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: 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: Tata Motors rebound, Markets still headed for 6100

The rally  in Tata Motors has been on and yes we would still be advocating fresh shorts on the stock. A bonanza in Tata Motors on JLR gaining strength remains the story of the day, with no news on bank licenses. Anand Sinha apparently is staying on till April just to ensure things are not done in a tearing hurry and news from yesterday’s session is awaited.

JP Associates apparently been in a two stock portfolio with Tata Motors, dropping precipitously even as Bank Nifty starts the day at 10250. Results from Dhanlakshmi Bank were not good. ENIL(Radio Mirchi) encouraging and TV18/Raghav Bahl also encouraging

JP Associates apparently could not manage earnings expectations well, leaving doubts if there is more to come inn pressure on the bottomline

Bajaj Auto is up and PNB is holding 550. Crude prices seem to have been exceptionally buoyant on the sly and a good bit of short is coming in Oil futures. The markets are still headed north as broader Bear strategies continue to create space for buying in the selected folios. Sun Pharma seems to be good for being on the buy list even at 624 levels. MCX and CFTC in the meantime cannot do enough to bring confidence back in the largest asset trades

IDFC and YES are as  good as Cipla, Lupin with Glenmark and Cadila  making a complete portfolio. Longs in SBI need to continue to be careful. Shorts in Kotak remain exclusive in the banking sector holes. Jyothy’s EXO round seems to be on a dho daala spree.

NMDC raised sales (37%) and profits, 20% on iron ore comeback

Sells on Bharti Airtel are going to be sad fails at  303 levels with the stock likely making new support at the worst at 295-98 levels Buys on IGL are not exuberance based alone and shorts are ill advised

ET Now’s suspect list for the Daily show remains ‘Pakau’ and uninspiring relying on Mitesh and Ashwini ( Bear Mama?) . CNBC 18’s Top 10 feature at 8 am is a great show.

HDFC Bank is in the middle of its 600-680 range and ICICI Bank well priced around 970 levels before index action takes up one or both the stocks. Pfaff on the winner’s curse is not going to make the real price degradation in the retail Telecom market go away. Telecom and Aviation have historically proved unprofitable with volume players shutting out sustainable pricing windows and Reliance JIO is again going to score the walls with ugly graffiti for the search for BOP without profits

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: Markets listless orphaned by a Superbowl

Superbowl sold tickets for cheap in the snow

Asian Markets are closed today and lack of Foreign investor interest on Monday Morning leaves an India open totally listless at 6100 levels and falling again, struggling after a brief respite at 6050 last week. IDFC results were inconsequential along expected lines with no fresh disbursements in this financial year but the stock has only upside left at 93 levels where it closed last week post results as it remains the only empowered player not dependent on infra approvals and a fresh book of loans in the pipe likely. Loans continued to make a better ratio of all NII at the Bank as spreads showed up resilient despite a bad interest rate environment in the nine month period reported.  Retail interest aside, the stock will remain on Institutional buy lists for time to come. It’s large provisions also make it a great equity investment with the Provisions unlikely to be called and can always be reduced prudently. Non interest income remains slave to PE principal and proprietary trading business

The Rupee starts the weak on such rumors where the deciding NDF market actually feeding on the panic mindset in low trading volumes and the onshore markets trade down but only for the morning after as the Superbowl even that draws a 200 mln audience in the US and around the world has ended minutes ago and investors will be back to a market fairly under priced by the recent pitai (hustle-bustle/buffeting not to be confused with the sage of Omaha’s investing interest)  Bank Rate will remain higher for the majority of 2014 , the prospect of rate cuts being pushed back and there being no prospects of improved transmission of monetary policy with yields pushing for higher dollar depreciation despite the RBI efforts to clamp liquidity which has time and again proved more amenable to intuitive policy than a counter intuitive rate hike move to tackle measures outside Central Bank policy. However corporates borrowing in ECB might actually be able to break the ice in terms of getting older level low rates and break the impasse eventually with increased investments (starting to flow in consumption sectors) and RBI , maintaining a new inflation hawk stance would likely have to hike rats further after the 200 Marginal channel cation and announce a veritable change in stance on rates first.

REC had started up Friday and Powergrid should join in after mi d-day if the sentiment indeed looks up. The Equity rally in the Global Markets hit a big snag in January and that is holding markets back awaiting  a confirmation of investor interest with FDI having exited Emerging markets like Turkey, Mexico, Argentina and Indonesia in a hurry with Turkey coming in midweek last to raise rates by 4% to near 12%. Goldman Sachs is in trouble again having started their own EM investments in losses having chosen MINT’s obfuscated markets and a deep and dead in the water China over India’s liquidity given the cross winds. The Rand(South Africa)  also closed above 11 to the Dollar for the first time in January.

However Emerging markets sentiment is likely to get into it in a couple of quarters from here and India will remain one of the best performing destinations having been unaffected in the post taper trade in January if it maintains 6100 levels or at least stays above 6000 levels

PNB scored great results having come in counter cyclically on raising provisions in a known strategy and NPAs under control in a rapidly deteriorating market sentiment for Banks shoring up investors to its ferry/rafters and trades 10% higher at 550 levels still a strong buy. Banknifty starts the week near a low at 10150 and is good for the trade up but one should be watchful with ugly quotes (in both the 10000 and 10500 series) in the bid auction market still holding an initiating trader to ransom with option writers playing ultra safe.

IT stocks are still overbought and Infy should retrace 3600 levels and even TCS should come down to realistic levels (but already at 2200 levels) as the IT/Outsourcing axis is not coming out as the GDP’s saviour this time either. Volatility levels are hardly material at 16 in the current rally agains 14 in the previous segment in December ’13

Energy stocks should start the climb back as and when markets stabilise, GAIL having  started the year smartly. Glenmark and Cipla/Lupin lead the Pharma rally that continues despite an ugly breakdown in Ranbaxy and Sun Pharma. We still do not believe in a robust Arvind Ltd comeback on USPA and other new limited franchises inroduced by the team since 2011. Tata Global Beverages remains a hold but the magic is still in 100% go it alone investments in India ( which are still a far cry from the carte blanche leading to exchange rate breakdowns in LatAm and SE Asia in recent EM history) Aurobindo Pharma on results and Lupin on announcements today provide good portolio picks along with Glenmark which has only $500 mln in overseas debt and among companies tapping a continuing generic opportunity in 2014 with a new pipeline

