India Morning Report: Markets jiggy jiggy with the promise of a new government

Investors are in sync with the BJP pandering interests looking at the ‘younger’ Modi lef new government for lasting game for India Inc. The Pharma index is down and banks have yet added a measly 300 points on the Bank nifty led by ICICIBANK, HDFCBANK and AXISBANK but mostly the nbfc / Financials as muthoot and manappuram lead with Bajaj, IDFC and LIC Housing Finance for the less than half dozen licenses to be issued. F&O bets will likely reward unidirectional risks with sold puts continuing to lock the market sentiment after a week
of rest at 6500.

Today’s morning session would have seen the most spectacular volumes at the best premiums before the 6500 strike wound out to lower risks and continues to interest incoming bulls.

India Morning Report: Markets gain confidence in the rally above 6500

As expected on Monday, irrespective of weaker global cues as the Dow travels back from new highs on weak Chinese follow through, sold puts have moved up midweek to 6400 levels on way to making a bottom support at 6500 itself before the end of the week. Mislaid punts in old Economy stocks like L&T and Maruti provide market shorts ready ‘bakras’ to support bigger longs in the rally segment favorites with PSU banks, tired from all the browbeating are also ready for a short short and BOB is teetering at new 650 levels in March.

BPCL turned out to be the surprise winner as ET Now also highlighted, gaining 20% in 2014 as PMCs and Oilcos caught up with neglected mispricing in the first six months of the rally from the Rupee’s endless bottoming in the last week of August as the Rupee leads the global charge to stay relevant in a post taper world.

Along with the continuing winning stock specific plays in all the new consumer stories of 2010, Just Dial’s F&O inauguration may well be one of the sterling performances that mark a lifetime winner as Titan, Maruti and L&T head for the dumps.

SGX Nifty  continues without a hint following Nifty to its close yesterday unable tpo provide cues to the Indian markets as FIIs continue buying, adding another INR 14-15 Bln on Tuesday. Asian markets opened exceptionally weaker after a Dow falll overnight as they remain sensitive tio the situation in China and need a significant depreciation in the Yen in 2014.

IDFC remains a superb trade and the expected corrections in ICICI Bank and HDFC Bank and thus the Banknifty continue to elude any other buyers waiting as the stocks remain poised for a big upward push from 1100 and 720 levels, FII trades switching the bottom of their range to 6400, writing 6400 puts even as Naked 6800 and 6900 calls continue to get more OI now instead of Call writers who can see the end of the rally before taking a position despite higher PCRs.  A hidden Short Straddle/Strangle ranging the market between 6400-6600 may well win the day ( Bloomberg F&O had a 6300-6800 recommendation on the 12:45) in March though it is still not the recommended trade, Call writers likely though to be not penalised with global volatilities at extreme lows . L&T Finance could likely catch fire from here as goroudns are laid for the trade on new bank licences limiting itself to just key candidates.

Only 35% of Indian Cars are compliant with new mileage efficiency norms applicable from 2016. Exports are down not just in Precious metals and Jewelry but also in Pharmaceuticals. From all visible indicators, Hotels and Airlines are coping well putting the almost recessionary two year spell behind them with double digit rate increases and new fare discounts respectively. EIA yesterday also confirmed that Crude prices will remain low till end 2015 at least while Natural Gas is likely showing an uptick even as Copper leads the metals down as usual at the start of a new Chinese year spooking the browbeaten sector needlessly before the murky waters provide real hints in Chinese take outs two months from here.

Questions on Indian Exports however, seem real as Indian Exports refuse to break the strangle hold /saturation around $27 Bln a month mark and FDA continues to eye Indian export consignments with due suspicion. FIIs may also be done with debt buys in India for this segment. One has a feeling the next month’s elections may not return a unique government mandate but are likely to see the biggest turnout in recent history, with more foreign Observers looking on curiously, Crimea and Turkey, not tomention China and Russia underlining the unique prism of stability offered by India.

IIP and CPI data releases during the day set the ebullient tone for Policy day next Tuesday /Wednesday for Governor Rajan.

