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

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

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

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

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

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

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

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

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

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

India Morning Report: 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: Expiry, Policy jump, Vettel at Airtel and a difference between Ukraine, Turkey and India

sinbadThe overnight return of the Emerging Markets this morning in ASia was none helped along by continuing waiting for news on the Taper Wednesday but India’s own policy will be stable, stoic and yet enough to motivate the markets ith the Banknifty at 10,500 laying the grounds for a bull trap that might finally work after ages.

Bears got the markets at 6200 again, the fall below 6170 precipitated mostly by Rollover computations in jeopardy. Maruti’s lookahead to today’s earnings may have helped but we think that performance remains sub par and there is more yen volatility on the horizon, trades continuing from 100 or stronger levels on the Yen back to the original 110 target for the year. The GDP forecast in today’s published review has barely any chance to score to 4% in April let alone any number RBI may still hope for in the policy. Banks should continue expanding NIMs despite the HFS effect loaded in Q4/H2 with easy liquidity and yields stuck in almost non-existent liquidity cuts which continue to be required for the same reason.

Indian Exports have inched close to the $325 Bln target and definitely do not need additional level punched in by hot money or market sponsoring of IT non-performance as the new India peak. The markets will thus expire at higher levels after running to close to 6300 again if not higher, the momentum on the positive side jumped by crossing over 6200 and 6250 levels. Volatility barely hit 19 yesterday and ‘proprietary’  longs in the eternal ghouls of  shucked out old fabric like DLF, JP Power, HDIL and Ranbaxy and Apollo Tyre showed up with more than 10% cuts in OI in each easy pickings for daily bears when a brief surge in panic put paid to a lot of outstanding long trades on Monday

Idea’s ARPU score improved to 169 again ( been a little volatile since 2009 including the last 5 recovering quarters) and es I do believe the full margined Indiabulls is close to being the scum that plays the hurt wheat in a festival of crushing chaff just in 6 hours and some few of trading.

Thankfully, including HSBC there are still a few advisors and boutique investors left out there that already under stand a difference between India and the Turkeys, Ukraines and even the Rand trades of South Africa.  Mexico’s recovery again is being clubbed with a fully private island (economically) of Thailand and that probably means the depth there is much weaker as most EM investors stay fully stunk in China, Russia and even Brazil. A glaring difference in most is the ease with which investors engender volatility in the Economy, Japan and India resilient to the charm

Tata Motors’ tailspin could continue as there are barely any reasons including Ralf X’s designer JLR bets for buying and investing in the stock. Tata Steel seems to have run out again waiting for the jump back in metals for further gains in Steel, which could steel ( silly, naive me) if construction in infrastructure picks up or being confused with a residential construction and auto slump  that is also extending the slump in Cement and other manufaturing bets, closer to a deflation in the core than one might think ( seriously just preppy talk)

Glenmark is up 10% from its recent all-time lows at 500 and GAIL shows a lot of promise. Today’s trades have finally rewarded IDFC and not beat it down with the Jhabla trades in chicanery beat down in a half day yesterday morning in Unitech and DLF

I respect both above for example but only when thy are near creating performance  and they definitely are not quasi- bets in private infrastructure holding on to an inelastic line created by their pricing power and always illiquid markets despite a surfeit of available built up real estate. Aswini as usual back in the morning with a straight face after recomending bear trades n BTST at closing yesterday but 6135 was certainly out of whack yesterday itself and markets did refuse to move north at closing despite every reason.

Gopal Vittal gets anointed as CEO and MD at Bharti Airtel and Formula 1 season is not so far away. Students and Analysts at work should not follow the woefully fashy and flashy titling on the report.

India Morning Report: Markets not ready to move from Vol lows Mr/Ms Short

A handicraft shop in Delhi-India
A handicraft shop in Delhi-India (Photo credit: Wikipedia)

Assuming a generic Mr Short in the market has been playing on the increase in volatility from lows of around 17 on Friday before last, he is still fishing for trouble and not getting much though the short strangle is paying the 6200 range(only in a very liquid market, and almost excluded the Nifty series too allowing only the sold puts most of the traction,( see Thursday report) and in fact continuing to burn sold call positions ( Calls written) as the markets move up on filtering out of bad news, post Taper and with the Indian policy and election juggernaut still finding surprising positives including the resignation of a Minister close to the DMK (Jayanthi Natarajan, is from TN) and a government with an unwilling, waylaid partner in the INC in the state of Delhi.

Buyers will likely be encouraged by the Rupee’s boost back from the 62.5 levels as government coffers will go on an eminent shutdown in Q4 holding down the fisc and may even include what markets would consider very surprising if indeed any infra projects and companies celebrate real news moving them on. The recovery is short, helped by the tough interest rate scenario extending well into 2014 and the EMBI entry pending, leading to Bond investors filling up their index linked quotas from elsewhere in Asia. (EMBI == Emerging Markets Bond Index, from both JP Morgan and Morgan Stanley, though HSBC is the biggest debt player in both Europe and Asia right now)

Indian Banks are probably thinking of ramping up the Transaction Banking/Trade Finance motif again and will again be squeezed by experts like HSBC and StanChart with Deutsche in Asia overall and by PSUs catering to (synonymous with: stuck with) Export SMEs domestically, Indian credit growth lag nullifying any growth vectors in the India Inc business and relying on Housing and Auto loan portfolios, which could probably over 2014-2018 also mean a growth trend in securitisation, more amenable to retail credit once available in bulk.

But back to the day’s report, few buyers, fewer large ticket deals ( anything more than 1000 shares) but no sellers and a drought for Call writers as the 6500 Calls remain OTM hedges and 6300 becomes ATM/ITM Finally though the probability of an uptrend is a finite 10% and above and can be assumed till as high as 1 in 3 from here. The remaining 2 in 3 remains a downtrend but is mostly going to be like a slow, very slow and thick cloud of smog floating down on the cities, making bull traders also disappointingly unable to breathe in much profits.

However that slow lazy market is probably still preferable to the One sneeze games, which may get to come back to the market in a last chance in this week’s 5 sessions.   ( Assuming moves of around 100 Nifty points and more in mostly the South direction from 6250 accorded by the mood of the network commentators and encouraged by Prop traders and brokers who have themselves been run out of the Crystal Ball.

A wierd yet surefire save from Team India on Day 5 of the IND- SA Test may lend to the fogginess of the market participants but was good for both BJP and Cong supporters and the now infamous 1 in 3 a political vote that voted in AAP in Delhi

IDFC is a good pick for the week, Tata Global too, and infracos may be chosen  in advisement with your bankers/brokers. As recommended last week, Bank nifty did not break below and starts the week at near 11400 levels, with HDFC Bank, Axis and ICICI Bank getting bullish picks. Infy may not thus make the biggest stock in the Nifty 50 with markets changing it to a funding trade till it starts moving u in strength again but probably not below 3400 at any time

Aside:Khobragade?

The Khobragade episodes has probably seen the media opinions at their most lacklustre on both sides despite the vain attempt by NY Times to misunderstand everything done on both sides and the continuing desire of the Indian diplomats to make it a case of total amnesty. The pluses however, India takes a strong stand and gets its way to move the US Corps from their longstanding desire to keep India as the one team that plays low and slow to insignificant in all standoffs and Two Preet Bharara overplaying his hand allowing US Civil and Political Executive to root for and get more protectionism. Both are unfortunately basics we should have started with at the turn of the crisis and protectionism should have been sliding now to allow US any chance of exceeding 3% growth along with a weaker dollar, both impossible to assume from here for everyone.  India and China now reap the demographic dividend with US remaining an economic ally regardless, India getting sidelined in the growth story by a China gaining currency #2 for its pegged Yuan more egg on the Indian version of the Silk route

India Morning Report: The Taper trade that did not matter and a SAP for Sugar

taper-2
taper-2 (Photo credit: Chriszwolle)

Even our best performance this fiscal is going to keep us in deficit and ECB debt is going to be fiancing thaat to a heavy share for some years to come. But we are not close to getting investment back into the Economy. Though one would specifically request those in the audience paying heed to the new Catcalls for Greed&Fear ( the one from Chris Wood, CLSA) to be extra careful even as India’s weightage rises in the same, the concept of greed & Fear including the other global index by CNN i s probably an important turn on for investors who like to measure a positive performance than just revel in the goodness of equities. The CNN index for one is more like a PMI chart to benchmark against esp now that VIX has shown to be absolutely negatively correlated to good sentiment.

Back on the Taper spooking the markets, I think the markets are being taken for a ride, but a s long as that is backed by skin in the game, the resulting corrections and from here the rally to 6300 are as real as ever. The Taper in its entirety has already found India backers pooh-poohing the European idea that India will shuck itself out from that ONE trade whenever it starts, and the traction for that correction was educative for India analysts to realize the negative sentiment India’s sitting on the fence has created for India.

Again, thankfully it is easy to see the negative sentiment as a European thing because those are really fragile banks and though they will continue to press enough of their capital into Asia in the coming decade too, their role after this taper might well be non existent after two currency crises in Asia and a little of the curry for the home run. Sorry, UBS. Sorry , CLSA. Pension investors and Infra shows like Citi, Macquarie and that HDFC investor(Scottish widows) still remain, but those sharper on the Short trade including HSBC and StanC at times, must suffer for it. That aphorism about Glass houses is meant for them to read into their history of shutdowns accelerated in the last few years

Taper trades are a hoo-haa if 6000 survived. The date for the Taper moving to June 2014 ( We mentioned sometime in October)  and a lower CAD, also star  as the most important factors in the next stage, when the Taper quantity becomes limited and gets filibustered by a non US QE from another OECD Central bank as 2% becomes their growth ceiling and the scare runs back to Bull trades, like they shut out shorts today

Of course markets closed yesterday without any shorts exiting and no one has been caught this morning because they exited the trades or are in the process of exiting the same. Yesterday’s negative FII flow would be a rare moment in the history of this exclusive bastion of Bulls that is India nd e are again ready to move beyond 2007 levels here, especially if the Dow moves out into the 16000’s as it showed last week.

