India Morning Report: Private Banks paying for PSU heresy

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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

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