India Morning Report: At the top, VIX = 18, NSE Nifty = 6535

DIIs are again trying to correct the market levels hoping for a bigger correction sooner than expected as markets having scripted a recovery trade from all time highs of 6500 level look to executing the same fueled by FII investments. Hopes of a mild correction in Banknifty continue as trades from 12000 levels in Banknifty are also stymied by the lack of positive PSU trades, SBI and BOB still counting as fundamentally short picks. PSU Bank Capital plans are likely to strain Government finances as Insurance companies also reach their sector exposure limit of 25%. It remains inadvisable to increase sector exposure levels from 25% as well and the problem is likely to get complicated as many PSU banks are unlikely to stop NPA accumulation at the 100 bln mark they magically topped up to in December 2013.

Meanwhile the Powercos (Distcos) supplying to Delhi have a long expected bonanza in regulatory assets allowed to be claimed by the State Regulator (DERC) (–see BS lead of date )but apparently the price rise and yield is already been priced into Rel Infra and Tata Power ( Tulsiani)

The VIX trade in the meantime flies off the handle at a tepid 18, the move from 14 to 18 completed in all of two trading sessions on Friday and Monday as Option writers finally got busier and naked calls and shorts covered out at Monday highs and markets continue upward. The PCR also is likely to be stretched at best to 1.30 and till then considerably larger highs could be established for the markets to return toa as indeed foreign buying of INR 16 Bln on Monday is likely to be followed by more such thrugh this week with many shortlisted stocks showing new stamina including Bajaj Auto which is likely to go up to 2050 levels if not 2150, Bharti which is still at  305 levels and can trade up to 335-345

Buying opportunities in ICICI Bank and HDFC bank would be grabbed by the markets though shorts re likely to succeed in Axis Bank as well, with its NPA and management problems unresolved. IDFC is one of the rare scrips that offers liquid trades witha 20% range from current levels on the long side to under 130 levels and YES Bank is also still a big gap from its earleir high valuations of 6000 valued  on the same economic scenarios back in 2011 as India repeats its unique performance twice within th single minded slow plodding recovery after the banks broke in 2008

Reliance however seems saturated at 855 levels and GAIL seems to have been ignored unnecessarily at 355 levels as Pharma is likely to be ignored till the end of the week Cipla headed to below 350 levels, Sun to 580 and probable 1950 marks for DRL while domestic producers with an export portfolio like Glenmark, Cadila and Aurobindo Pharma are likely to get a fresh batch o f long term investors from current levels itself

The Rupee’s trades at below 61 levels , opening at 60.70 in the morning are likely to be followed by better and lower yields in the Bond markets as investors follow the currency buying with some debt investments in India and hopes for an investment cycle upside to India increase with easier availability of “ECB” debt

One should choose pedigree and portfolio when choosing infra stocks and not follow for leveraged small promoters as deal wins in the space almost threaten the existence of such corporates instead of improving their chances given the debt raising limitations

Infy and TCS are already topped up in investor portfolios and current falls are fundamental revaluations and not much institutional trading is likely happening in the two stocks right now

The 2010 consumer flotation offers including Talwalkars, Prestige , Page and LL remain premium stocks with Thomas Cook for FIIS looking at sectoral picks

 

 

 

 

India Morning Report: The Rupee now counting 63..62..61 , the Nifty counting 5900..6000 ..then?

The PCRs are already hanging by athread. But the long seen unloading in IDFC seems to be at an end with FT announcing investibility changes in IDFC and HDFC for the rebalancing from Sept 22. IDFC investibility is down to 54% from 74% and HDFC likely to see $208 mln inflows (JPM) from investibility rating increase from 74% to 100%. IDFC is also up 7% on the far end to the big story and is likely to move up with its close association with infra debt like at JP Assoc also relieved by Manoj Gaur’s latest sale of a 4.8MTPA Gujarat plant to a now 59 MTPA Ultratech under the Birlas (KM)