There is no argument 280 per tonne,is electorally stimulating for farmers and ever untenable for Sugar Mills suffering from days they could get it for INR 130 just before the SAP arrangements began. However, it is unlikely that farmers will go back to lower realisations and it is still that SAP’s positive effects continue to out weigh its negative impact on Agri inflation. I’d say till Core inflation starts getting impacted, it is another “sleepy hollow’ strategy that India Inc is more willing to bear than it lets on and will be critical in India’s continuing move to reap the demographic dividend, not just in consumption but in investment in urbanization and modernisation residual to the New World

Those bullish on IT and Pharma for the wrong reasons may be the next in for a rude shock as markets refuse to stay on a particular 6200 or other level in search for the elusive big trade. Especially in IT, those like Tech M may not be able to hide their being disapproved by current and potential customers despite the Dollar Rupee. One suspects HCL’s half hearted transformation may also have found the cliff it was hiding for all the time.

The Taper? It does not loom..Sorry Mr. Doom

Banknifty had a hard call for market soothsayers even as higher than 9% yields tempt everyone to the current Fixed Income market as well .Kotak’s projections for H2FY14 could probably look for sympathisers extending the sam eto the Full year where it a little short sightedly holds the bullishness in earnings to a mere 6%., that probably landing it again in the wrong side of caution tales.  Also one expects Bank earnings to tank the H2 report card for the index as a whole but the double digit earnings score should still be a n easy challenge for Indian companies showing an immunity to global volatility esp with FMCG, Domestic Pharma and Automobiles. The Sun Pharma trade is on the short end right now, more to do with Sun Pharma being clubbed in the passive folios with  Hero Moto and thus probably caching good stock for short trade to use a s collateral. They could thus off and on make the negaive end of scrip pairs within their sector but overall they will still be an increasing part of bull portfolios their index scores likely to go up esp with those not formally keeping to the index components in index tracing funds that will walk away with more inflows

 

India Morning Report: Infosys slam starts off a results season rally

infosys pune smoking zone at night
infosys pune smoking zone at night (Photo credit: srijankundu)

 

Probably the consolidation is good for a big move, probablyit is not. However this would definitely mean the PCR increasing again with the right Put strategy ( sell Puts  and hedge with a 6500+ OTM Call/ 5500 PUT). Hero Honda seems to be getting some sympathetic gain too in the move with Infy as Infy likely crosses 3500 also in early trades on Monday. EBITs have crashed from Product Solutions drop in sales order books, but any defence of that is unlikely to impact a new guidance push up for the industry that foretells IT will support the Economy’s return to life

 

Bajaj Auto and ITC will kick  in , in the later sub rallies hopefully from higher levels as the good moxie uncoils into the market  capacity. If there’s a reason any NBFC sector including Realty or Telecom Demand has bad news to offer , then that should be an important worry in the run. LIC Housing and Bajaj therefore will continue to pack in volatile buzz before and after the move while KPIT and MindTree scotch up even to the point of making margin security this month. Statistically data is unavailable of these security positions ( in the open)

 

Rupee will definitely move back to 60 as the Rupee trade is picking up and Stanchart (listed here) and HSBC will likely be key movers. Pharma unwinding is just a funding move and Glenmark remains positive. The markets are definitely making a run t o break the 6100 cap but as of now Friday closing being positive is about the only fact out there.

 

The USD Index hovering above 80 means a small move further weakening to 78-79 is improbable but Dollar s weak and Crude has never broken 108 lvels in Brent in the Post “No Taper” announcement.

 

 

 

 

 

India Morning Report: My right shift key doesn’t work. Will the right UBS please step up!

The McDonald Happy meal is still Rs 20/- and the $5 Big Mac Meal still under INR 200 all taxes paid ( Large fries and coke), so it is not PPP. However, Bhanu(UBS)’ target of 68 is very near and there are no buyers in the currency yet, thus the new Box from 70 to 78-80 should be in play in the coming week. That should also see the traditional Exports rise because of depreciation an import spending goes down finally proving true before the policy implemented is taken seriously by those still trying to understand India from an investment point of view starting from Ford which began in India in the first wave of reforms and is still unable to use it as an export base or get a competing model up against Suzuki.. but the three traditional arguments above hold no water because of the vast difference between reported statistics and trend forming prices, markets and the still unexplored new CPI barely a year old. Bond markets have traditionally neglected volatility especially in Valuations and recovery LGD models from KMV to other modified Merton and non Merton / non Fama-French models.

Domestic consumption is firmly isolated from the one fifth of GDP that is Exports as long as oil prices stay south which looks likely as even $15 Bln less in buying is hardly to be noticed except for the improbable hysteria still not shown by markets. one would probably see Fed buying reduced by half by the end of 2013 in the strongest such scenarios and the markets have broken trends enough to stand tall in that event nullifying any tail risk or God events as a result. Such rabid unnecessity aside, Indian commentators are not expecting a recovery in the currency, and with Foreign interest likely to return in to the investment cycle and in ETF inflows to India and the EMs in the next two months, 80 thus could be my ventured level for the currency, 60 being overshot long ago. A long recovery trade in the Rupee could in fact still be impossible at those levels and any attempt to recover the 60 levels might not even be theoretically feasible right now.

UBS of course has lost all pretentions to Investment Banking and its PPP valuation of 78 is probably a non starter even if they receive 100% of revenues in bonuses as a stay away handshake from the European Private Banking Management. credit Suisse is still due for a hole in the shoe quarter as its ROE calculations seem to suggest this quarter and th Euroean trend t increase bonus percentages flares the remaining  investment bankers to a quick relapse of their own holes. Traders at Deutsche bank of course would have ore room to create a new stand in Asia after having completed restructuring and HSBC may not have deprioritised the same as well. stanchart does well with a long term view so it may be planning to sit out further bullish rupee moves too.

India Morning Report: HDFC Bank gives way, KG D6 ‘honestly’ increasing output

Of course the news of the week, last week preceding today’s AGM was the burly new gas find in MJ1. Actually predominantly for Oil, the MJ1 also falls in a gas rich area but details apparently have not filtered from the ongoing AGM and will probably be easier available to ‘non-digitised’ social networks  which remain the most important achievement for Reliance and partake of their retail investor community of yore. Reliance will be forcing a turnaround in KG D6 output levels too after a long wait.

With india’s digitized data communities and even the lack of analysis communities a virtual impossibility, online social networks in India remain dominated by shopping cart brands and facebook and twitter remain ineffective for real business conversations despite teh affectatons as a large global user of social media.

Importantly to those of us who missed Idea to stay on the run to bank nifty, it is the right time to invest in banks es as network analysts and “chhutbhaiyas” in the markets continue to try to scale up the tiredness of the bull move earlier as always falsely seen to be led by HDFC Bank and HDFC for a few.

The FDI panel has made its recommendations and as with all things UPA, hose that have swtched to the bear side are still on the other edge because of such policy pronouncements that are so comprehensive one has to wonder if this government will ever go beyond cabinet Oks and then continue to miss the parliament or ordinance, an uncomfortable fact they seemed to have used home with earlier such comprehensive proposals  already proved to be not worthy, excet for the putting of thought on paper and certainly not an implementation blueprint giving the holey book of India to the dubbas of the opposition  NaMo and namesake Amit and one hears Adani as ‘implementation power’ of rural India.

Update: As Oil tracks evening session vales on the MCX in toay’s morning session it seems to have reach an optimal level for a big optimal short and if one is willing the 5400 contract can be kept rolling to a target of 4500 but in more than three months from here.

However such new eigenvalues and initial states apart, one still does not see any need to push forward recovery or for FIIs to exit India again as the bare minimum in play now is big ticket enough to get international media coverage of the coming big ticket recovery and of course the elections as well. Stay long on private banks like YES and select PSUs like PNB, don’t short the Banknifty and dont expect any pre election rallies either bear or bull for now.

Sell Side brokerage research however is increasingly reaching their ‘trend flatulence’ in the hype cycle esp detailed notes from Macquarie progressing retail credit growth at ICICI bank and their use should get limited too, till more coherent thought can lead the selling of India recovery to foreign players in the next wave aa normal di in the usage cycle of new products, in India’s case still true for research. Rerating at brokerages and new players like Deutsche, despite a good global dbAccess conference (in its most obscure markets, USA). Stanchart had a good media ‘week’ just less than a fortnight back and the HSBC seems to have slipped with lack of HQ and trading room attention on India.

Deutsche and even MS despite a good back handed effort from Riddham Desai for ‘India according to Morgan Stanley’ last week sticking to its 6% FY14 stream of thinking and detailing it rather at the last minute but still making it a comprehensive view. You prbably cn already guess about my opinion of other such commentary by the BNP Paribas wealth, trying to skeet the losers of yesteryears as Defense scrips converting to trend leaders, another “strategy push” which failed to interest the bulls or the new money to INDIA

Things look dustier in fact in Turkey because of the revolution and in Taiwan / Vietnam as China gets ready probably for exporting jobs to Asian locations and importing a lot of foodstuff in more wholesale ranges from American pork(M&A) to wheat rice and more.

Though in a more copious mode under the China series’ we would have covered details but right now i seem to be on shaky ground wrt revenue/study opportunities and writing has to be restricted to these daily / weekly updates i hope readers and followers do not take for another occasion to stop reading and writing. Aussie is going to be the other big ticket investment soon and Korea is not far behind so India still does not get rerated up in global indices, but one can see the noise of rerating up is real except at S&P which is better off completing a going global transaction of CrISIL it is stuck with as its arm in India

India Morning Report: Imported Durham Wheat and the JP Morgan BPO

Canara Bank Near Town Hall
Canara Bank Near Town Hall (Photo credit: SumaVV)

What would your friendly neighbourhood snitch or hag have you see in India’s future now? BPOs recruiting for Voice processes and documentation work or captives claiming they are not BPO for the same work and a hoard of imported foods you buy now but will not afford on a salary six months after.

Unfortunately, our elites continue to get such side issues with  India education after being worse than a blind bat and halfway through their work life but one should not lose much sleep over such influences in your life as more and more recruiting shifts out of the magical BPO/IT abyss and returns to active traders, banking sales and i am sure a lot of non business administratives already pulled into quasi business development roles at one man MNCs having finally run their roost.

