India Morning Report: IDFC gets a bank license, India goes to Polls, Sun buys Ranbaxy for $4B

Though the trend is no longer on the up and up, BS revealing that IT and Pharma earnings have reached 20% of India Inc scorecards in 2013, doubling in 3 years on the depreciation dragon that caused a 14% run on the rupee just in the December Quarter. Meanwhile the Rupee is ratcheting back to 55 levels. According to RGR, the threatening levels of the Rupee appreciation start near 55 where it is overvalued to even 50. Remittances from the Middle East are flowing in mercilessly , leveraged by 5% loans in dubai and Abu dhabi as NRIs continue to fuel the investment boom’s precursors almost like any other Fed stimulus (QE)

However, as traders picks have shown in the week gone by, almost all shorts have been closed out and a further upmove for stoicks is not ruled out from here even as PSU banks and leveraged realty stocks like DLF remain outside the reach of good news and hence hold back most of the trading capital. As mentioned on Friday, March closed with $3 Bln inflows and almost two thirds is in Debt. A modi rally pre elections is scored in at 7000 as he steps closer to an absolute majority but it may prove over ambitious even for the NaMo juggernaut and markets may accede to pleas for a reaction this week before or after 6800 instead of hitting 7000 before counting closes on May 12. Assam and other NE states go to polls today

Bank Nifty has done creditably in this rally at 12550, without flatulent acccession by PSU stocks that have tripled NPAs ionthe Banking system adding INR 65 Bln NPLs to INR 3 T in Gross NPAs this quarter. Apparently metals continued advancing last week on news of a Vedanta upgrade to stable by Moodys, finally a piece of good news for the merged Sesa Sterlite and the acquired Hindustan Zinc

Arun Shourie and Arun Jaitley made the customary election time appearances for the party and are unlikely to be part of the governance framework in a Modi government that  has also sidelined MM Joshi, Yashwant Sinha, Jaswant Singh ( standing as independent from Barmer)  and son, even as LK Advani made a reasonable comeback on Modi’s behalf on the weekend as Modi asks for a personal vote for PM in the final stage. Sonia and Rahul also continue through a tough election schedule, made grueling more by continuous adds in Election surveys and a virtual estoppel on government business

IDFC’s bank license is indeed welcome for the strong business model of the company but as it starts running up to a grueling 18 month schedule to conform to all guidelines required for executing its license, most investors will be watching at current levels as a plan for reducing FII stakes to 49% is also confirmed within the new NOHFC structure for the bank. Bandhan was the other licensee. Most NBFCs in the fray including L&T finance which fully well knew the limitations a year ago, led the mid week breakdown as the RBI points to existing NBFCs and corporates to explore a differentiated licensing model. Policy day macroeconomic report for the quarter showed a limited recovery underlining the unlikelihood of any further improvements in RBI stance as recovery remains limited to fringes of the economy and a panic over the incoming government’s reform stance slowly takes hold during the crucial polling month

The mega deal announcement by Sun Pharma, taking it off its Japanese buyers for $4 Bln is still being digested by the market as the ramifications are mostly negative for Sun Pharma unless the game plan from the group is cogent and quick acting

Yes Bank is still a buy at 423 levels. Market indices are likely to continue adding straddles in the 6500+ ranges this week, unlikely to allow a sharp correction except for other news.

 

 

India Morning Report: IPL gotchas, as India markets work to stay in at 6600

Gavaskar will probably take over as BCCI chief for the IPL 7 “bat-arounds”(Whack-a-mole) as CSK and Rajasthan Royals shutdown could see sentiment spillover to cash equities and a 30 edition IPL in the UAE as suggested by the Supreme Court a body blow to the sport. India Inc in the meantime continues to enjoy a brief respite from discussions of continued troubles for India as investors return to one of the world’s deepest markets, markets staying the course now at 6600 levels, keeping gains and sentiment firmly taking out 6500 straddles to new bulls at likely 7000 levels in at least tail risk hedges for bears who would be indeed not averse to a sentiment turnaround from these levels.

The SC action is a desired one as any other sport league worldwide like NFL has gone thru similar phases and thier popular nature is likely to transcend their unlisted nature and submit enough relevance to market flows as well, challenging other news flows like the general elections.