Interest in the IPL in the meantime continues strong esp evincing interest from global players in the playing XI and a fresh re-auction for all the 8 franchises picking up steam soon after the spectrum auction closes. ING and OBC related good Q3 tales as were also employing covering strategies but have not started lending/stopped losing on NPAs. Yes Bank may not fall back to 280 levels and accumulation is advised at current 300 levels. The BOI /BOB story broke down in January itself as we foretold with both banks still addding NPAs in droves. ICICI Bank’s INR 45 Bln ( including INR 30 Bln pie in restructuring) included the bank can survive the pressures with relative ease having also been proactive on definitions than the PSU penchant for playing it by the ear and losing continuously losing investor confidence and investor money as far as its favorite proprietary traders are concerned who lose another constituency in an unplanned bull attack with construction stocks Dlf and unitech still in a free fall after the ill advised run

Energy Markets react positively Midday

Gas stocks reacted positively as Petronet LNG produce became free to sell to industrial users and IGL and other domestic distributors esp IGL getting commitments to cheaper Domestic LNG in the new pricing regime. This also means domestic CNG in all markets including Mumbai where already 100% domestic gas was supplied prices of CNG and PNG were reduced by 30% and 20% while increasing IGL margins. Petronet imports LNG and will no longer be getting custom from IGL which Delhi used upto 33% imported gas

The move was a n expected one with a new Minister coming back (Moily ) in a sensitive election year . Moily is also expected to facilitate large project clearances with changes at th e Ministry of Environment (EPA Act bottlenecks)

GAIL shares the good news as renewed pressures on its subsidy costs will likely subside as it supplies to city gas companies and others at new revised rates and the policy is deemed stable after LPG quotas to residences have increased to 12 cylinders per year and gas TX likely to increase volumes with good results reported Thursday

India Morning Report: It’s Conferencing time again, do India advisors need the Brain Buzz

View of Hilton Towers Mumbai
View of Hilton Towers Mumbai (Photo credit: Swami Stream)

The Kent RO India Economic Conclave(ET//ETNOW), probably reminds other Indiaphiles of the Autoclaves and Indian barbecues as the Delhi Winters approach. Indian (Mughlai) Barbies of course last all year and the take off on that name is rather steeply silly, but not as silly as those Modi’fying Indian polity or still relying on Bankrupt European franchises not just in India but even in US where European Banks try to claim the upcycle again just for having reached the bottom of the valuation pile in investor opinion.

It signals that people are listening to more than the seldom heard refrain earlier that US Bonds are headed for the 4% mark on the 10-year Treasuries, Goldman Sachs having updated their opinion and with US equities starting from record 16000 levels finally after 5 years other equity assets around the globe are also finding favour. India must be enthused because even without the Enclaves or any agro encomium (at the new WTO round in the ‘hood), India weights will remain ahead of European bank investments, HY Bonds in the US that continue to come back however will be something EMs and India cannot compete against.

I-Banks stocks are a good pick if your portfolio does not have overseas diversification yet, with Investing in fashion and rising by the EM watermark rate of 30% growth at least in the first 6 months. Again, these flows including US high yield and specific picks in Global equities do not compete with India flows, while Asia credit remains at its most constrained sufficiently tempting even without European QE to keep the arbitrage for Asian treasuries and an umbrella from Domestic Interest rates is always readily available, not threatening the CAD in any of these South Asian / ASEAN SE economies that seem to bring more relief to Chinese investors and pro reform governments. The winners however in the I Banks are HSBC and Goldman Sachs and other stronger names, and one should be careful to whom one listens and sets the morning alarm with.

FIPB approvals have come in for Singapore Airlines – Tata Air joint venture and Religare which will invest as holding company from the island state.

Another quick silly update: The linkages of urban and even rural India to radio as a media have again spiked into something tasty and a medicine to nail the hubris, without having to drink and drive, even as new year celebraions come around the bend in Lutyens’ Delhi and elsewhere. Home is where the heart is, they say, esp when the RJ is handing out your favorite Mall freebies and movie Tickets with Muscle and oomph.

A small slide in from Gold to near 31k marks just on the news of 40% investment demand of last year returning. Gold season is tough for Financial discipline. UCO Baank results? give them a pass and stay with BOI and PNB, and you must get short on SBI to save the India Fund you have been planning. Buy IDFC, trade YES Bank and ITC because you have already bought and no there are no retail investors to count in the Indian markets the residuall INR 50 Bln turnover of the class probably counting professionals in the trade, since the first 95 circulars from SEBI cut out sub brokers and MLM chains from Indian Financial Markets. QFIs have still not taken much to directly investing in India and apparently there is still something to be done about it..

Modi? Bad experiment!

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Hotel room, Hyatt Regency Delhi
Hotel room, Hyatt Regency Delhi (Photo credit: John The Geologist)

India Morning Report: Wish you a Happy Festive Season and a prosperous New Year

The diwali diyas at Diwali Celebrations at Ban...
The diwali diyas at Diwali Celebrations at Bangalore 2010 (Photo credit: Wikipedia)

That of course is Diwali day trading, a welcome to Hindu Calendar year 2070 ( there are many variations of this year 2070 too, and we follow the ‘Vikram’ calendar ‘officially’)

Goldman Sachs has upgraded the season’s new watermark to be 6900. Others have posited a 7500 mark to aim for till next October and the markets are a little broken, down 30 points at open in sync with the rest of Asia and most market operators simply look at the number and believe it is more about building that appetite for new levels and with buyers primed by the good analysis floating all around, and retail investors held away by “the urge to splurge” the trends are rock solid this instance. ITC is still funding the new entries and new shorts have been segmented in JP Associates, ITC and IT in the F&O market

After October’s record inflows, the November marks’ buoyancy is likely to create a currency ripple and strengthen the Rupee to 60 levels and probably bring Fixed Income yields down by 20-30 basis points through this month and by the time equity series expires on November 28. The day is off with short calls and if the trend is indeed sustained above 6200 levels, the first target will be the long-awaited 6350 rush. domestic institutions will be staying out in this rally and unless you have an appetite for longer term investing – YES, IDFC, ICICI (down 30 today), ITC, Bharti – you should also watch from the sidelines and trade in derivatives along strict lines for the big bang when you read the risk.