At least in the shadow banks and the foreign brokers we have been increasing recruiting breadth for the last 5-6 years despite shutdowns at Citi , RBS and UBS. Of course the recruiting profession itself and over the hill 50 something bankers remain unqualified in the new world so the global strategic direction is unlikely to be set anywhere nice soon so be careful what you wish for in a job or you might get performance linked appointments with fancy names and quickerr shutdowns than the Sasketchwan scare in North Canada

ICICI Bank is picking up the slack thankfully on a stronger day at the bourses and more thankful because that means market interest in SBI or PSU banks is increasingly turning merely technical in nature and ?india’s story of future consumption expansion in the hinterland is not making anyone secrete excessively rooting for SBI and the dud dudders from Union Bank to Canara and Syndicate, Dena, BOB and PNB hardly looking like having recovered or improved from their unholy business ethic of the last two decades which they were seemingly not a part of.

skyrise
skyrise (Photo credit: Brennan Mercado)

Etihad had another finger in India’s aviation pie though the reporting team got busted as a Bombay Tabloid by the last century’s sole network on Indian equities and is actuallya  scoop by Mirror  ( the city based TOI daily magazine of local specific mantra)

India Morning Report: Asia shines in global cues, the FDI challenge will be limited

Yen-Hsun Lu
Yen-Hsun Lu (Photo credit: Carine06)

 

Probably some of my friends might find this calling the chickens before they hatch but more would understand why we are calling the upcoming Parliamentary challenge just another cog in the (w)heels (sic!) of India Inc.

 

China’s Flash data in the meantime shows HSBC’s Private survey catching up with recovery as expected after a few scares in the last year when itdipped and clipped any recovering trends and underscored the state PMI by a higher and higher margin. The Flash Manufacturing PMI is above 50 and that means the composite too will scratch above 50 and Services in China can also conme on up and announce a full recovery. Though MOM retail sales data remains a challenge, the annual rate of growth with weak Japanese exports also getting a bit of hope from a climbback in almost minimised Toyoda sales in the kingdom and Nissan and Volkswagen were also hopeful

 

Older Style Nissan Logo (1984–2001)
Older Style Nissan Logo (1984–2001) (Photo credit: Wikipedia)

 

The last 50+ HSBC Flash as 13 months ago. Back in India, nothing’s moving the markets ahead of the anticipation of a big blockade by Mamata Di and NDA independently already shoing that the fracture in the opposition is likely to eliminate any serious threat to governance but underwrites another loss of 20 orking days to the nation’s Parliament, hoping to clear as many as 17 bills in this session hich the ruling party will unlikely table so precipitately.

 

Asian markets rebounded led by good growth frm the new ASEAN low fare carrier Air Asia and a big jump in Korea and the new weakness in the Dollar has indeed multiplied nefariously on early Thursday trading resulting in a nice rupee open too. The Aussie in the meantime cratered as expected after the Yen offered a nice segueway, Reuters commentary (Neil Kimberley) even betting this rise goees beyond 85 to the Yen giving precious ammunition to Japan to recover the Domestic GDP growth thats been flagging under pressure from the neighbour while the USD gets a leg from Treasuries that Japan has been exchanging for its JGB holdings

 

 

 

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

 

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

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

A 2013 story train from us 

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

The rest of them and reform

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

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

 

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

 

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

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

The policy data comes out in a n hour

 

India Morning Report August 01, 2012: There you go, Dollar is down, Rupee will correct that?

 

Korean surplus of $2.7B for the month was lower yet followed the Dollar index down becoming stronger and Chinese Economic data fooled quite a few with the state sponsored PMI going to another new low but staying above 50.

Economic conditions have improved however as China’s property is returning to a comeback and both Indonesia and China reported stronger PMIs , Indonesia scoring a 51.4 and China manufacturing scoring a high49.2 on the HSBC MarkIT surveys ahead of last month’s 48. While lead times and prices are weaker in the Chinese case, in the case of indonesia they are already stroner reflecting continuing groth as the previous series was also in expansion.

Indian data as usual is likely going to be in the comfortable 50s and then next week Services data would again be leading US.

Nifty is flat, banks are yet strong, HDFC Bank should get caught up with the leaders in pricign and the Northern power grid’s woes unlikely to affect production and services further. The Rupee should strengthen further as the Euro tracks to 1.23 and the Rupee has opened at nearly the same day before yesterday levels as it is apparently rudderless, india having being read land clean like a whistle, Rupee decides to create a intra day breathing and diving range with new Olympic disciplines in and out of matter

Economically India is stronger but as the rupee says, prove it! so do equities, cautiously optimistic and apparently time for a technical dragdown to the earlier Fibonacci levels would now make extremely sensible trading.

 

India 2012 FDI Reports – Curtain raiser

Though details are yet available till January, the rearly momentum in FDI and the now value equation in India’s Financial Markets has again meant renewed inteerest in India FDi though the buck stops at retroactive amendments and the recent clarifications on FII portfolio investments thru P-notes a s a measure of investor confidence. In the last three months of November, December and January more than $5 bln in FDI was reported despite the ongoing saga and domestic credit growth also belies expectations of a slowdown at more than 18% growth.

January FDI of $2 bln mostly Added to Services sector for $1.3 bln and Infrastructure construction projects of another $600 mln while there was also a solitary software project investment for $100 mln

That means there was no FDI in sectors like Automobiles, Power and Pharmaceuticals / Healthcare unless new projects have been added in February and March buit these sectors will also contribute further in FY2013 alongwith Financial Services and Transportation/Travel and the ongoing impetus in Infraastructure witht hte first two India infra debt funds, one with Citi and another with HSBC in play.

Ten month FDI totals have hit $37 bln and Feb and March would at least take it to $0 bln for the Fiscal.

India’s Fiscal Deficit in the meantime hit a few flood signages on way to INR 4.94 Tln for 11 months in FY12 from a INR3.68 tln for the full year in FY11 which was a humongous 68% of the Budget estimates against this years likely overshooting the Revised Estimates of INR 5.15 Tln CPI Inflation was a high 8.8% in /february and thus WPI will also climb from March and April risking the rate cuts planned in early part of the fiscal by RBI

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

China

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

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

India no. 4 FDI Destination : E&Y

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

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

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


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

JM Financials: NBFC is, NBFC will be (HSBC cards portfolio)

Commitment to a non banking model does give one clarity to operate in the high risk high margin segments that are exclusively revenues accretive to a NBFC. Apart from the big bang in MFIs in the unregulated market earlier, NBFCs may also proceed to have fun in the millions of card accounts attrited in the 2008 restructuring at banks

JM Financials for example , has bought HSBC’s credit card portfolio for its bad assets..and if you are one of the unfortunate ones without income, you may yet get new calling agents to break the rules as the bad assets business is very cash driven and thus highly accretive for exactly the wrong kind if not understood carefully.

You could have bought these assets from the bank for 20-30% of their value and the bank could have recovered most of its debt by continuing posting 50% interest charges in defaulted accounts, the low revenue to the bank from the sale being more than profitable to recover the lost retail banking win. HSBC already broke even last year in 2011 March in retail operations and has restarted unsecured lending

Services growth pushes composite Growth

By PMI numbers alone Services PMI A full percent ahead at 54.2 and composite HSBC MarkIT PMI

India Gatereaching a 54.7 high even as india Services input and output inflation kept pace with each other, this bein g the 32nd consecutive positive for New Orders in India at great divergence to global aftershocks except in china whre also Services PMI kept ahead of Manufacturing which nonetheless improved from a November low

India’s services exports will not be growing too fast but the exchange  rate kicker has brought in $500 mln of new business to the Top 5 IT services players alone or INR 3000 Crores in revenues for TCS< Infy($115mln)  Wipro CTS and HCL Tech ($69 mln)

India Infrastructure: HSBC, ADB funding to bring up $ 1 bln debt fund

India’s first infrastructure debt fund is well on its way with the $1 bln corpus mooted by IIFCL successfully

Infrastructure improvements
Image by Scottish Government via Flickr

siloed for a launch of the fund in February 2012. the first fund will include IIFCL participation to 26% or $260 mln only as Asian Development Fund and HSBC chip in with $250 mln each for a 25% stake. LIC and IDBI get to participate in the fund with $140 mln and $100 mln each

As a mutual fund the Infrastructure Development Fund, first proposed by the MOFFIN in the 2011 Budget, will invest in debt of the infracos , allowed 90% by its mutual fund charter

The government is infusing the INR 10 bln required by IIFCL the first of India’s public infrastructure funding vehicles set up by the Indian Budget of nearly 6 years back and has failed to tak eoff while Pwer finance companies also set up by the govt and IDFC in the private sector have

500 Rupee note with Gandhi on it
Image by nimboo via Flickr

picked up the funding requirements and turned in a few successful projects each with a good interest margin on each sale.

The debt fund is part of the 12th plan charter to ensure at least INR 1 Tln (Rs One Lakh Crores) in infrastrcture funding primarily via PPP projects if required and ensuring Private participation to close the Infrastructure Financing gap for the country.. India’s overall financing gap coul dbe as large a INR 2.5 Tln or 4% of its GDP

Foreign Banks in India: StanChart, Deutsche Bank get new licenses

The bigger foreign banks in the country, SCB and HSBC have not activated new branches since 2009 and hold 94 and 50 branches respectively. Even as equity marets get bullish and a return to expansionaory policy is considered byt he Central bank, rate cuts following ina few months, not many foreign operations are considering a retail presence and growth in India since 2007 when DBS and Barclays showed interst and since have not expanded after 2 branches apiece in 2010.

This year, with no new branches the 5 licenses given will take SCB’s strength to 97 and Deutsche Bank to 17 with additions in Ahmedabad and Surat

Global players hold 7% of the assets in the Indian market, HSBC leading with $6bln in assets

Barclayscard Fire sale

Barclays Bank, 2 Victoria Street, Westminster,...