In the more likely scenario, markets will however cross into 6800 levels with relative ease, making complex F&O strategies a non starter except for those ready to bear additional transaction costs in unwinding such strategies, selling 6600 puts now however not a guaranteed profit transaction and thus likely to entice those willing to go with a proposed “done and done” rally trend, an exercise usually made unlikely in deep markets by the presence of more balanced pushes and pulls, especially in this segment for Indian markets determined by market inflows, predominantly FII inflows which continue to signal a better placement of India vis a vis other Asian and Emerging Markets as investors exit Korea and China portfolios after a vain 4 year wait for a global turnaround in sentiment 

Most of us commentators would indeed continue to prefer a single post election 2014 rally than a continued token into election weeks from April 7 and 17 right till counting day on May 09

 

India Morning Report: Portfolio investment highs let India story dominate

Investment percent gdp
Investment percent gdp (Photo credit: Wikipedia)

As investment flows confirm net positive investments in India on a regular daily basis, making the total for March closer to $3 Bln or close to $150 mln per day (INR 900 Crores) , India and Indonesia keep hopes alive for Global equities and EEM flows remain negative with exits from China, Japan and Korea closing out on any hope for recovery in North Asia with China remaining dull and Japans deficit imports coming at the cost of lower Exports being kept on deficit mirroring the phase of growth investments without concurrent investing flows.

 

6590 levels obviously proved daunting for India Inc and markets returned the gains out of the morning trades after a buoyant day for equities all around, looking for new levels not belying the sad events of 2012 for Corporate India Markets stay away from Banks as markets had a big open on Monday and new levels in private sector banks seem to wait for PSU banks that continue to be neglected for their larger than life NPA sores and aches.

 

Reasons for cheering the performance of Auto and metals however still seem t o be further ahea d on the road to recovery and have hardly earned their stripes. Bank License hopefuls that still include the Aditya Birla Group and a couple of other corporate houses are probably caught unaware by the extra scrutiny imposed by the Poll panel ahead of a new government in steed at the Center. RBI has enough reason to deny corporate houses a chance to play with the banking system but it may be difficult to deny claims of available NBFC models like Aditya Birla Money ( Diversified Financial Services ) AND M&M Financial Services ( Retail unsecured/Auto Lending ) after satisfying the NOHFC structure requirements, giving the CEntral Bank a tytough decision as it probably wants to hand over no more than 4-5 new opportunities

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India Morning Report: Nifty futures still above 6500

Infy is available at 3350 in case you are looking at gaps in your portfolio. The twin shock to Sun Pharms from the US FDA however, broke the proverbial Camel’s back, big sharp falls in both together taking ou t the bulls hopes ( as i n fact the bulls ar e in no particular hurry) Probably from the stock specificness of the new rally in both the Dow and the India Nifty, above old highs and resilient to most investor breakdowns a fair smattering of geo political uncertainty laying the groundwork for such tests of both indices in the last few weeks, that now the indices are called by a set of unrelated stocks, not part of any index necessarily and sector led predictions still valid independently as also to  a certain extent stock specific upsides.

Downsides and new buying levels are likely restricted to the bad news dozen, currently the set including just Sun Pharma, Infy, Maruti , L&T, even Hero and a couple of the last week’s  weak entrees like Tech Mahindra which would also put traders in a likely soup.  shorts do continue in infy but one wonders if anything more than 3200-50 levels on the low side are possible. It is probably also a reaction to unrly traders looking for a fllight to quality indepeendent traditional favorites losing a lot of times in this rally with the short traders

HDFC, HDFC Bank and ICICI Bank for example continue to nestle new levels and find no dearth of long investors. SBI could have more traders like me waiting to pounce on the fresh chance for shorts to below 1300 as its NPLs are not done. Bharti like others has been able to raise quick debt this week and IDFC with the Power NBFCs remain a good story , fresh longs waiting for the couple of bad ones to play out as they are pure trades on fundamentally strong ideas and potentially unlimited longs would not change their current levels ( unlimited institutional appetite ) unless the trade wanted a clear push and will likely compelete to 128-130 levels

Fixed Income Markets will likely find a day between today and Tuesday to factor in a little more good news of the CPI and IIP scores before responding to policy day’s volatile hopes with a strong top in rates under 9% as rate cuts are  ruled out. The MCX and NSEL slugfest continues in the background, as decorous solutions to the problem seem to leave some unsatisfied yet. FTIL and MCX promoter shareholding has been redenominated as Public and a rights issue is in the offing, the book building sentiment showing in these parrying moves. A deal to sell down that holding of FTIL and MCX is still a long way to go