The institutional hedges ave to move from shorting the index this instance though some of the longer passive fund s would still short  at the OTM 6750 levels. A 78 Rs move in Reliance has made it the largest contributor on the Nifty and as was its wnt in the 90s, its stemming the correction singly. PSU bank trades were no trecommended here, esp in Union Bank of India and Indian Bank ( a very counter intuitive “bottom of the rung” move by bigger tier 2 operators /proprietary desks at indian brokerages)

The Sell on HCL Tech (Prakash Gaba) is an instant success recipe and remember to book your profits. The shorts in Powergrid and any dips in REC are good opportunities to buy . In fact REC is good at current levels even s press notes of further clearing of roadblocks in projects worth INR 4 Tln are not worth the sound bite, but the infracos have the rights to an ultra explosive take off, IDFC already up 12-15% in the crossover. Real estate will not be too hot despite the great results as the pressures remain, gold demand down 40% after a non-existent takeoff in coins and other investment bullion trades. Metals rally is on, though with the miners (related) NMDC and Coal starting back in favor. Gains in HUL will be along calculated returns for high yielding investment strategies. MidCaps are going to have to wait

 

India Morning Report: Markets wait for fuzzy logic to come back as banks get ticked off

The Rupee has continued its climb but equities have taken a break even as Rupee survives end of the month selling for import payment obligations in a benign environment Oil heading below $103 (US Crude)

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

FDI Dollars will likely boost debt markets soon, the positive sentiment from that and the promise of removing extraordinary liquidity measures letting the markets 5 basis points off the 10-year bond yield to 8.73% . BofA ML in the mean time agreed that there was no doing anything in India till 2014 came and went so the rally is at a loss still from  a disgruntled bull frustration at this rush for beyond 6000.

Goldman Sachs put India in the same basket as Turkey and Brazil, rather on the heels of the City beating Manchester United and showing Goldman Sachs burnt in putting too many eggs in this basket too. However, we go agree on the Fragile three from Goldman Sachs which will really get stricken not just because of dollar dependence but because of domestic alchemic leadership that continues to drive a fiscal big bang attempt in those two domains as well as someone like South Africa. The Fragile Five however esp India do not exist as those with deep domestic markets cannot be clubbed with Emerging Markets

India’s Dollar dependence is much a factor of the Oil price, so that can’t happen without Syria, Iran and israel. No, India cannot choose to come out of the growth plateau overnight by dissing inaction and is not  sign of weak politics, just more federal than the smaller EMs can afford. Our deep markets still offer much more than even China in most asset classes and Financial market reform is not a steeplechase to be run, or a small sprint but a consistent marathon. Neither is the consumer credit habit overdone in India or hitting the falling Domestic savings except that real income has ben stagnant even negative as non agri GDP data shows us in 2013 ( a 0ve 0.5% growh in since April this year, i.e. Q1)

Reforms did break India’s markets stride yesterday again, as the SEBI panel freeeing Govt Bond investments frm quantitative restrictions has to merely posit the same to RBI at this juncture. RBI in the meantime is busy bringing down growth era economics by C Rangarajan and others who took his place after he remitted office for higher advisory office. The edgy action on 0 percent loans and the continuing waterboarding by banks on using MSF and overnight liquidity instead of interbank markets have got RBI in a fi x of its own and that has definitely been scuttlebutt fodder for the equities.

Those following the soliloquy of Ashwini Gujral however may do well to note that I think neither Maruti is making it higher in this week nor traders or investors are going to wean off Bharti Airtel in this series. Volatility is on a thin leash as October still rushes to 50 point premiums over the current Nifty levels even as barely three days before expiry premium in the current series has been completely blunted off by the trading blades used to bigger prizes in an Indian rally constructed/deconsructed at will

Markets could well bottom out especially if action is indeed seen in the infra sector and more is not thrown banking’s way allowing the sector to recover last week’s trading levels. Inflows from the NRI binge for example have been waned to Deposits apart from the continuing rush on Dollar payments home to the tune of $1 Bln from just three publi banks. SBI in fact is looking at its first woman Chairman in a few months

ITC and YES Bank, along with AXIS on hedgie trader desks, remain in limelight with incoming investors and most wait for a resurgence in Financials to confirm India’s superiority as an Asian investment destination though China remains bigger an d better after another shocking half year of underperformance 5600 does look like a tradeabl market bottom for India, surviving these levels in such economic doldrums

 

India Morning Report: Markets staying the course as US responds to GDP

US Markets reaffirmed their commitment to stronger equity markets going north from here as the Fed noted inflation concerns on its latest FoMC release. Of course US is worried about falling for the stagflation/deflation trap before withdrawing excess liquidity, while Global markets having been awash in that liquidity without it reaching industry, reacted by exiting US Bond investments in a hurry.

The Indian impact due to Oil and FX is still unfolding and today the Rupee made further inroads from the 61 levels of yesterday while Oil might remain low priced for times to come because of the ‘disturbing’ innovations entering higher shipments of the same into the high seas from the erstwhile importing only US oil industry.

The difference between Brent and WTi has vanished too and thus crude mechanics may not be able to force the desired course esp for the global economy if India can withstand the onslaught for a few more months and in fact strengthen from here.

July auto sales are down 21% for M&M including exports, as are two wheeler sales with the deep cuts across the industry but an improvement over June as Bajaj Auto remains above 300,000 motorcycles for the monthand honda would have gained the continuing depletions in Hero Moto that has moved down to 490,000

BOB NIMs have come at 2.4% and the ain is not going away for time to come.  The indices at 5750 have again exchanged productive businesses to the downside correction bringing back supernary outsourcing valuations with HCL counting its frst inr 250 Bln score in revenues across the full year.

Banks are a great trade and investment as 5750 holds and though traders that finally saw the rush from shorts in the green may not be able to start new shorts from the weekend trades Friday before great Volumes return in the next weeks. As mentioned yesterday FIIs are already covering index shorts on the hedges.

The Goldman Sachs downgrade does not match its own long term review of the currency pinnin g65 to 2016, a fairly bullish evaluation and investors would continue to bit at these levels strengthening their exposure askets to india which have remained underweighted probably related to finer point correlations and larger unlisted opportunities available in east Asia and others including Mongolia and turkey that must return to normal eigen values after the beat down because of political rushes showing up governance in a bad light

 

India Morning Report: Private Banks paying for PSU heresy

feted by

Bank nifty private bank leaders were again targeted as investors refused to let the index give up its gains. Those locked into long PSU strategies remained headed for negative gains in the 2013 cycle and switching trades also not being available, as a measure of respite seemingly, unwitting profitable counterparts were targeted by those prefering the short side of the target at nifty near 6100 and banks are unable to resist these sharp cuts with most other new longs since April not including banks. To wit, Indian Bank is trading in positive territory being one of the few whose positive uptick in Q4 results fully recovered the profit habit in the eyes of investors. Canara ‘s NPAs for examply stayed above 2.6% headed for a 3% cut in assets and negating any other income of the bank.