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Barclays sold out its retail interest in India to Stanchart last week. Seemingly however., all’s not well as HSBC RBS still awaits the regulators directions on how to manage with license transfers unlikely etc. Int he SCB Barclays deal the thorn is the status of Barclays card accounts as only 150,000 o f the 300k members it had on rolls were sold ot Standard Chartered. Assuming that the Emrging markets specialist SCB did purchas erthe active accounts it means that most likely all the other 150k accounts are delinquent and not expected to be remunerative to the bank as the 150k sold were by themselves sold out at a not very expensive price for the buyer

Foreign Banks in India: European Banks deleveraging in Asia

A key feature of transacting and building relationships with global banking brands in India is to note their reflexivity to pressures in Europe that gets limited to Sout East Asia and China and never impacts us in India. Most likely the current european banks deleveraging is also expected to go along the same lines.

While Middle East and Central Asia have long been given away to their culturally more akin regions in Africa for all Deals and management control globally in the Banking and Finance markets, even in Asia ex Middle East and Japan the two distinct splits of China and SE Asia  North Asia incl Taiwan, Hongkong and Korea and India and south Asia continue to move on distinctly independent lines. The banking business of HSBC and Stanchart for example , who are not deleveraging that frantically, business is in fact booming in China and remains dull in India in corporate and investment banking business. Those that are deleveraging however would be critically taking a call on Asia assets that total $560 bln of the $3 tln in lending assets of European

looking west towards UBS.
Image by clarkmaxwell via Flickr

banks. With Yuan business becoming dull and all not well on the home front those under fire would not be able to plan growth in China and may thus include India assets again in the Exit column

In China, FIEs have been bearing more than 50% of the trade and a significant chunk would work through Foreign banks from the volume of $1.67 tln. Foreign Banks exposure incl Off Balance sheet assets and Transaction Banking products is $1.6 Tln (BarCap)

While 40% of the deleveraging that banks need will be eked out of Risk optimization, changing risk weights of categories like manufacturing and even Geographic exposures and thus reducing RWA, the rest will be real deleveraging by selling down existing credit assets and reducing probability of considering new credit business in Asia. The required $300 bln in deleveraging, ostensibly over 5 years and more could come faster out of intractable portfolios in Asia if and when a choice arises for these European banks  as BNP , Credit Agricole and SocGen or those deleveraging or shutting down exposures in the market book like Credit Suisse Banks have started repatriating funds and cutting back on  loans

In the melee, it is unlikely that the 10% market share of the Foreign banks in India is hurt much though it is

ubs
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unlikely that they would readily incorporate RBI’s concerns about having grown off balance sheet or transaction exposures without committing to real lending in the country.

Banks such as CA and BNP may not like to continue in India with the limitations facing them and their own myopic concerns in committing to asset based growth even as ANZ that re-0entered India in 2006 and NAB and CBA continue with single branch existence in India to base growth in Corporate Investment Banking in the region without planning any roll outs for their retail franchise.

Australia and New Zealand Banking Group
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As Wealth managers like UBS already have offshore business out of Singapore or sometimes Hongkong nad Dubai, they can well reduce their risks in India and go back without a loss to India and their own even as they pass up growth opportunities in a growing consumption economy.

The impasse over the impracticability of transferring extra licences from the RBS sale to HSBC who has made the purchase continues in a stalemate , banks noting they would abide by RBI’s direction

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India gets a good mark up from Investors

As expected the Indian PMI numbers turned around from 49.7 in October to over 52 in November, indicating investors coming back and new orders and production picking up in November even as stock markets turned around faster from almost a fleeting bottom in a fast paced November

Services growth was faster and more confident, PMI surveys bring back the services index to 53 from a low 49.8 in September and 49.1 in October even as China went ahead with easing credit for rural and then all banks with lower reserve reqts. China’s updated reports make or great insights for Financial investors at advantages.us. China’s manufacturing brought down output as the index has plummeted to below 49 in the November HSBC MarkIt surveys but Services remained above 52

MarkIt noted that the new businesses number is a good 52.3 in Services in India, the nag from PMI coming in the last six months in the empty new order pipeline Composite PMI was thus driven up to 52.3 up 2 points. Investors and travelers have responded to India Travel and Transportation sector performance as well as its resilience in Financial services as the “Expensive” tag moved from India valuations. However, as the last 15 years have shown, India’s Capital Markets cover up more ground than the real economy while the Dealscape remains fragile in India compared to the sudden closing of larger deals in the US geography  and FDI in retail is rolled back in India. FDI in distribution platforms ( DTH, Cable) and aviation is also to be considered by the Cabinet

HSBC MarkIT produces PMI numbers for more than 130 countries and measures flash and

NDTV India
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final reports for 3 sub indices each in Manufacturing and Services as well as future outlook. the future outlook numbers remain bleak at 63.6 lowest in nearly 3 years as respondents worry about inflation. Input prices and PPI sub indices are the ones that moved the most in the PMI indices with scores of 57.6 and 56 (NDTV) manufacturing indices overall coming back to 51 but remaining confident ( expanding at >50) in the India story’s likely bottom scores. MarkIT also notes that it is the fourth consecutive decline in employment

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Foreign Banks in India: India a good FDI destination in 2011

As HSBC , Citi and SCB continue to target large private banking accounts in India they are unlikely to step up

Citigroup Centre, Sydney
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price wars in retail as all 3 are struggling to break-even. Others hardly have retail operations at all, Deutsche Bank also having sold its cards division to Indusind. Savings bank rates in the meantime have been upped at the new premier competitors, the  crop of private banks given licenses earlier this decade and last, with Kotak and Yes offering 6% on the daily savings balance computation alongwith Indusind esp on deposits above $2000 (Rs 1 lakh would translate to $20k in PPP terms)

SCB’s 100 and HSBC’s 46 branches (incl any RBS branches allowed in 2012) as well as Citi’s 15 branches are about to break even in retail after the 2008 purge. Corporate and Transaction Banking continues to bely hopes in the September and December quarters as the falling rupee makes syndications in ECB/ FCCB impossible to justify for most India corporates hurting from the forex risk already on board With Barclays and

HSBC global locations
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BofA non serious contenders to expand in India and corporate and advisory squeezed, Foreign retail banks wll grow in the depleted ‘supply’ scenarios outside the cosmopolitan centers where there is enough extra “premium ascribed to banking with MNC banks” esp as they offer integrated MF investments and competitive online accounts/ salary accoun tpackages but without disturbng their fee streams from balance charges, debit fees and lower savings bank rates.

As FDI investments exceed $20 bln in 7-8 months, FII interest is already returning to India and as and when it does, larger global businesses will come through these foreign banks only, while the competition is with the growing Yuan and Dollar business in China and Hongkong

However growth in personal loans and other unsecured lending in the festive season as also the jump in debit card spends is likely to sustain With structured transactions their coup de detat in the Indian market their retail CASA ratios and “real lending” remains a lower priority with a CASA of nearly 45% in all 3 cases

SCB also lost minute amounts being bullish on the rupee in September 2011. Dealmakers have been shifting  mandates and jobs at foreign investment bank units with revenues down 40% for the year and the Indian market fee reduced to less than $500 mln in 2011-12

However, the talent is likely to stay with India / Asia given the new FDi regulations in retail and expected soon in aviation. the interest from foreign PE firms also remains only temporarily suspended as FDI operational concerns and issues with standard safety clauses / control clauses awaited for resolution ( nomination of independent directors and ROFR could trigger requirements for 26% open offer)

Foreign Banks in India: Building franchises without savings incentives

20110422_Mumbai_023
Image by Friar's Balsam via Flickr

As HSBC , Citi and SCB continue to target large private banking accounts in India they are unlikely to step up price wars in retail as all 3 are struggling to break even,. Others hardly have retail operations at all, Deutsche Bank also having sold its cards division to Indusind. Savings bank rates in the meantime have been upped at the new premier competitora , the  crop of private banks given licenses earlier this decade and last, with Kotak and Yes offering 6% on the daily savings balance computation alongwith Indusind esp on deposits above $2000 (Rs 1 lakh would translate oto $20k in PPP terms)

SCB’s 100 and HSBC’s 46 branches (incl any RBS branches allowed in 2012) as wlell as Citi’s branches are about to break even inr etail after the 2008 purge. Corporate and Transaction Banking continues to bely hopes in the September and December quarters as the falling rupee makes syndications in eCB/ FCCB impossible to justify for most India corporates hurting from the forex risk already on board

However growth in personal loans and other unsecured lending in the festive season as also the jump in debit

20110422_Mumbai_006
Image by Friar's Balsam via Flickr

card spends is likely to sustain With structured transactions their coup de detat in the Indian market their retail CASA ratios and “real lending” remains a lower priority with a CASA of nearly 45% in all 3 cases

SCB also lost minutea moiunts being bullish on the rupee in September 2011. Dealmakers have been shifting  mandates and jobs at foreign investment bank units with revenues down 40% for the year and the Indian market fee reduced to less than $500 mln iin 2011-12

20110422_Mumbai_016
Image by Friar's Balsam via Flickr

However, the talent is likely to stay with India / Asia given the new FDi regulations in retail and xpected soon in aviation. the interest from foreign PE firms also remains only temporarily suspended as FDI operational concerns and issues with standard safety clauses / control clauses awaited for resolution ( nomination of independent directors and rofr etc could trigger requirements for 26% open offer)

September the dull month for IIP (Corrected)

A photo of a match between Chennai SuperKings ...
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With credit picking up only in end September, the IIP figures for September trolled to an unimaginable 1.9% with consumer non durables reporting a -1.5% contraction(growth) from a 6% growth of last September and mining reported contraction of -5.5% The base effect and nature of bulk orders etc played truant with Capital Goods at -6.8% down over 1020 basis points from 3.8% growth in August.

