the last six months, but somehow we missed our growth imperative in 2010 and 2011 before being caught inthe slowdown, looking at the fall now negating our previous accomplishments rather than allowing us a wait and watch period.

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