New positive offshoots from Infra and results from Karnataka elections that firmed up chances of a stable regime the next five years till 2019 also indicate a firming up of price levels for a success to be feted by equities in Indian markets. All Capital markets look to move unidirectionally in the first few months of confirmation of recovery as fixed income markets celebrate a new 10 year bond and yields move closer to 7.25% levels Strange opinions from Goldman Sachs take over the small screen though as the broker’s opinion tries to spread /believe recovery has spread to stocks like L&T and Apollo Tyres, which both seem to look askance yet and well may lose steam to winners forom metals and minerals first as those look more positively geared up for a recvovery than these GS recommendations

Meanwhile IDFC has hit a late stride on the bull run and DIIs including bulk buyers like LIC look to be stuck with purchases at these or higher levels except for a later correction to 5900 and not more than that

Germany’s IIP data meanwhile only helps our belief that the Euro has taken the proverbial high road, any lack of recovery in the 17 Euro countries unlikely to disturb the currency’s upward trend beyond 1.36 ( hsbc target0 or other higher targets near 1.45 even as any meaningful recovery in the 17 country economic zone or progress on closer union may also well be ruled out after German elections till 2018.

Disinvestment mandates to achieve promoter compliance with sebi requirements (GSK Consumer, HUL) seems to have rung the cash registers at HSBC as the banks good results earlier this week, also showed its great pipeline in Asia, theonly one including both China and India.

 

India Morning Report: The meandering world’s progress condensed in a fete of ‘immediate payoffs’

The Seal of Salt Lake City depicts the building
The Seal of Salt Lake City depicts the building (Photo credit: Wikipedia)

With Goldman Sachs moving its next meeting of shareholders to its other back office in Salt Lake City, Utah, India’s sloth in an optimistic IIP growth of 2% and FY 14 downgrades to 6% by a couple of foreign brokerages it was all but sure that Monday’s bad openings would be followed by a tirade to the finish line with Network analysts from Ashwini to SS and Udayan Bose (TV18)  pining for the 5500 mark to make the uncertainty go away. Of course that also unleashed the India outsourcing Bull with IT companies a safe bet and TCS the largest Market Cap company ahead of Reliance Industries.

However, sanity has returned to the market since with interest and eyes returning to Indian equities and the Dollar index having recovered its paces since the Yen correction at the start of the series without the Yen losing any of its pressure to cross parity to the Dollar and the Euro denizen of Germany proving that it is unlikely to feed its south neighbours including France (conceptually) anything other than Target liabilities for the growth spend everyone was sure Germany has keeled over for. Germany preponed its budget exercise to reaffirm its primacy of fiscal discipline as the Euro recovered last week’s blues since and the EU summit failed to move on any of the agenda items. The European economy still needs to work out a longer timeline for its recovery.

Trade deficit data however points to a tight cap on US GDP growth for 2013 and similar warning bells toll for Exporting countries like India and China though EU and Japan look at the small recovery in both Capital Goods exports and imports numbers for US in February Capital Goods trade up by a net $1.1 Bln in the ever increasing Trade deficit and a bleak month for the US in terms of the shored up Fiscal surplus breaking down along expected lines in February’s big Fiscal deficit.

India too therefore looks at a larger trade deficit even as Oil prices come down by over $10 in the last 30 days with Exports barely maintaining the newer levels it managed in the last throes of 2008-2010 and February’s deficit of $14 B is likely just an aberration after January’s $20 B hit.

Markets look better in equities from banks climbing despite the fourth estate coup against the top 3 private banks looking to make a mark in wealth as brokerages rang the bell for State Bank and the stock climbed up 3% in Banknifty’s climb back above 12000. The attention on ITC which was almost a giveaway for the lack of short interest in the broader market also encouragingly continues and the picks on Bajaj Auto should also bear long again than continuing south or short as last week. NALCO and RCF Offers for Sale also look lined up to complete successfully with LIC’s participation in the OFS taking its stake to 6% in RCF. The residual stake sale in Vedanta’s BALCO and HZL investments could really brighten up India Inc’s balance sheet in the current fiscal itself but one cannot gauge the impact of continued market confidence to the T given the fourth estate’s penchant for equating accountability for the government with all lack of information and analysis on any story /subject

India Morning Report: How wealth now hates equities for keeps..

stock market
stock market (Photo credit: 401(K) 2013)

 

Globally emerging Markets have become a unique asset class and the first month of 2013 was as sunny as the latter part of 2012 in terms of asset flows. US enters a period of so-so uncertainity in equities a stronger currency on the anvil to stew the growth equation for the largest democracy, and not mirrorred in the Yen’s ever increasing appetite hitting a weak 94 /95 against the Dollar last week enroute to par economics.

 

However predominantly from investor behaviour on MCX’ new segment highlighted in launch yesterday with volumes of just 1.1 bln it is obvious that wealth that favors Oil speculation, Fixed income, Currency and Commodities is wary of this simple growth paradigm advocated by equities and even when it invests in growth it by passes the “stock market” dream with much more muscle than any lip services its banks pay to the segment. Though at Goldman Sachs and European houses, equities trading for clients till forms a substantive segment of business, back int he country and in real markets Equities are failing to entice banks, institutions and retail wealth equally miserably.  (Nifty bottom is capped at 5800 at its worst intraday moment and can be bought)

 

It is possible that ironing out execution flaws and goading institutions to trade the segment in due course will bring volumes to India’s newest stock exchange, but it is unlikely that equities get any more weightage in this large wealth market already lening on just that precious drop of gold more than anything else and addedly missing its calling in the global markets with shallow and reefy fixed income, currency and even commodities markets though courtesy of MCS we have volume leadership in key contracts.