Exports in October grew 36% only but will not limit bounce in IIP next month(October) Basic Goods grew at an expected 3.5% agst 4.5% in August while intermediate goods scored a low 1.5%. Consumer Goods grew 6% while Consumer Durables managed to grow at 8.7% though against a14% score in September 2010

MarkiT HSBC had reported a good tracon in the PMI figures at 5 with even Services PMI falling but staying above 50. The August IIP was 4.1% but observers had expected a jump in Utilities / even manufacturing numbers to a 4% IIP rate as per PMI indications and leading indicators tracked. Exports growth has slowed in October but remains a large $320 bln run rate to March while the trade deficit governed by the jump in Oil imports to a deficit of $19.9bln for the month

Infra output reported growth at 2.3%in the month September manufacturing PMI was India’s lowest at 50.3 PMI growth in October points to IIP recovering again in October with a good jump again in Capital goods..(no one likes the Capital goods series anymrore. one wonders if another redesign is planned)

September the dull month for IIP

With credit picking up in end September, the IIP figures for September trolled to an unimaginable 1.9% with consumer non durables reporting a -1.5% contraction(growth) and mining reported contraction of -5.5% The base effect and nature of bulk orders etc played truant with Capital Goods at -6.8% down over 1020 basis points from 3.8% growth in August Exports in October grew 36% only but will not limit bounce in IIP next month(October)

MarkiT HSBC had reported a good tracon in the PMI figures at 5 wqith even services PMI falling but staying above 50. The August IIP was 4.1% but observers had expected a jump in tilities / even manufacturing numbers to a 4% IIP rate as per PMI indications and leading indicators tracked. Exports growth has slowed in october but remains a large $320 bln run rate to March while the trade deficit governed by the jump in Oil imports to a deficit of $19.y bln for the month

Infra output reported growth at 2.3%in the month September manufacturing PMI was India’s lowest at 50.3 PMI growth in October points to IIP recovering again in October wi a good jump again in Capital goods..(no one likes the Capital goods series anymrore. one wonders if another redesign is planned)

India’s Trade Deficit See saw

Exports continued their healthy growth in September growing 36% but even as the trade deficit came back to $9.8 bln in September and imports grew by 20% only, the trade deficit is galloping to a $42 bln gap for the year at a $10 bln over run per quarter

The growth in exports, verified to an extent by data on port shipments (RBI:Governor’s Interview on B-UTV) is a welcome addition of $6 bln to India’s topline everymonth, coming to $24.8 bln in September after a $18 bln September 2010 

Going by Q1 ‘s example, as also Q2, 2 out of 3 months in the December quarrter may end up reporting a $15 bln deficit in trade each

India now expects to triple its global trade by 2025 and even pip China as largest trading partner in the

Taxi in Abu Dhabi / U.A.E.
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Middle East (Abu Dhabi) according to a HSBC trade conference in Abu Dhabi. Trade with Abu Dhabi is expected to grow to 100 bln and India’s overall trade bill $977 bln / $1T

Foreign Banks in India: The HSBC RBS Private Banking Sale

ABN Amro Bank in Dubai
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RBS had committed to HSBC towards the sale of all its 31 branches and 100 retail / wealth staff to HSBC. It is yet questionable if HSBC could have absorbed all 1800 staff which continues to operate as ABN AMRO in the country since License transfers are a throny issue that from the point of view of the regulator should not have risen as the occasion to sell in each case is in question.

Since the deal signing in 2009/2010 when ANZ lost to the HSBC bid in India and Malaysia, there has been speculation peculiar to the Indian regulator’s national requirements. None of the speculated objections have yet been resolved, additionally with RBS and ABN planning to come back to the country RBI has taken a harder stance on this apparent tomfoolery with buying and selling branches and networks . Among the first nonsensical results of immediate interest to RBI would have been the multiplicity of licences for the acquiring bank and the lack of branch approvals for HSBC once it as acquiring bank had surrendered the second licence per law with RBS. Even before the assumed non-event (buyers/sellers) though RBI has now found itself troubled by the fact that RBS wll continue to live in the country in isolation as also ANZ ( in its TV appearance by CEO Mike Smith on Bankers’ Trust – B-UTV) plans to remain only in institutional business in India. ANZ, ICBC have one branch each in the new avatar, the most planned by RBS in its new role as a exclusively wholesale player in the country.

Media reports make it clear that RBI has made a unitary objection on the sale – that of the 32% priority lending commitment which precludes any option without retail branches and in factas the new charter sugggests, new branches in Tier 5 and 6 town.

Priority sector requirements are not new and all the 32 license holders in the country manage the same lending requirement without their own branches in the rural hinterland. Obviously those wholesale approaches are not the objective of the Priority sector lending regulation.

Global evidence of parochial regulation

India’s own ICICI Bank is curtailing international deposits in most geographies as local regulators want such deposits to be ringfenced for local disbursals. This instance is unlikely to be an isolated one and a ringfenced national structure is already mandated for most banks but expensive to execute. The Indian regulator per force is under pressure to clarify  and safeguard India’s interests in terms of adequate capital for local operations which has been found wanting by banks as they feel strained by restrictive voting and limitation on branch licenses among others, as also their inability to compete with Indian majors in retail footprint

The Original Sale

RBS sold the ABN AMRO business it acquired in the country while keeping the Global Banking and Markets Divisions along with the Global Transaction Services it acquired from ABN AMRO headed by Meera Sanyal.

BS of July 03, 2010

RBS’ retail and commercial banking businesses in India house portfolios with a gross asset value of $1.8 billion(nearly Rs 8,400 crore) and have 1.1 million customer relationships, served by over 1,800 staff through

31 branches currently.

According to the terms of the agreement, 90 per cent of any credit losses incurred on RBS’ unsecured lending portfolio in the two years subsequent to the deal’s completion will be deducted from the $95-million premium to be paid over the tangible net asset value of the businesses.

 

This was later deemed to be a portfolio sale and RBS was not allowed to transfer licenses as the banks were not incorporated in India and were only branches owned by foreign parents The Stanchart offer for the same sale was considerably lower as it expected the regulatory run-ins to be discounted. ANZ that had earlier sold off its business to Stanchart in 2001 and ABN have planned a return to India in 2011 and again received licenses while being welcomed by their core consituency of customers in retail, do not expect to go beyond Transaction services and Capital Markets/Fixed Income / Syndicate lending

Other thorny issues still remaining to be sorted out thus the picture that emerges is the following :

1. Each branch still requires explicit RBI approval and none of the 32 players have been forthcoming in unitarily capitalising the India subsidiary for its leverage commitments as currently we all go by Internal Risk management approaches that count on a single Asia Pacific Balance sheet to sell loans to India corporates esp as the competitive advantae for us in Foreign banks is in arranging cheaper ECB loans and FC denominated swaps

2. Licenses being conditional to Priority sector lending apart , there needs to be dialogue between banks and the local regulator with the Indian operation commiting that it has the authority and the reach to complete all its India commitments and RBI observations. For example Swaps create unseemly leverage and banks do not resolve the same as per their own internal risk management where approvakls are already received?

3. Banks may feel stretched by the current requirements to commit 12 new branches in a year as are automatically approved with the 32 foreign banks surviving on 320 branches for their nearly double digit share in Indian banking assets and having avoided the changeover to WOS formats suggested in 2005 with INR 3 bln capital minimum . That this capital would have to satisfy basel and RBI norms on CAR locally queers the pitch for effective pricing for these banks and also in terms of global business sructures where entire regions operate on economics of large volumes that they will have to independently build in India.

4. The banks do remain commited to growing in India, HSBC for example and till recently Citi heavily recruiting in the country in retail and wholesale. Banks remain the preferred stock recriter of MBAs led by Foreign banks in India

5. A roadmap for ringfencing national operations has not been committed by BCBS ( Basel Committee) and banks have already calendarised ramp up of Capital per new standards till as late as 2016 (Ph II) and 2019 in view of the adverse strains on their global operations

6. Foreign banks have not been able to get RBI’s specific approvals for any request for voting rights beyond the current limitation of 15% though there is no such limitation on purchase of individual stakes by the banks. HSBC had earlier planned to stay with Axis Bank as partner but had to make do with the solitary ILFS Investmart purchase

7. New private banks are allowed FDI of 49% for 5 years and changes on voting limitations may be made in the Banking Regulation act as per demands. Many in pvt sector insurance also await allowing of increase of JV partners’ equity expected to be approved to 49% since the last 6 years but still hanging fire based on reform to holding limits acrossindustry per se

8. The impression of RBI as an archaic regulator somehow persists in the global bank offices as of last count in terms of capital commitments to India operations being recounted as Comfort letters provided proved to be of no later consequence for the banks

9. Even with local subsidiaries, RBI feels that Foreign banks commitment to the country is volatile with over 16% contraction in credit in 2009 and 8% in 2008 after reaching a so called “dominant” position in market share in 2007

RBI paper on Foreign Banks (2005) suggested a WOS structure be mandatory now for 0.25% of national banking assets or mor ein share (IIFL – RBI  paper )

HSBC global locations
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Living with high interest rates: How Banks will follow the script for India’s new growth – Part II

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The RBI proposal for making a 100% WOS structure mandatory for existing foreign licensees is likely to get the tax man’s blessings if the diktat comes through form the MoF letting Banks bring in unlimited Capital for the new banking company without any tax implications. It still leaves to the foreign banks to set up such WOS structures that bind them to 25% branches in rural unbanked centers. In the draft for new banks for example I do not believe rural unbanked is the term used and they may be just llooking at setting up next to the HDFC Bank or PSB in the village/town when they do get down to implementation. Also with Foreign banks have partnered themselves in Insurance the FOHC/NOHC structure will be invoked with nary permutations to let HSBC and Citi operate for the projected bancassurance incomes in reputed cross sell revenue burst yet to be seen here.

