India Morning Report: Bad Boy shorts in more trouble, Rupee at 62.50 ‘lows’

Green Energy (narrow)
Green Energy (narrow) (Photo credit: Truthout.org)

Dow corrected its Wednesday closing reaction welcoming the taper and Indian markets will likely realise they had shorted the markets unnecessarily and move up with IT stocks back to 6180 levels on the last trading sessions of the week. That means bad news for Angel Broking as Ashwini with them, keep digging for lower levels and markets hold above that 6150 support and move back to 6200 levels.

IDFC and Reliance are special mentions in the Morning Report today. IDFC as ET and CNBC18 report struck the alarm bells when hitting 50% in Foreign holding took it out of the bank license race. It would be applying for bringing down the foreign holding limit to 49% from 54% now. The overall foreign holding limit will be bumped back if the Central Bank refuses them a bank licence

Reliance GAS price hike of $3-4 per MMBTU seemingly translates into a sub Re 1 increase in Power Tariffs(Tulsiyan, CNBC) while Reliance increases profits on its current 20 MMBTU production (CNBC) by INR 25 Bln but its production does not increase till FY20 materially and it will thus shuck out of the Winning XI again by next week. The Gas Price Hike was approved today allowing gas availability issues to recede from April 01, 2014

On the diplomatic front, I think serious gaps between diplomats have surfaced that take the India US relations South as the focus has shifted to getting the charges dropped. The US side will thus focus on legal issues as well, where probably the real issues of employing domestic help in the US within the Embassies should probably be addressed more in the ‘face saver’ agreement, wilfully skipped by both parties showing up both sides in the Foreign Services not being live to real issues in the quick and quiet undercurrents that matter so much

Powergrid says it will be worse off by just INR 1.6 Bln on new CERC availability regulations a very small road bloack and that gives us at least 3 sectors going strong apart from the ephemeral IT and the longer term moves into Energy and metals which should completely rule out any shorts on the Nifty which continue to ride December series. Pharma is good for immediate trades, as is FMCG including ITC available at trend lows at 310-12 and Bharti at 320 levels as well as Power which almost welcomes the hike in its Gas prices as that is definitely more realistic than the $4.20($7 incl taxes) rate expected per MMBTU in the MSAs esp at the GVK Hyderabad plant example which would also benefit from the Powergrid reconnection in the South.

The India Rupee has likely bottomed out again at INR 62.5 levels

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

 

Rupee impact: The Free fall continues, small snag on equities

A world map of countries by gross domestic pro...
A world map of countries by gross domestic product at purchasing power parity per capita in 2007 from the International Monetary Fund. (Photo credit: Wikipedia)

Unfortunately, with India inc again adding only probably less than 10% of its External Borrowing Capacity in debt, the Rupee and the equity markets have consequently snagged on the  Asian free fall, and now pro bably rupee has a trading target of 4-5% in this move to achieve the new 2014 equilibrium. While the stabiity is currently lacking it is primarily because for the Rupee it is not a daily volatility that is germaine to the currency markets and the trading range is much smaller than the other asian markets while it is still not picked upa s foil to the ultimate managed currency the Yuan which is a precipitating event of greed in the “Currency Wars” mechanism

Having said that, if one were to herewith propose a new rupee exchange with its limited degrees of freedom, the government cannot and should not bother about stepping in till even 65 levels and find meanwhile a longer run solution to the CAD, while the markets will take the Rupee down to 65 and fundamentally destroy the entropy required for recovery to resume in the aftermath and while it may be a jurassic/triassic notion of yore , destory the eigenvalues of Purchasing power parity much before the global market engagement is  increased   to a true equilibrium.

Mumbo jumbo apart 58.50 should hold because of the stability of governance and the defeat of inflation but if it is whirled through the week, it will tip to 60-61 levels and thence may not ever return to anywhere near Friday exchange levels because the fifth of GDP that is exports will straddle the rupee for the remaining term of FY14 for Global trade agreements for the year

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)

On the equities front, today’s event of correlation in moves actually mirrors the hidden correlation in capital moving out primarily from debt and in probably a stabilised form of market prediction from JP Morgan asking that the recovery bottom has not happened and will happen till now. While the RBi therefore is discouraged from rate action next Monday, it has put in motion a cascade of rate cuts which it must follow through and avoid running into damage control esp as Fixed income Markets will continue yielding lower on higher demand despite FIIs leaving Indian debt in the first pike exit of QE linked withdrawal from Asia as the lowest volatile investment and thus unlikely to produce ‘abnormal profits equated with Asia’. The PPP map of the world in the meantime as reproduced here from a long left to be updated web provider of images shows the fast losing relevance of this indicator and probaby needs a trading measure to it to harness its gains.