 

Structured Term investing probably brought the equity paradigm to oratory finery professed by the rich and the nouveau rich, giving them cleaner mirrors into what they wanted and perhaps their disregarding risk is what made them pliable which would be a pity as that market is unlikely to be permitted to grow that size again as Derivatives would go into regulatory scrutiny in more regime than those like Singapore and China willing to publish new regulatory regimes with large chinks int he armor, but that in turn just crimps the prospects of banks rOE and those seeking employment predominantly in Finance in Banks and other fund investors (

 

The original Private Equity Council logo in us...
The original Private Equity Council logo in use from the formation of the organization through September 2010 (Photo credit: Wikipedia)

 

shadow banking). All classes of non bank investors including Private Equity though Hedge funds still trade in equity at almost negative returns, have shunned Equity markets underlining the need to perhapds reinvent the paradigm, which iss till more understandable and germaine to capital flows than even the post Bretton woods world and its currency wars

 

The Stride Arcolabs deal with Pfizzer at 8X Sales at under $2 bln highlights the efficiency of Dealmaking and Secondary equities esegments are but a highlight of the equity charaacter that allows such Capital flows to underwrite the growth in both G10, G20 and the emerging economies

 

 

India Morning Report: Some New Shoots , Some Old Short Stuff..Nifty Rolls Right In 2013

English: Logo of The Goldman Sachs Group, Inc....
English: Logo of The Goldman Sachs Group, Inc. Category:Goldman Sachs (Photo credit: Wikipedia)

Some interesting first moves from Bankers seemed to be on in Pre Budget parleys on Monday with Bankers looking for tax wrteoffs on loan NPLs to encourage new fair practices and bankers emerging with a Commodity Transaction Tax to help the government tide over losses from the ensuing discontinuation of STT as Securities Turnover has stagnated since 2009 despite the market being in the bull orbit for over 6 months

Meanwhile the first novel biologic from Biocon has been approved for marketing in the US. Itolizumab’s successful clearing by the Indian DGCI after meeting the treatment score for primary and secondary endpoints in the treatment’s clinical trials. A read of the last investor presentation in April shows that the company will find best market openings in Mylan’s oncology drugs and this new psoriasis treatment in global and US markets while keeping pace with Global partnerships in Syngene with big pharma and obviously growing in the Diabetes treatment segment which has been growing equally well in 2012 even after a good 3-5 years globally.

One wonders though why coverage has been initiated seemingly in private banks with sell calls on HDFC Bank again probably just because of hopes of a rate cut receding before the release of comprehensive production data. Selling is however unabated in PSU banks and they  make big shorts with good targets while the Banknifty, Nifty and even the other bull/bear picks on networks today like Renuka Sugar seem like well left alone including any bump in Goldman Sachs and Credit Suisse /Morgan Stanley backed Bajaj Auto, Tata Steel or other stories. Nifty 7000 wis more exploratory than a serious accusation by the sell side team at GS and Banks Pharma and Retail consumer (discretionary incl ITC not HUL) remain firecatchers in the rally(ies) to come in 2013. We ourselves expect GS has underplayed China and even Indonesia in the Asia spreadsheet released yesterday (Check ET of date) Defensives from mining stocks are especially looking ripe for accumulation in portfolio giants allocated to this side of the Himalayas

Meanwhile Kaya (Marico’s hair and skin care saloon business) and Spencers ( RPG’s Food world led retail superstore business) ill be spun off into listed IPOs in 2013. kaya is a part of Marico’s core operations and Spencers is apparently ready to be spun off from the CESC utility balance sheet for the Goenka team

 

India Morning Report: And here we are 5850 and nary a huff puff break!

The early morning run for the Nifty has panned out really well, with the 5850 mark looking as enticing aas the hitherto 3800 mark(5600 from August) and no employment for traders yet again on the upswing or as now most would like to say in the week of consolidation after it ends the day after expiry without new brilliant moves of mathematical elasticity of direction brought about by Expected returns of each stock. algorithmic/Program trading however is different yet and with new regulation pon HFT preceding other countries’ attempt at controlling the HFT beast, Goldman Sachs trading rooms and that o f JP Morgan will continue to resemble SOHO offices trading the solitary Gilt in action.

The OMO scheduled as promised after a big break that definitely helps the cause at many ratings analysts’ desks is still required though for what would have been $3 B but is considerably depleted in Dollar terms . Similar problems with credit growth data also top up your and my morning cuppa as the absolute growth of INR 300-500 B every fortnight is now going to be a below par performance especially for one of Asia’s Top 5 equity markets of 2012 and probably the Top 3 in 2013 as Phils and Thailand are probably over the hill from all the buying un abated since china’;s slow poke began in an atmosphere of  European banks’ left with Asia as the only profitable franchise in 2010 and continuing through their liquidity squeeze on Asia and post the ne liquidity moves of 2012.

The Euro is king right now among currencies and that means the Gold and Silver tunder will be missing for some more time though buying has begun. China’s industrial demand for silver had thoughtfully started increasing this quarter but accordding to somenon conventional indicators china is still a long way away from a beneficial breeze starting to blowin new custom even as impports continue to rise optimistically keeping retail sales steady on month.

Back home in Mumbai, Bharti infratel IPO is finally up and running and seeming there is more clarity in the CDS market for insurance cmpanies as well which could be the leather for the leather hunt required in fixed /income markets to keep the comeback int he currency markets esp for those longer term rupee investors which have stuck around after banks withdrew fromtheir Bullish rupee positions just last quarter albeit a bit too soon. Despite market movers, I am not very fine with the move in Canara Bank or other PSU banks that are keeping the Banknifty abreast. Its pure sacrilege of the same variety that brought the house down last time. NMDC should be a good issue and good pricing will bring good treasury gains to banks supporting Divestment OFS issues like the one priced at 155 last fortnight

India Morning Report: Considering the velocity of the move, it is now improbable that the bull run is yet in progress?

Pivot table NSE Banknifty PSUBank index scrips...
Pivot table NSE Banknifty PSUBank index scrips from OJN for 20110609 (Photo credit: OJN2)

 

The 90 point move on the Nifty yesterday, trying to make spectators out of those opting for not such a roller coaster move means that the classic correction/ consolidation prospects have also improved apart from the secondary improbability of conditions improving as no policy execution is likely.