However Banks will have a significantly larger play than just habituating Indian customers to high rates (mostly on loans), to mobile USSD messaging, UID enrolling for deposit accounts and mobile payments interfaces With RBi close to the curve on inflation there is much more rate hike in India’s future till we can outrun that inflation or pull it back(not happening till midway in 2012) Social programs in the rural hinterland may become more common and apparently more sophisticated than the public sector loan melas of the 80s

Swabhimaan inititive or rural unbanked villages claims 70,000 villages covered in 2011 till now, while NBFCsoperating int he country are being re regulated to level the playing field in terms of prudential and provisioning norms while deposit taking remains the purview of banks and those already having such a license in the NBFC space while allowing NBFC s access to SARFAESI Acto to allow recovery

It is the urban market increase in consumption which is a fertile grounded seeded by the Private and Foreign banks with renewed vigour. With underwriting norms slikely to be ofllowed diligently at least for some more months to come, the higher rates may not make much of an impact on consumer disposition with Cars and Homes hoping to come back to the top of the shopping list sooner than FY12 end in six months

Contraction in bank branches in the US however and in fact everywhere in the developed world where branch interaction has been a much lower component since more than a decade back, the growth in superstructure may be discouraged by the higher rate structures for the banks themselves. This is exemplified by the transaction charge difference of upto 5 times in a bank branch (40p) as compared to an internet only transaction(8p)  An Asian Banking report recently suggested that Internet transactions in Asia are more than 1 in every 5 transactions including large monolithic markets like China

Investments in risk process and Trading systems and platforms will likely take uo larger investments on the banks’ part yet. However, globally some larger operations in FICC and Equities may be looking for less regulated centers than the freshly reregulated markets in US, India, and China and global expasion to SE Asia’s frontier markets and Africa may well shift  the invesment locus from India and China too and thus Indian regulators would have to sweeten the regulatory pie they have to eat at India’s party for some time to come.

The ideal for banks right now is the renewed strength of income from the Wealth segments in Fee and Advisory income, investment income as well as financing the luxury goods consumption channel that seems to have been fairly robust during 2008 and now. Even if retial was to reach an average of 33% to 40% of the banks’ income statements it could mean large jums for the banks’ balance sheets and for India’s consumption pie. Corporate Banking and the likely revitalised IPO market remains the banks’ most dependable source  of income even with a more conservative range of products for the dle funds that have been the banks’ focus for faster profits to the clients and themselves

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Is HSBC retail competitive enough to keep 6000 jobs? (Foreign Banks in India)

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HSBC is one of the strongest franchises in Asia and despite its global mandate of cutting 30,000 jobs in line with saving $3.5 bln and getting Cost income ratios back to below 50%, its staff in Asia has been pretty optimistic and straightforward in its plans to grow in the region. HSBC therefore is probably recruiting nearly 15,000 people in Asia this year As a close observer and follower of the bank I remain for example among probable candidates, the bank and very few of its competitors can choose from while recruiting in Asia. Deutsche Bank in Singapore and StanC and Citi in India and China remain other Regional Brands that feature as  Top employers. DB and these others even recruit continuously for their offices in London, New York and /or elsewhere in Asia from India not just internally but thur external hiring programs.

Despite the continuing strengths of Asian markets where a slow India and China still guarantee a near 8% growth for the region, many banks like StanChart , Citi and HSBC have found their own challenges with their 100 branch networks in India and even smaller ones in China. While new Chinese Yuan business for mainland companies and international investors has grown business in Hong Kong and somewhat in mainland China itself, Indian business for these banks has started in a renewed manner just last month with new focus on quality unsecured loan portfolios and continuing cash flow from Corporate Investment Banking businesses in India.

HSBC’s competition comes from entrenched players in its strong suit of Investment Banking. StanChart for example is part of almost ever outgoing FDI business from India including the two latest purchases by GVK GVK is probably considering buying more of Bangalore Airport from Siemens for control of BIAL and is also getting ready to spend nearly Rs 100 bln on a purchase of Australian Hancock mines for assured coal supply to its power projects under GVK PIL However that is another tale to tell.

HSBC also has achieved breakeven in its 50 branch retail operation and the investment in quality and service may yet return higher value towrds its 2013 goal of earning $1 bln from the region in profits. however, its 6000 employees may yet be on the chopping block and/or the bank may find it difficult to assimilate the army of private bankers and retail employees with its acquisition of ABN AMRO/RBS in India completing this year.

The competition in india in retail is varied and diversified. For example Religare may lead in retail broking despite HSBC’s big ticket acquisitions, Credit Suisse and Barclays still aggressively hiring in Research and investment Banking despite having been showing optimism on their emerging markets desk for over 3 years and not achieving probably as much as they wanted. HDFC Bank leads in Car loans from another era but the flight to quality may bring a new leader. ICICI Bank may no longer lead in retail high value mortgages but with a new Fixed / floating hybrid product it may yet walk a mile ahead of its competition in sales and as usual its skimping on spending on the service value chain for the customer may work as tactical strategy till quality issues sink it again.

Citi is going to be starting at a disadvantage however and thus i doubt if Stuart Davies would be in a hurry to cut his well established team as the Indian market again readies itself for a battle in retail deposits and lending, this time for the pie that is profit and not just Sales.

Foreign Banks in India: Looking cheerful again

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While Global results did temper Indian ambitions at HSBC and StanChart, tidbits confirmed from last month and anew show the magnetic pull of a 7% growth for India as the baseline factor.

1. HSBC is recruiting heavily in India(HT). With 50 branches and a retail operation that is almost profitable, HSBC plans to continue expanding its India footprint to a $1 bln profit by 2013. This 6 months saw it make $394 mln in Corp Advances and $451 mln overall in India, incl Investment Banking and Asset Management, no mean feat and Stuart Davies has a hard time recruiting enough, confusing watchers who probably just left the bank and more..

2. SBI’s results have been noted and HSBC Global has already put out a buy on the stock, raising its target to 2600(ET)

2b. Citibank is restarting its unsecured lending business in the country while HSBC continues to be careful in retail assets given large NPAs(BS) India’s Private Banks hope to restart the competition in the space with Axis Bank going after existing customers and HDFC Bank increasing the share of new customers to 25%

3. Emerging market funds see most outflow again for the third week and Paulson got out of more than 50% of his BofA and Citi holdings in June according to his 13F filings. All hedge funds filed their 13F and see idf we have the right analysis in quick time at advantages.us

4. Of the $3.2 bln leaving Emrg Market Funds $2.9 bln came from Asia ex Japan funds. Also in the first half of August FIIs have sold INR 53 bln in Indian equities Emrg Funds saw outflows of $14 bln  in total in 2011(DNA)

5. StanChart PE is investing a good $250 mln in MSM, 60% owners of Sony, SET MAX and SAB channels. StanChart PE is buyin g stakes of opvt investors including Jackie Shroff, Sudesh Iyer and Rakesh Aggarwal – and infuse fresh capital into the company. (TOI)StanChart profits in India fell 39 %in the first half

6. StanChart Economic Research  in general has committed to using the Dollar forty rule from the looks oof it committing rupee to an appreciation cycle till 2013(Kudos to me-self at the the Banking Intiiative). Equating Dollar to Forty rupees is uplifting, simpler and generally true for all investments spanning till 2014 and more

7. The New Private and Wealth head, Ananth Narayana at Standard Chartered confirmed his faith in the Indian Economy’s restrained performance being in a select band as repeated by many network commentators throughout the day today

8. He and other commentators also mentioned a pause in RBI September 16th policy, quite some noise on that. I would not mind another two rate increases. Been there India. And we will never outperform anything anyway, might as well not stay a lossmaking enterprise

9. ING Vysya raised rates a day after RBI announcement and HDFC Bank upped policy rates by 50 bps today in response to the RBI hike

10. SBI and ICICI Bank also upped rates by 50 basis points today, ICICI Bank’s base rate now a round 10%. While ICICI Bank improved profits year on year, SBI managed to increase margins, with NIMs improving to a never before 3.89% on a Rs 8 tln book

11. Indian Mid Cap Bank, Axis Bank is raising equity & debt from Foreign investors, with IFC chipping in a $100 mln

12. Citi India is ramping up its FICC and equities trading teams in India according to CEO Pankaj Vaish last week(IBN)

The key appointments include those of Rohit Dusad, who joins from JP Morgan as director of origination in credit markets trading; Aditya Bagree, who joins from Nomura as director of credit structuring; and Chintan Shah from Morgan Stanley, who joins as Vice-President for credit trading. In the past three years, Citi has helped raise close to USD 60 billion from capital markets for its Indian clients and advised on nearly USD 25 billion of India-related mergers and acquisitions, the American banking giant said.

13. Indian M&A scene has lit up Asia pacific, with Asia ex Japan reporting a renewed $270 bln in deals year to date (only M&A) out of which India has reported more than 10% at $26.9 bln

14. India’s foreign debt? India owes INR 4.17 tln ($105 bln) of which $66bln is interest. Look at this piece on delusions and economic fallacies

While Global results did temper Indian ambitions at HSBC and StanChart, tidbits confirmed from last month and anew show the magnetic pull of a 7% growth for India as the baseline factor.

 

Foreign Banks in India: Losing the premium mark in Delhi, Bombay

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Though Bangalore remains buoyant and probably by extension Calcutta and Hyderabad, I would posit that Metropolitan megatrons of Delhi and Bombay have quit on Foreign bank custom esp after the derivatives market wound down and limits on Swaps created business in Credit warned by RBI in June. Of course at both StanC and HSBC CIB business has grown Even Indian Banks have pointed to recent growth (HDFC Bank) coming from Tier II and Tier II towns ( which would be towns of 1- 5 lacs pop)

Stanchart produces $9 mln lower CB results

The India business of SCB and that of HSBC talked of static consumer banking income and/or loan book sizes. Asia’s GBP 6.8 bln ($10 bln) EBITDA for HSBC and $3.1 bln for StanC boasted of almost 80% Hongkong contributions in the profits for HSBC and the largest 25% for StanC with India coming in at $451mln (Op Profits) for HSBC and $378 mln for StanC. SCB extrapolates INdia GDP at 7.7% and 8.3% for the next 2 years.

