India Morning Report: Global investors look to India after India Inc outperforms expectations

IDFC Project Equity
IDFC Project Equity (Photo credit: Wikipedia)

A quick re-rating of the F&O market in the early trades yesterday meant that writers of the 6000 call had a hurried exit from trades and very few have tried to cap the maarket already at 6100 or any other digits as the markets actually show signs of a breakout. The low volumes of MCX SX are perhaps an open invitation for the short club to try something faster and tighter in F&O trading on that exchange but with index trading not open yet, it is unlikely to have any impact and in this predominantly Asian leg of the bull tour, it is unlikely they will get past petty strategies to break up the trading interest up while 1 in 3 rating agencies have already fallen into the usual rut of calling for India’s derating showing up our lack of faith in India as another 90 days look set to pass without any execution bombs and those analysts and short side traders aree undoubtedly still just waiting for actual policy and roll out execution announcements which can then accordingly be belittled for giving them a leg to stan din the crowded room . Givcen that it is used by most large media as well, the tac has become almost respectable but is painfully obvious and can usually be shot down with larger negative consequences for purveyors like these rating agencies

However the disconnect between investors, foreign brokerages and domestic traders only joints shows up mercilessly as a red flashing risk factor with domestic traders sticking to corporate governance unfriendly scrips and sectors like fertiliser and sugar before policy announcement or choosing unknown branding successes like Sintex (‘pani ki tankiyan jinme jang nahi lagta’) for shorts on a stable market suitably gaining strength for a small pre budget week rally

This rally has a new keeper

Bajaj FinCos (Bajaj Finance and Bajaj FinServ-insco) came into favor largely yesterday as the banks’ tandem with infracos which will lead the new rise of the indian indices has largely been lost with Indian banks ramping up on the strength of the domestic market and their robust balance sheets which will be of use to foreign investors. Infracos led by IDFC have seemingly won a few more partisan traders to their side in this current rally on its trading strengths and while ICICI Bank and IDFC will both rise, PMEAC and RBI favored NBFCs like M&M and Bajaj are more likely to be important investments for the fund hungry infracos and their new leg up post budget.

Budget announcements have come into play but after the unlikeliness of DTC and GST rollouts has already been debated and the futility of unassigning another INR 100 bln odd to infrastructure and prioritising sub sectors is argued out , mostly there is just a wish that PC succeeds in billing down the fisc and the government borrowing in the coming fiscal.

India’s equity friendly outlook carries the day

India remains the only big market ready for a rally and global equities get ready for a sharp cut. The first two months of the quarter substantially shored up business volumes and profits at Hedge funds, PE companies (?? we are as much mystified by it ) and Big 4 investment banks . The global Bank rally being another three month away is probably the reason why this cut could become sharper as UK recession and US tempering down of growth at near 2% GDP levels demonise stable markets. The early global moves in the euro give it one high Six flags slide to come down in and Flash PMIs today from Europe, underlining their inability to survive with 20% lower budgets, tough love for banking and devaluation by the yen esp as competition in Capital Goods exports is considered.

It’s sorry, Indian coffee trades down

Currency wars having been a no show given every FM’s need to follow in the steps of Japan’s Abe sooner than later, Indian currency continues to resist strength on silly excuses woven into the fabric of markets structure as Exports like Coffee suffer a double whammy from India in volumes as production is more than 20% lower and value as indian coffee quality has apparently not registered favor with quality international buyers. Meanwhile Asian coffee offers hope to Indian exporters as Mustard, palmolein (Crude Palm Oil imports) and Onions fall 20%, 33% and 20% respectively to allow CPI and food inflation barometers to cool down or at least not ratchet up the fiscal bill for India Inc. Government borrowing is in control and yields have held at 7.8% desspite the small cut and the unlikely prospects of a cut in the next 6 months

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

 

 

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