However markets would woot for Goldman Sachs’ revised targets and Moodys’ clean chit for the subcontinent’s Economic goliath “Mumbai dreams” upping growth forecasts to stratospheric ( and they were so “stratospheric” just 8 years ago) levels of above 6% by FY 2015

The Pre Open went along expected lines, traced the line in the sand for bear traps with fastest rising prices from Bharti and HDFC Bank to Axis Bank among others correcting to Monday levels before the Pre open ended with a sigh above 5730 , cutting out shorts from the lifelines to the next few millenia. Decks are cleared for all cash subsidies and other such tools that would ensure no Old India thus gets in the way of New India but I would think the more things change the more they remain the same as young India hardly owns any mints especially if high priced MBAs ( like us) are as few and young couples that are actually growing Bangalore’s per household income and disposable spend levels are actually as relatively poor as they are with MNCs leading local IT companies in correcting compensation to an affordable baseline suitable for fatter expansion of numbers on call from more working class ratios like teeth to tail ratio ( ratio of solders to commanders) and enabling keeping existing customers happy as possibly only viable strategy inputs including at banks and marketing consumer companies hitherto fueled by top management / boardroom expansions.

Of course for the markets that aside is as peripheral to the rally as the Moodys’ report they triggered to a big high yesterday and as peripheral as the bickering in Parliament led by that able woman on how to lose the no confidence vote to be tabled by the opposition in Parliament

Banks esp Axis Bank and HDFC Bank that led yesterday could exchange roles with ICICI Bank and because the fourth member of the trading independence consortium of the banks i..e. SBI or Banknifty (PSU – not a defined sub index) is incapable of leading from the front without crashing through it is unlikely that the Nifty will easily cross over the 6000 line yet again. I wonder what gives when the Nifty finally does it in a few weeks from now.

 

 

The Goldman Sachs Tower - Jersey city, NJ.
The Goldman Sachs Tower – Jersey city, NJ. (Photo credit: Wikipedia)

 

 

India Morning Report: Yes this is the bull run in progress :)

Though it would not seem like it to you and me and even those who were lucky to get into the hallowed portals of JP Morgan and Goldman Sachs before us, this is a continuing bull run ith just too many interruptions and cavilling to ignore. Witness how there are not more than one nay sayer in a crowd of 50 commentators. Witness also how market traders like Ashwini Gujral and SS keep trying to put out short picks every now and then but come back empty handed at 3:30 pm. Also witness how the ruepee’s weaknness making the IT sector attractive means suddenly all other fundamentals are “poof” vanished in the air. Importantly, as someone caught me on telly today, ( I opened the screen to TV18 as he wasz speaking the subject) , portfolio inflows are strengthened by Rupee’s unbroken move towards the lowest on record 56 levels and odollar sales are washed up by the high tide of month end Oil purchases and the burgeoning trade deficit as is usual for our second half of the fiscaal, and for the second year running, we follow up on daily tidbits of how India will no t be able to manage the fisc target but the bullishness remains on call.

Securities and Exchange Board of India
Securities and Exchange Board of India (Photo credit: Wikipedia)

Did i cost you a fortune? I may have because as a single hand I was unable to suitably direct you on big time nbullish calls like Stride Arcolabs which has always been an emergent blue chip on my card like much of the remaining sector including the crop of MNC pharma led by GSK which as known for ages is going in finally for a fresh buyback to bring its stake up to the now standard 75% for MNC players in line with SEBI requirements of a public company. But I do not regret sending more the way of IDFC who also has an active PE arm in non infraco projects apart from its starting blocks it purloined from StanChart’s Mutual Fund in India.

On global cues, both Europe’s new Greek agreement and China’s slowdown had nothing new to offer for global portfolio investors and hot money trade fronts while FDI related or otherwise Policy execution remains on hold in India that also been duly discounted by the market aand any pyrotecnhnics by flailing oppositions and Catalonian adventures are unlikely to firm up as a new trend into the mix, favoring the recovery of Europe into a mild recession and now despite growth in UK and Germany while the fiscal cliff seems to be ready to become a new non event yet someone should not get their hopes all up too soon.

Gold and Commodities look unwilling to make a move but the Dollar is not getting any stronger and the Rupee’s weakness is another capitulation to current deficit demands by our policy makers as our champions of growth budgeting find themselves unable to get to the next watermark or making a stand in execution or in substantial politics.

And Hindustan Copper is back to 155 as the price was marked in the Offer for Sale, letting investors keep hope in the IPO process ( with due discounts and ready profits without issues devolving on others – excepting LIC’s coffers that are now an unbridled part of India’s budget machine)

 

India Morning Report: Here comes the Winter session..NDA, No Confidence, no market action?

Markets for the proverbial retail trader are now right next to that other veritable institution in inaction and ‘eyes glued to electronic networks and news papers’. Yes, the market action , especially the lack of it, comes a close second to the inaction created by NDA in the upcoming Winter session with a few failed No Confidence motion attempts. One already wonders if the markets will expect further implementation at 5550 levels and react negatively  to such non action like the straitjacketed range of now, enticing increasing short positions strategies but one still considers that extremely unlikely.

Image representing Hewlett-Packard as depicted...
Image via CrunchBase

If you are exiting positions such as J&K Bank (cnbc commentary) or Jubilant ( despite the recent Goldman Sachs upgrade bump, which could just be a wall strategy from the brokerage) do not put all your eggs in an illiquid Karur Vysya or a tenacious VIP both of which are just likely to be jettisoned to their ever steady lows they flatline to. Silver would hit the high bars by 63000-64000 range if it crosses 63000 and Gold is just not going any higher from here till I would prefer some certainty in political climes for a chaneg as I would prefer gold investors take this time to reevaluate the soveriegn hedge of all depressions, recessions and even repressions on the back of a host of currency action in this second cycle to stake the global weakness in USD and the likely continuin gweakness in Oil. After all like its name Gaza is just a strip in the world of OIL incapable of escalating to a real resolution of Palestinian woe. I am still adding positions in ICICI Bank and IDFC.

The troubles of HP are likely going to be instructive for India too and the vaunted distributor tentacles could be wiped out for many MNC franchises in India to come, led by the large wins (finally) in retail space from Dominos and Jubilant, encouraging the JP Morgan and Goldman Sachs’ and the Apples and the Dells to consider an expansive lurch into this market like in China instead of the fool’s gold pricing strategy and a CIB franchise in rare climes.

 

India Morning Report: Yes, a resurgent festive season and the earnings were WOW!

October's Palette
October’s Palette (Photo credit: dibytes)

will it, won’t it. A flavour thats missing from most mature markets and though SEA markets might still like to flatter JP Morgan and Goldman Sachs for their unlisted and pre IPO equity investments in these frontier markets and the shallower yet tepidly multi bagging SEA markets, the big moolah is in India and thats where most Foreign investors are headed again with the trade winds during Winter.