SCB Op Proft or EBITDA is down 39% for the HY over the same period last year as income dipped 12% in India. Consumer Banking ex India grew at a fast clip for SCB and is $404 mln fo China , a relatively new piece of growth for the bank

For both banks markets in Hongkong, Singapore, Korea, Malaysia/Thailand and Indonesia, have delievred extreme growth on the runrate normally ascribed to a secular Indian banking market

India business will grow to $1 bln in Op Profits for HSBC by 2013 Hongkong business for SCB matched the groups overall growth in NII as China renminbi business grew on the islands of Hongkong for both the banks  with the India  CEO for HSBC Stuart Davis cautious in lending over growing NPAs

SCB’s deposits grew by 9% for the 6 months ended June 2010 Operating exepnses  in CB grew to $174 mln at a faster clip with continuing investments by the bank Op profit from India at $44 mln speaks volumes about the bank’s challenges in their largest market so far

Stanchart doubles Offshore WB, HSBC builds fee income worth $375mln

HSBC relied entirely on the CIB business to produce profits, wth $393 mln from Investment Banking and Loan income doubled to $78 mln as the business staying with the bank would be amenable to cross product business and insensitive to rate increases, being a part of the corporate’s business to banks and not the relationship as lead bank still in many cases. The Advances for HSBC are a mere $4.2 bln on its total loan book of $6.1 bln or INR 25000 Crores

StanC doubled its offshore income from Wholesale Banking to $185 mln but operating income (Topline is static for H1 2011 at$760 mln over $770 mln in the second half of 2010 WB assets grew in India by 10% and India remains an important market to break open for both the Emerging markets dominant banks

Hiring

Even with 15000 new jobs in Asia,  India is unlikely to be a big growth market for HSBC, SCB stepping in to wean away the common DNA as HSBC drags on consolidating RBS business and looks to India and China out of their Top 5 businesses. all in Emerging MArkets like Mexico, Singapore and Malaysia

StanC’s India costs have been growing due to the extra hiring planned for the India business where HSBC will be managing 300 new ABN AMRO staffers in Bangalore alone StanC also delivered a much healthier cost income ratio globally

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Happy Thursdays! Inflation inches down, Europe cracks

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Not much going on for this report thought as the Markets are sstill at 5500-5600 not looking to move much higher. Inflation on Food for the week ended July 16 reported a fairly reasonable 7.33%, and even Primary Articles tclose to breaking lower from double digits at 10.49% but with Fuel inflation stayign on at 12% worries still continue. Bank Policy Tuesday rocked some guns with most Economists sinking their teeth into the policy after the deed, while Banks and Autos spread losses alongwith the newly crowned real estate sector.

The Debt deal drama in US is still on and  the weak dollar putting paid to most results in Europe while US earnings look bright and sunny, even the banks reporting an ok result for each

European Banks may have cleared stress tests but all hell has broken loose otherwise, most reporting half the earnings from last year and Credit Suisse, and HSBC announcing fresh job cuts today ( 2000 and 10000 respectively) In fact except for Shell the European Earnings today from the big companies also pointed to a very mosrose economic situation for the continent and the British banks reporting on Friday already a lost case.  Bellwether Siemens and the largest Chemicals maker BASF reported subdued earnings while unlikely European Pharma Giants Sanofi and Astra Zeneca reporting better than previous results. All these would vbe reviewed in dsue course at advantages.us but the Indian pharma midca story looked like it was getting better with Glenmark and Lupin reporting good results as molecule approvals for $1-2 bln drugs keep coming through and each adds poential sales of $100 mln to each company

Returning to India, with bank rates in a new orbit in a week after day before yesterday’s policy announcement, prospects for growth have dimmed up and its time to be cautious though India remains insulated from most of the global currency troubles outside establishing a steady rate for the Rupee and a healthy exports target.

Managing credit growth in Asia

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Global banks are planning cut-downs slashing salaries and staff to gain back lost ground as revenue take a dive in 2011(advantages.us).

Interest rates rise in India on the other hand is creating another bag of worries for banks like HSBC whose demand is very much dependent on prevailing rates vs a vis their offering. Public demand for credit in India however has been shored up by NBFC loan demand(up 56%) and that is personal loans(unsecured, 17%) as public sector banks hold on to larger market shares in the domestic market. 

As of June 17,  when outstanding balances rose to 42 lakh crores ( a dip from an even higher 44 lakh crores in May) and deposits grew to 54 lakhs crores ( 56 lakh crores as of May) the incremental credit deposit ratio had come down to 44% from 88% in March, implying that banks would now be more conservative in the CD ratios even as higher rate deposits interest payous do not mean any significant dent in Net Interest Margins.

With Credit growth at 21% and closer to 22% for the quarter, Banks are set for a surprise showing in the quarter. However HSBC and Stanchart would continue a slower, tougher and less profitable showing along with other MNC banks for their urban 10% market share as swapped credit ratios were higher than 25-26 in relation to their Net worth in March

NBFCs are being used as intermediaries as 30% of NBFC loans get securitiesed by banks and realtors make a bee line for NBFC loans that come at a similar cost in the higher interest rate regime when compared to any bank offers if were still available to real estate. 

Happy Thursdays! The India June Reports on inflation and expectations

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with the Friday tray of goodies gone..diesel and LPG are upgraded to almost profitable for OMCs. India inc is on a roll waiting for the fuel inflation to build up in the July treports. Stock market volumes across India, US, China and elsewhere have been down by 10-30% ( in the US NYSE now trades 17 bln shares a day) . However, the commodity prices going down have helped the cause of investors vis a vis inflation hawks and the market is showing a lot of skin and a fresh round of global FII recommendations for the next half of the year in India

Last year around the same time, we had taken up increases in the price of petrol and the cascading effect on inflation was pretty tough scare for India Inc. This time Diesel is even more directly linked to input prices thru freight but everyone would be happy if the RBI kept raising rates allowing a sneak vision of even a 20000 target for Sensex. But I would not be fooled with food inflation still 7.7%, fuels still 13% (before the impact of 5-10% hikes on Friday) and inflation still 9% for India Inc (week ended June 18, 2011)

Also, it was great listening to Wilbur Ross on the differences between European and American Banks , the critical being that Our credit deposit ratios never exceed 75-80% unlike Europeans which thrive on 120-160% Credit Deposit ratios but Cost Income ratios are intact at less than 60% ( Of course that does not include global survivors like HSBC and StanC)

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The Indian takeover code and Banking M&A

Thoguh the creeping acquisition route in the new takeover code allows holding up to 25% in the acquitree and then making a mandatory open offer, Banks’ experiences with RBI in such acquisitions have been testy and short on discussion. Current and likely future regulations with RBI limit the voting stock in a bank to 5% despite alllowing 74% FDI in any bank.

Also its view point on possible acquisition candidates for JP morgan and Goldman Sachs among others is not a known dfactor and they may want to put in some extra pprovisions even if they ever do allow voting stock of more than 5% . For example it may attempt to ask acquired banks in these cases to ramp up to Tier 5 and 6 town objectives for new banks and also fulfil social objectives akak priority sector lending which has kept foreign banks to lucrative OBS products in India 

2010 also saw foreign banks shrinking their balance sheets and staff in India bvy 15% and 5% respectively

HSBC plans for India

Though India is not one of the Top 5 markets for HSBC per its latest Strategy notes, it is still a crown in the Jewel as the bank plans to grow 18 markets in its latest 5 year strategy coinciding with Stuart’s coronation on the island. (Check advantages.us for HSBC strategy series’ with Gulliver, Stuart and Iain Mackay) 

Group General Manager Naina Kidwai  did make a splash on Bloomberg UTV around Diwali last year and our tweetseminar of the same is also on advantages.us (The Banking and Strategy initiative)

Press reports in march and as late as last month indicated HSBC India plans to grow its franchsie to a profit pocket of $1 billion from India.  

Deutsche Bank India reports growing income

The indian unit reported last week on June 13, 2010. Fy 2011 Income rose to $700 mln ( Dollar forty rule ) up by 20%, adding $83 mlnin Capital to India operations apart from the winding down of the Credit Card unit. The bank has been able to acquire premium realestate in India ops incl Cyber City Gurgaon. The banking company has been active in Debt Capital Markets deals jsut as Naina Kidwai’s HSBC starts showing up in ECM syndicates. The latest Reliance bid however has HSBC in the deal signage

DB’s book size in India would still come to INR 350 bln or $8.75 bln and Non performing loans stand at 1.24%.

The ubiquitous note on Foreign Banks in India

The press release , yet a idiosyncracy as many units report directly into risk and central ops at Singapore, London and Amsterdam for Foreign Banks and subsidiarisation is mooted not advertised or condoned by global banks. JP Morgan is also looking for M&A candidates which would probably be 10 times the siz e of a DB or a Citi operation in the country once regulations provide for the same. Similarily

.. the results cover the performance of the Indian branches of Deutsche Bank and do not include results of other Deutsche Bank Group entities in India covering businesses relating to equity broking, asset management, primary dealership, corporate finance, outsourcing or the NBFC. (Y!)

Global Bank India 2010 reports

Deutsche Bank
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In the global banks results season analysis and reports , a mainstay of our success we had found special place for SCB’s reports whence India had a major share in the Half year and full year balance sheets. Stnchart 2010 reported a $1.3 bln profit from India, growing India profits by 15%

HSBC similarily reported a $750 mln year for March 2011 for India growing profits by 88%. This compares to $366 mln for Citi with 42 branches. 2012 figures include retail business from ABN/RBS branches

Deutsche Bank comes in a late fourth, excluding sale of its card unit. Its profits amount to $152.25 mln for its retail banking and Corporate transaction banking units. Citi’s shares in trade and corporate lending amount to 6% and 14?% respectively Stand alone financials for India might become fully available as bank subsidiarisation gets in and reference financials are also made available with RBI

Credit Deposit Ratio for Citi as a norm may come to just around 60% in contradiction to their stated subdued lending in India compared to a Credit deposit ratio of 75% again we are researching aavailable data slices for more detail

What’s up with ING and Deutsche Bank in India?

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Even as ABN AMRO gets ready to re-enter India and ANZ is ready to come back to reclaim their territory, the new look branch and retail superstructure created by ING Vysya Bank and Deutsche Bank in India continues to look for higher volume business. ING is listed as a domestic bank while Deutsche Bank is growing under the global structure with South Asia and Asia independently managing regional operations. Both these banks are focussed on retail banking superstructure. Global Risk pools at ING and Deutsche Bank may be challenged by the bank subsidiarisation regulations, though both banks should be inherently ready for it. New look Indian Private Banks like Kotak had been unable to compete effecively with global bank preceptons and all make do with a stagnant marke without personal credit and asset management/bancassurance businesses.