Meanwhile the index comfortably opened the sultry day proceedings at above 5900 and the Rupee almost tore into 62 levels before retreating towards yesterday’s day end levels. Friday’s 6000 level run  is thus still a given though the markets are not seeng serious buying right now and is not yet under the bullish impact of such salubrius India winning strategies as Import substitution. The $10.9 Bln deficit, a very respectable low given recent scores since 2009 is however still near the Post reform highs than the average rate as could be assumed by India Investors and the $75 -80 Bln trade deficit targeted may well be just par for the course if India Inc does achieve it, with Gold imports already under 1 MT in August (650kg)

English: Panorama of Sachivalay (Gujarat Legis...
English: Panorama of Sachivalay (Gujarat Legistative Assembly) at Gandhinagar (Photo credit: Wikipedia)

New layers of investors returning to the markts however muddy the prospective recovery levels of the recovery, some like Kotak expectng the Rupee to top off the move at 63 itslf. However with the 5th day of rally past ysterday with just minor scratches, today’s close may also be positive and selling 5900 calls are likely to be beaten before day end even though the markets are in an extended short covering phase through this week. IT stocks are nearing fatigue levels, cntriuting to India’s bullishness in ameasured move avoiding days of Rupee depreciation as they target longer term portfolios again, and markets now actually prefer Auto and other performing Economy stocks that are in cycle and not tagged defensives. Before the news of war in Syria died down $151 Bln was already the bill for Indian Oil imports in four months and that turnaround with lower Oil levels could see substantially much more sustainable interest in energy stocks

High CPI and negative IIP reports due today should worry no one as markets resume to wieh in on the fact that Foreign investors will likely keep India in th center of their Global portfolios. No there is virtually no risk of India aplying for sovereign debt default in the coming days.

Morning Trading Strategies – India September 10-14, 2012 (Day 2 – Tuesday)

 

State Bank of India Logo
State Bank of India Logo (Photo credit: Wikipedia)

 

No do not do that. though smaller targets that Ashwini Gujral has suggested work, you never know which short won’t work and thats a good investment on the long you are switching. Of course I refer to the markets enticing show of what’s left in India anyway and exiting by the back door for the show is over kind of morning with dear networks taking turns on shorts for day traders. Yes Bank could very well come back to 320 and IDFC has already shown enough to stick to 122 levels than go back to 114 both indicating that the supposed over emphasis on both banking and infrastructure financing is unlikely to go away and REC and PFC are already at encouraging levels for an uother upmove.

 

We do not expect markets to go for the South side vacation day traders are so fervently hoping for.

 

We do not expect markets to go for the South side vacation day traders are so fervently hoping for.

 

ITC is a buy again at 253-257,  More IDFC can be accumulated at cirrent prices, ICICI Bank is a good buy but the stock ill run below 900 on some quick performance concerns regarding expectations on NPA portfolios, and restructurings as well as business segment portfolios the firm operates without any regard for the consistent high NIMs  and quality credit pull to the franchise.  SBI stock similarly awaits a big bang news before a new positive target thus making a good upmove unlikely while big news is unlikely in this quarter or next, banks having stabilised a volatile operating scenario

 

 

 

IDFC Recommendations off the mark!

Not that many are on the mark, being based on fundamentals alone and not able to find a fair hook on timing. However the FMCG and Health calls are fine as a sectoral calls and I disagree with both exits from ITC and ramping on new Henkel owner Jyothy Labs. Both recommendations define  a very different time horizon than the market horizons currently and this particular rally is obviously not a choice for the house.

Jubilant Foods and Titan shorts are not going to work for long either. the infra NBFCs in Power from PFC and REC to PTC may take a break here as well, IDFC could restart on the run from 137 or 139 itself and has stabilised by itself since the morning.

Quantum, strangely is better placed with today’s picks ( on the ticker) is it just RELIANCE?

UPDATE::2.06PM:: The Markets agreed with both and infact profittaking in ITC suddenly reversed in minutes of this post being published and ITC recovery main part of the run before the CAG report dampened Power stocks like RPOWER and IDFC itself came down after.

India Infrastructure Series: IDFC prospers in the new Economy :: 2011 results update

(Press Con/Analysts) Profits in the core business grew 40% with loan book now INR 480 bln ($12 bln) at 50% higher, the support from fee based businesses have marginally declined as AUMs in the AMC decreased in FI outages and falling NAVs.

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