The US holiday season may be a little marred by the disasters on East Coast with Hurricane Sandy causing $2 B illion a day New York City to buckle under with never ending losses ( of 20% of the daily GDP) we trundle forth after a big ‘flat off’ September and October as the Twowheeler sales data for October pours in. Bajaj Auto starts the day off with a 411,000 sales figure including a 50000 three whler sales across all markets topping its best performance in twao wheelers in October alone with 62,000 Boxers, 155,000 Discovers and 85,000 Pulsars electrifying the market and Hero ‘s resurgence may not stem its market share losses but definitely brings back volumes and margins to that business.

Across the shores, Coke is powered by the Indian Festive season too, though Intel suffers from emptying assembly lines in the December quarter as Atom cannot ramp up to the steep increase in mobile form factors and Sales . Intel alone has lost margins of close to 10-15% in the December quarter to a measly 55% as Apple also takes a rain check on global volumes.

India’s smaller stories on the other hand have the robustness to climb to bigger budgets in Advertising, marketing and promotions and bring the house down with digitization also , with a little official help hitting the required numbers in the metros and increaasing the known C&S market by almost 50% and accruing immediate subscription revenues of an additional 20% to the cable players and available new market share to Satellite players as well.

Retail and Aviation FDI maybe robust stories as well as they seem to have started off on a surer footing though at the infuriating pace India is well cordoned foff for in global investment books. Earnings reports continue to underwrite a consumer and healthcare stock boom in this rally as the banks continue on robust credt growth after the additional provisioning also destroyed the banknifty members except the private banks

Did you know that it would take $1.5 Tln from the Federal Government to take US Trsry interest rates back above 2%.The resulting weakness in the Dollar is also likely to continue thru 2013 and mean that the 105000 Marutis sold in October will come at a much steeper cost to the compan y int he coming months but it seems to be a season for the price hikes everyone had been stalling and Rupee’s strength might well recover all the margin Maruti needs while letting the sun rise in the east again over Japan

India Morning Report: Markets to follow up another uptick from 5650

The Rupee started the week well and set the tone but the ‘missed’ opportunities to churn the portfolio finally got to traders as the index is definitely not more than range bound though biased to the Northerlies taking it up. The resulting afternoon correction should not have worried you unless you were the few who entered this week in the last INR20,000 Crs or 200 B entering the cash market, which is going to be in a little trouble as the downward trend for Hero and the continuing travails of Infy emerge again with IT scrips getting hammered for prices booked in September in their quarterly results.

The Rupee hopefully will get to stronger ground nearer 52 than 53 before Oil prices rear their ugly head again, precariously poised at $92/$116 for WTI/Brent per barrel and India staring at just concluded well priced contracts askance if they could still bite on the WAC cost of our rising Oil bill. The September deficit climbed out of the hidden trenches on mass buying of Oil atleast as it seems from the monthly deficit and the growth in China’s exports can only do so much for our exports to Big brother.

Obama is back in the reckoning and though that does not mean good things for outsourcing followers, most IT companies have been hiring locally and settling down in the US as local color than exporters of manpower with a more than 10% bench at Infyand hiring for special skills in larger accounts now more than remotely likely. Banks and global financial services majors have much more bandwidth going into 22013 to expand footprint in Asia again outside of Goldman Sachs which is already fully invested in growth portfolios and the Deal markets should help further FDI/FII interest too.

India has managed to get extra flows without affecting prospects for Mexico or Turkey showing Emerging market inflows are more collaborative than competitive and US equity inflows should not impact the flows adversely either but worries come from the coming increase in share of the Commodities complex and the Japanese commitment to keep buying US Treasuries. Japan’s currency’s new turn is alsoa great story as the over valued currency seems to be in line for a big correction in value as China gets left behind in the list of US Treasury holders and the regional argument between China an djapan is balanced by the weakness in the Yen for Japanese and probably Korean exports as well.

 

InDIA MORNING REPORT SEPTEMBER 07, 2012: Global Liquidity Moves and a crunch in China

English: Bharat Swati (BHEL Swati) is an India...
English: Bharat Swati (BHEL Swati) is an Indian two-seat training monoplane designed by the Technical Centre of Directorate General of Civil Aviation and built by Bharat Heavy Electricals Limited. (Photo credit: Wikipedia)

As GSAM and a few others will willingly admit over the air, there is no return on your investment in China for a few more months. Of course the most important news of this market and it is affecting pre open rates as we speak is the Central bank liquidity thrust which has started in earnest even before the last obstacles toa Spanish bailout have been removed from ESM approvals to Spain’s own assessment and formal request. Bond buying in the 1-3 yr range by the ECB was announced at the monthly ECB meeting yesterday and was good news fo those already picking up 7% and 5.5% bargains in Spanish and Italian bonds. The resulting liquiddity esp as China is crushed under its own policy weight of the last twenty years is more investments in India.

However sooner or later more backing will be required for this rally as the BHEL and SAIL disinvestments look ticklishly unlikely despite Chidu’s best face on it. Bank nifty should be an important gainer if not today, tomorrow as 9850 was an important point of support.

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Happy Thursdays! Lets see, Ronjan Sodhi, 25kgs lost, Leander Paes, Sania Mirza lost and me!

Thursday
Thursday (Photo credit: bob8son)

Firstly, the confession that this Thursday afternoon missive was written 24 hours in advance while I was wondering if it was already Thursday, and no I was not drinking or too snowed under from work. I just thought things were chugging along fiine through tidbits like our best medal hopes at London had been dunked, our best Economic leads have been wiped out, we never had the infrastructure and no educated man has one elected democratic fights ever anyways, or that Leander Paes and so many more including our boxers and archers had crashed out with below par performances and it was the perfect day otherwise, these being the usual muniton of the logical mind on home ground.

The Global Economic slowdown has hurt us the least till now but I tell you trading can hurt every now and then in moments and shutting it down just makes me wonder what I am going to do for a livelihood. The bear trade on india though is still not on not after where we came down to just months ago. That does mean we will see the least of Goldman Sachs’ allocation, but then that might be good for us too, because we do not seem to do well when we have more as ew never get more than one good year in any business cycle unless it is for odds and ends and all things not written down. None of indian businesses or policymakers can stick to even rudiments of the written word, and while it happens in more than one place the others in Europe and the US have already passed on their golden age and the ones coming are too poor for their meteoric growth to mean anything at all. and I mean when compared to India. Thursdays, the usual, it is FUTILE.