New look Yes bank may yet break the mold however and expand the market while IDBI moves with ICICI Bank and HDFC Bank to rural marketspaces and Tier 2-3 towns to build on their distribution and public heritage.

Bangalore, Jan 2009 - 02
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Stanchart starts spreading the word

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Phase II of global MNC strategy in India sems to have started with a clean slate. Bigger players in personal wealth and Private banking space come from the top 3 in India, among Stanchart, HSBC and Cii. Smaller offshore franchises like Socgen do not seem to have growm. Deutsche Bank also planned an aggressive expansion in India, though in retail to $1 million deposits. Stanchart toook a new public PR route for its Private Banking appointment and it was refreshing to see banks sharing staff movement information.

StanChart’s Jaspal Bindra was appointed Group Executive Director in 2009 after a good stint as CEO of Asia during the crisis. TS Shankar was appointed as South Asia Treasury Chief earlier in the year. In the latest appointment Sandeep Das comes from Premier Wealth prodct to head Private Banking. Global Bank s are looking at asweet spot in retail banking for ‘higher’ networth individuals with deposits of nearer $1 millon. HSBC has also recently averred the same to be a profitable segment

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HSBC Credit Cards up for sale in India too

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HSBC credit cards franchises in India are seemingly up for sale. Indus ind had just grabbed the Deutsche Bank franchise in India for $50 mln.

Citicards have attrited from 5.8 million customers in 2008 to 3.5 million customers. Indian banks like ICICI Bank and HDFC Bank are holdng at 2.5 million cards each right now. The credit cards market witnssed a lot of aggressive marketing tactics since 2000 onwards (when ICICI BAnk made an entry) as Credit hungry metropoltan customers were few and far inbetween. The indian franchises maintained a regulatory and marketing strategy that was distinctly split from its global franchise yet with reliance on usurius interest rates prescribed for rollovers, and high delinquent rates, keeping the business profitable was not enough.

HSBC had also clamped down its Personal Lending business for a long time since 2008 as sales practices in unsecured loans included distributer collusion and missing underwriting goals wilfully. The practices are yet condoned by the Indian duo though they have been consolidating on lower numbers in this business since 2008

HSBC strategy might well agree with the latest studies placing India as 16 out of top 20 emerging markets. The bank has found regulators in China and India tough to ply and not enough rich customers. Stnchart also faces challenges after two resilient years in 2009 and 2010

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Happy Thursdays! What else to expect..(Early Report)

HSBC in Kolkata
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Inflation WoW came out as expected at 11.7% for food inflation, 12.86% for Primary Articles and the consolidated number at 9.02% ahead of the unscheduled eGOM meeting for Diesel and Kerosene price corrections that will keep inflation up. Expectations are normalising to a higher level and in an hour or so the bank policy for the rest of the year may become clearer with the Bank rate 100bips above the Repo rate and currently at 8.25% (Repo 7.25%) likely heading to a above 10% figure andd more as imported inflation and the one carried into input prices squeezes profitability factors in yet bereft India forver waiting for new investors..This article will be updated later throughout the day

HSBC and Stanchart have come out as the only ones carrying forward from here being used to a Rupee Trillion of business assets each in the country. MoM inflation WPI figures had earlier come to 9.06% on Monday night and markets have started correcting from 5500, results a few weeks later probably accelerating the down move this time and the yield curve moving after the announcement further higher from 8.3 to even 9 – 9.5 % in the next quarter or so. Banks’ pricing will move as also for deposits after a couple of months if and when inflation stays at 9-9.5% and RBI makes a new set of more quicker baby steps just to stay on top till the rates start moving southward in 2012

The monthly inflation figure saw non Food core inflation move from 6.5% to 7% Month on month and base transmission is on to manufactured articles as car prices were hiked this week while FMCG / durables keep playing with their own retailer economy.

Happy Thursdays! The India March Reports on IIP, PMI , Inflation and the year ahead in tweets

After the hour: Exports came out with even stronger growth for India clocking 34% higher at nearly $24 billion for April, maintaining the new heady run rate since Jan 2011. Imports continue to grow at 22-27% higher to $34 billion adding $10 billion to the monthly deficit but the higher exports making up for a long lost impetus

 

In tweets       indiaseminars In tweets  
                   Food Articles Inflation down 85 bps at 7.7% , Primary articles down below 12%.  
                   marginal improvement in non-food but India story survives

 In tweets  

India IIP consumer goods growth healthy at 7.3%, PMI steaming at 58  

 In tweets  

India IIP 7.3%, basic & intermediate goods stuck at below 5% but Cap goods, Utilities back at 12 & 9%, despite high yoy comparisons in 03/10

 In tweets  

Emerging Markets should continue raising interest rates | Advantage Economics | The Banking and Stra… 

 In tweets  

There is no QE2 unwinding when June comes 

 In tweets  

India’s new look Infra resources now a multibillion industry looking to ECB funds regularly Post:  WP:

 In tweets  

Neglecting India’s infrastructure preparedness a travesty..for the investors who lose out 

 In tweets  

banks back in the main tiles today, don’t misss them..

 In tweets  

India Earnings Season, all highlights that matter ..

 In tweets  

Goldman Sachs, JP Morgan still the best traders, is there a second tier that survives? Isn’t it time you followed China.. 

 In tweets  

NSE, BSE continue to look eager to for a “deep dive” in mid market trades

 In tweets  

An eventful global Wednesday yuesterday with HSBC, Rajaratnam

 In tweets  

BHEL receiving $400mln for 1.26 GW capacity supplied to Iraq (govt )  

 In tweets  

sonam kapoor at Cannes in designer clothes by Rhea – India’s Ms World story is truly overrr

 In tweets  

Will this 300 million share $9 bln AIG offering in IPO also shift to Asia again?

 In tweets  

Cong back with a bang in election results tonight except in TN where it is still counting Rajahs on its banknotes

 In tweets  

india gets its own Competition law allowing M&A below $1 bln t/o without verification for monoply

 In tweets  

Devyani International is planning to invest into 200 new restaurants across KFC, Costa, Pizza Hut in India post-IPO foll. Dominos, Starbucks

 In tweets  

Indian Retail Lifestyle extravaganza: Pizza Hut, Costa’s Franchisee in India going public for $200 mln, investing as much as Pepsi itself

 In tweets  

India Pvt Sector Insurance: MNYL valued at $400 mln for stake sale to Axis Bank  

 In tweets  

HSBC’s Strategy day could be an example for BofA too.. | The Banking and Strategy Initiative 
 In tweets  
Rajarathnam guilty on 19 counts- The extent of insider trading in the Financial Markets|The Banking and Strategy Initia…

Insurance Dropzone – Part II

Depression has changed a few facts in Insurance

New players like Reliance and old alike like LIC and ICICI Prudential, Axis planning IPOs ( rules require 10 yrs of Operations) _TYY4 less than 10 seconds ago from web

New players like Airtel have been non-starters _TYY4 3 minutes ago from web

Other players falling behind include quasi Asset management peddlers like ICICI Prudential and WL players like New York Life _TYY4 4 minutes ago from web

LIC held 40% share in the new business in 2007 and 56% in 2009 _TYY4 5 minutes ago from web

Shikha Sharma has joined Axis Bank as MD and ICICI wants a unified holding company alongwith SBI to manage as part of the bank!!

Indian Insurance Market: DLF to get out of Insurance when buyer is available- AIG, Prudential turned down _TYY421 minutes ago from HootSuite

Apna Bharat Mahaan – More India Trends:: Swine Flue catches Twitter http://tr.im/vIg0about 1 hour ago from TweetDeck

RT @mashable TWITTER PURGE: Top Twitter User Unfollows 106,000 Peoplehttp://bit.ly/3IMizabout 1 hour ago from TweetMeme

Trends in apna bharat mahan – It happens for Twitterindia Bank strike – Twitter Searchhttp://ow.ly/jfp1about 2 hours ago from HootSuite

Trends in “Apna Bharat Mahaan” Twitterindia speaks for Inflation down – Twitter Searchhttp://ow.ly/jfoJ (DON’T TOUCH BIT.LY) about 2 hours ago from HootSuite

I think someone shd check the bit.ly bug: they don’t shorten the complete url on search.twitter about 2 hours ago from HootSuite

Last but not the least Twitter India speaks on the RIL RNRL gas dispute http://ow.ly/jfnJ about 2 hours ago from HootSuite

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Insurance Tweets (India) :: Midweek Dropzone

  1. New players like Airtel and HSBC have been non-starters _TYY4less than 10 seconds ago from web
  • Other players falling behind include quasi Asset management peddlers like ICICI Prudential and WL players like New York Life _TYY4half a minute ago from web
  • LIC held 40% share in the new business in 2007 and 56% in 2009 _TYY42 minutes ago from web
  • Life Insurance Corpn alone holds a book of $64 billion in investments including double digit figures in unclaimed funds _TYY43 minutes ago from web
  • Additionally, 6 pvt Pension fund managers are mandated to run state owned and independent pension funds _TYY46 minutes ago from HootSuite
  • 16 private players in Life and 11 in non life _TYY46 minutes ago from HootSuite
  • Motor and Health makes 50-60% of the non-life Insurance segment _TYY47 minutes ago from HootSuite
  • Insurance in India had last grown to $41 billion in 2007, Life marking $36 b7 minutes ago from HootSuite
  • Indian Insurance: Bajaj Allianz, Metlife and Aviva safe in India till now _TYY412 minutes ago from HootSuite
  • The Foreign partner can bring up to 49%? Insurance Reform stuck in the middle _TYY413 minutes ago from HootSuite
  • AIG wants to sell off Indian Life Insurance stake – We’re safe with IRDA watching _TYY415 minutes ago from HootSuite
  • RT @zyakaira: Indian Insurance Market: DLF to get out of Insurance when buyer is available- AIG, Prudential turned down _TYY418 minutes ago from Plaxo Pulse
  • AIG wants to sell off Indian Life Insurance stake – We’re safe with IRDA watching18 minutes ago from HootSuite
  • Posted via email from The investment blog on Post

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