 

India Morning Report: Just Dial IPO great hai ji, Rupee feeling quiggly

Image used to convey the idea of currency conv...
Image used to convey the idea of currency conversion (originally from en.wikipedia). The signs are (clockwise from top-left): dollar, euro, pound, shekel, đồng, yen. (Photo credit: Wikipedia)

Markets opened to the new week’s excited chatter for a change this morning after a few weeks but the better IPO prospects and improved FII flows already more than $2. B this week could not excite the Rupee and it again opened at its lowest for the week above 55 as Forex broke on last months Gold data and apparently has become the exit for bears that know they are unwanted, trying to break the cosy relationship between currency and equities in Asia and dragging down equities towards the afternoon. Rupee, with my apologies to the surfeit of economists at the top Mr Prime Minister, is just reacting to India’s weak international diplomacy.

We should have probably given you a heads up in the morning, but revenue and subscriber prospects fail to excite indian angels into backing such ventures as ours, bent on writing and interest in firings at ecommerce carts or exits from PE investments of the last cycle not enouraging towards commercially viable prospects for analysts, writers and discretionary advisers. IPO sizes are getting comfortable around the INR 1000 crore and above mark and went thru with out a hitch despite a surfeit of promoter buy backs and appetite for indian debt has also increased manifold in the last two years

Bullish straddles/strangles are cheaper and you should not fund with calls unless beyond the 6400 mark. China premier Le Keqiang’s visit to the Capital could have been much more fruitful if the premier had tried to get more pulic awareness around it, India of course happy to have exited US defence exercises to get status quo in play at Ladakh ahead of the visit. No that China is looking to allow India banks or exporters further as it continues to keep a chinese only list for government tenders and machinery ( esp green power) bids

Those who thought Indus ind would catch again would have retreated after these two weeks and especially because apart from the positive wall offered by YES, it is also a better choice portfolio for pickers across infracos esp those looking at idfc, itc, jpassoc and gmr where buying would be perfect value plays esp if any DIIs had been carry cash for the redemptions and the volatiity turn awaiting

No, the Rupee is not going back to 52-53 levels immediately though S&P’s reservations have not been of interest to any FIIs and we would like to err on the side of caution ourselves with the CAD at ever higher levels though as the CEA mentioned the reduction in CAD faster than the reduction in Fiscal should help drive growth come 2014 And yes, Lets not forget our natural advantages as a consumption and trading economy at the bottom of the commodities cycle unlike the competition

No not yet Trading Strategies – India July 05, 2012

MK_GMR4827
MK_GMR4827 (Photo credit: Presidency Maldives)

Late Morning Trading strategies (DID you buy your ITC yet?)

As the title suggests most of the activity is in the silent bond and currency markets with Indian bond rebound and unrelated yet unlikely dollar rebound sees hectic activity as accumulation continues n the suggested consolidation, the market having not seen any exits and the rally probably been too quick for the bus to fill up before it moved.

The marktes are healthy not waiting for a fall though a dollar rally cutting off air supply cannot be ruled out and hence the unwillingness to move from the enw normal – right priced in ne light after  a 5600 year to years back left investors bothered seemingly

Buyers have to stick around and probably get in today or tomorrow. A dip does not relally add more interested investors and thus is unlikely.

Buy Infra stocks, GMR, RelInfra and RPOWER and even RelCapital and of course IDFC

English: Diagram of covered interest rate pari...
English: Diagram of covered interest rate parity in the foreign exchange market. (Photo credit: Wikipedia)

Playing on India’s FX rate? RBI is monitoring your treasury again!

English: Diagram of triangular arbitrage in th...
Image via Wikipedia

In a ‘blow’ to liberalisation as old as old wives tales from Delhi ki bhatti, RBI let out a warning from its bag as old hands from Foreign bank desks set out to build treasury positions in Rupee with out Import / Export obligations on behalf of compoany treasuries throughout the country. Right now it may be simpler derivatives, even forwards and cash to play on the weakness in the rupee as the finite returns have quite an attraction for corporate treasuries wilfully blocked from Money maret lending to banks or excessive ticketing in money market mutual funds.

the citi scam of 2010 used such monies thru personal accounts of the bankers concerned in the Equity Capital Markets segment


Business Standard
 via moneycontrol.com

The rupee has depreciated nearly 16 percent in 2011 against the U.S. dollar.