So, why don’t you think Dynamic provisioning norms will hurt banks?

 

 

 

It is just a proposal at this juncture but we would be pushing as many good bankers for the provisions on standard assets to be adopted so the NPAs can be taken out of this subset of provisions and expensed off at least. As of now the proposal is still raw in its details requiring banks to keep additionl provisions including for foreign branches which are still leveraged on structured plays for each loan\

 

Current proposals start off with introducing provisioning on restructured loans specifying that such restructurings should have more skin from the promoters, lessening pressure on banks from the bankrupt promoters and adding a possibility of debt recovery before preference share conversion is forced and then giving it to years before adding specific provisions to that. This is overall a discipline that may be disavoed only by a fe Public sector banks depending on their portfolios

 

 

 

 

Bank Results Season: Kotak does operate in a saturated market segment of its own

Kotak again proved with today’s results that its ins on not bothering to reinvent themselves have been playing to the old Goldman Sachs gallery and not really going anywhere on the business learning curve. Couple that with another likely two year holiday till it starts to wind down promoter stakes and it is ripe for an Ingovern/Veritas hit which its strong fundamentals can resist easily. Private Equity must be thinking of the prospects of buying this 50% promoter stake daily but seem to have no partnership basis with Uday Kotak

A true smaller range was never ever found again!

Net Interest Income is reaching a degree of scale at INR 7.20 B and the Net NPAs are as suspected rising as it akes out of its existing customer set and splashes a little likely to recede again. One wonders if someone can really revamp that governing structure in place, each manager at his island of incompetence with the HCL GPS device in hand

NIMs are its strength at 4.7% Gross Lending income (only Interest) is up to INR 24.7 B (DJ wires)

Back to the banks then, Kotak having totted up Gross NPAs to 1.4% and NIMs saddening to 4.7% now at 33% higher than the Industry highs of 3.5% among Private and Public sector banks. Anyone who can get a more than 20% credit growth in their conservative forward statements is a shoo in into any decently managed portfolio as the midday correction on sales growth to INR7.2 B definitely brings in Kotak to a short list. Net Profits of the group were INR 2824 M and I would like them to scale a mark of a 1 B in  profits every quarter so the growth in advances and the 7% campaign’s impact on CASA are welcome. CASA is now 22% Advances and Depsits grew more than 30%

India Morning Report (July 05, 2012) : Risk on trade continues, yet a stalemate

Image representing Goldman Sachs as depicted i...
Image via CrunchBase

Of course no one’s fighting to take the Nifty down now but some are waiting if they can buyin again at lower levels an oft repeated strain since August 2011

However the correction though not perfectly correlated will depend on the weakening in the rupee as it becomes another export dependent economy without consumption growth as in Brazil, Australia China and Russia. Not to confuse the bulls, wea re still doing well, PMI at 55 and Services Indices at 54.3 athe best showing globally currently and a 5% growth guarantee at this bottom means India’s premium is justified and riskakers would be growin gIndi’s share . As BRICS follower Jim O Neill and now Goldman Sachs aver, the BRIC markets are at a 33% discount to their share of world GDP of 25% in their share of investment trades in Equities at 16% so the immediate opportunity in those which have steadied the tide in an environment of uncertainity, will get  alarger benefit of the global liquidity injections.

Ofcourse, India participation by FIIs remains capped and Policy decisions continue to teak within India’s share literally capped at 5% in the Global Indices

Acorrection is unlikely as Consolidation has held, and the investors must be patient. The Rupee may let the Dollar recover durin gthe day today as emerging currencies broke their 4 day run yesterday

Basel 3 requirements for India Banks

India’s banks already satisfy a core Tire I 8% criteria so a move on to a Tier I 9% criteria which RBI proposes would be an easy task and not need INR 1.5 T of cash as ET and some experts have suggested. It also means however that India will again choose to face BIS with “Country specific requirements” to completely do away with complicated RA considerations. Apparently Goldman Sachs agrees that India’s banks do not need much to get to the Basel III requirement too. However in defense of those who cooked up requirements a typical global bank would get charged 1.5-2% of its Asset book when it moves to the new Basel III RWA regime, sometimes even more.

That means that Basel 2 and Basel 2.5 ratios for banks have to be far more than 10% for them to consider being safe for Basel 3 even after inter bank capital is cancelled . That at once identifies the different challenge for global banks who have been surviving on 20-30% components of Capital coming from other bank issues , each scratching the other’s back and that it fortunately is not a systemic problem in India where inter bank exposures are far more limited and measured against specific deals

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....
Image via Wikipedia

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.

“HDFC fixed first” leaves a good taste in the mouth

ICICI Bank Headquarters, BKC
Image via Wikipedia

“HDFC fixed first” leaves a good taste in the mouth

As TOI said, OP Bhatt must be a happy man..Though the HDFC/HDFC Bank scheme follows in the foot steps of ICICI Bank it is unlikely that this will be christened teaser (update: it was: everything with fixed upfront would require additional provisions according o RBI in late september, thankfully credit shot up this period) by the regulator without raising a few eyebrows as Fixed rates are inherently smarter in this ruptured leg of the Economy. Though we may not enter a recession and even US may avoid Japanization and the double dip threats with strong consumption, the conditions in the Economy are far from rosy and with the Land acquisition Bill more than one expert may even trim GDP forecasts further (RBI computed its projection as Factor Cost mehod 7.6% translating IMF 7.8% , Mon review said on 24 October that Investments are down instead of the forecast of 35% and the rate hike will continue. Selected banks may not pas son the rate hike as PSU banks see a spike in NPLs)  as Corporate costs climb back to above par and have to shoulder the burden of  the rising inflation.

More disinterested participants in the market – but no recession

I do not see how Goldman Sachs’ prediction of rate cuts from next year is even hopeful of being achieved as the political situation is at its most “non performing is mandatory” right now in the middle of the term of this executive and surrounding each leg in corruption scams already. In a true return to 2008, the paeans to luxury goods spending and wealth have started doing the media rounds showing that everyone in the writing business is done writing and is now just waiting for the inevitable report card for the Q3 showing a series of collapsesin PMI, IIP and GDP , even Exports as the benefits of lower crude also have not percolated down yet

And the buying is already in process

Ofcourse,  the optimists rule the roost right now with so much value available in the market but most know that their purchases of today may not give even a normal trading profit beforre returning to the same levels next month and it is i the easiest to be a mealy mouth right now and keep buying everything insight

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