“RBI was aware that many foreign banks were encouraging speculation in the market. But it could not take any action as most of these trades were done offshore outside its regulatory purview. There was a meeting last month where RBI issued oral warning to some of these banks,” a source privy to the discussions with the regulator, told the paper.

Most of these trades were done taking advantage of the difference between the forward premium rate in India and the offshore non-deliverable forward market rates, the report said.

The RBI, on December 15, reduced the net overnight open position limit (NOOPL) of authorised dealers in the foreign exchange market with immediate effect, potentially reducing capacity of market participants for taking trading positions.

Rupee Impact: Rupee Turnaround

While we have already discussed and the story of Forex losses for Indian corporates is ongoing given the 15% correction in Rupee to its lowest levels in November alone, the rupee has already started its climb back, not as a intra day reaction but as a secular move as governments realise the fragility of the Euro albeitly slowly, and the Europeans battle with an extended low period for manufacturing

The resulting Euro weakness eases the pressure on

One rupee — Obverse
Image via Wikipedia

the rupee which should anyway never have been an issue to dollar’s supremacy in the last 3 months whence despite low trade flows it corrected under sharp shorting by traders as the unlikeliness of fiscal deficit coming near targets or trade and revenue deficits being under control was made clear here.

The Dollar may continue strongly however but election years may limit the trend for America as well despite the easing of US oil supply as WTI instead of slimming prices is on a b inge to catch up with Brent more than halfway as prices converge

Indian IT is an immediate loser in the resulting investment interests in India as gfrowth in retail and infrastructure takes center stage Consumer Discretionary businesses may be excluded bu tthe Indian consumption story is doing great esp as more urban influencers dedicate a higher 20%-50% of their disposable spend to entertainment and “going out”, eating out at an all time high despite the high food inflation figures Of course supermarket outings continue to masquerade as non TV entertainment for most couples

IMG_0979 - 2011-06-27 at 20-24-06
Image by KiltBear via Flickr

Predilections: The exploding turkey

one rupee
Image by balusss via Flickr

The market sentiment today after the Euro’s integration was exposed to the public as nothing but  a rear guard defense throughout the coming decade, was a perilous wait and watch for any buyers with the indices giving in to another one-sided move after 8 days of unguarded hostility, broken for a brief lull yesterday.  The market also sees everyone else as unwelcome intrusion, just that there are sellers in both equities and currency markets , not to forget bond markets who still like to see the government’s face on the other side before stopping the spree.

Whether in currency markets stemming the Yuan rise or the Rupee breakdown, most would look at the woeful example in Europe and stay away from intervention as nothing good comes out of it eventually. However, the sellers are very clear in their actions and verbal speak that their selling is not based on fundamentals and they do not think that matters. Hence, given our unlimited patience and the propensity of going bankrupt by going shopping for Rupee or Dollar at the wrong time, we would stay away till things settle down. and now, the nifty after breaking 4700 down, may just swing back tomorrow for 5 minutes before staying down till Europe realises how much it is left with after the margin calls and how much it has to print. Unless China gets a new breeds of FIIs. Though, none of the money that enters India typically leaves ( After profit booking, more is inside than it is outside in this entire 2011 spectacle)

Not to say that the markets can’t rise vertically after they do end the fall, but as the exploding turkey in the oven, it is hardly going to be championship fare when this selling gets over. The prognosis therefore is that the markets will stay dull enough and you can wait even more before you do start buying. And, right now shorting any of these would be committing hara-kiri, in equities or in currency As even newly converted India bull JP Morgan mentions, we are still overweight on cash.

Sector wise, no one who is overweight on Comms can be without skeletons to hide and I would not suggest going overweight on Comms or tech. Except that Airtel scrip, which has a lot more going for it too and a sthe only player with muscle,  in its main markets, it will turn out well. I hope my readers have been buying on fundamentals, as there are a few stars out there . Also, apart from the intermittent interest in consumer staples and healthcare, sectorally, the market does not get into a secular upswing till the best sector there is i.e. infrastructure and banking, get up and get going again

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