The Astrazeneca delisting seems to have finally seen the right levels for the stock as the last rally in listed shares starts , heightened hopes marked by FIIs holding a big block of 15% in the stock. ITC seems to be a t the top of the range and a trade from 342 to 325 levels is likely. Despite today’s defensive buys investors should avoid Titan, ttk or Jubilant Foods or even aviation picks like Jet Airways. Bharti on the other hand will see buying at thhese levels of 300 itself and not recede much beyond 290 levels at worst

The market rally will likely continue if not this afternoon then on Monday afternoon with buys firmly holding on, with better than any other rally’s chances of retaining permanent levels as the market bottom has definitely moved up to an even 50900 – 6000 ruling out further cuts int he select stocks that have created and added fresh demand in this rally, markets having carefully shucked out PSU banks, construction and other leveraged plays with no fundamental performance locks on them. The Rupee can move back from the Friday’s 61.50 levels almost immediately

Crompton Greaves turns out to be headed for the chopping block, a potential sale likely to bring in a good uncertainty for investors in the stock. PE investors like Blackrock who is strong on issuing debt to promoters trying to tide over the bad economy are already providing fresh debt to the Avantha team

In other Unlisted business, we are a little fogged as we cannot determine what happened to the FIPB meeting on March 6, to discuss Braun and Destimoney among others. The sensitive handling of the Election Code issues had clearly seen there would be no controversy regarding this meeting despite impending elections

Commodity investors (HNWI) are unlikely to be able to return to longs with the slump in that sector heightened after a half hearted attempt by gold and Oil early this year.

Investors should continue to pile into longs in their choiceportfolio including scrips like CESC, Arvind Mills and Jubilant Life ( Looks like a quick trade can get buyers Arvind at 135 -140 levels)

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: Banks keep investment cycle hopes “flying”

PSU Banks have mostly reached the highest expected NPA levels at INR 100 Bln each even as SBI discovers the choice to sell off current NPAs in the market, giving it enough tailwinds for the stock to catch up to rally leaders as ICICI Bank and HDFC Bank work to renewed targets after a buoyant Friday when the Banknifty’s 600 points led the index rise to above 6500. Asia opens much lower as China’s first targeted trade deficit makes it on lower exports, confusing markets looking at the same as a weak signal for other Asian and Australian exports to China.

The indices can now apparently score their new peak much before General elections are counted opn May 16, 2013 and a new government sworn in. The market is however not looking to correct anytime soon even as the PCR has ticked back to 1.16 on the Index and call options at 6400 and 6500 unqind with Puts and option hedges switching to writers and volatility for the overall markets still barely above 15, despite the big move up all of last week

Investment stocks getting delivery attention ( CNBC TV18) like Ashok Leyland and JP Associates, still lag behind immediate trading up potential in Eicher and Crompton Greaves, old stalwarts since the reform story of the 90s propeled India into investment portfolios. The weakest link in the market spine still seems to be heady interest in margin devolved Real estate and construction stocks  a little ahead of the real conversion in investment interest in India outside equities. The Pharma sector sees buying interest returning with shorts in DRL, Ranbaxy and Cipla countering excessive defensive runs by delivery buyers earlier in 2014.

Continuing short covering does not preclude higher levels in ICICI Bank and HDFC Bank, with FII investment cycle also updated in Mannapuram Finance and indices now continuing further consolidation and increases in levels on use of index hedges converting to written puts at even 6500 levels by the end of the week despite it being a new high for the Indian markets starting the week with easier 6200 expiries if the markets continue to showcase buying strength as delivery interest in many undervakued index components and blue chips keeps up new bullish levels in the market. BOB almost seems like as good  a short candidate till 550 levels as DRL or Ranbaxy on Monday Morning

If markets ignore the steady stream of buying and keep 6500 levels it would definitely point to a better 2014 overall , however  an improbable choice would be a sharper run right away for quick profit- taking at below 7000 levels followed by a sharp correction ( Ashwini Gujral on ET Now had our ‘improbable’ prediction today morning)

SGX Nifty was unable to lead the trend over the weekend and waits for the Monday open at cash levels of the index. Apparently the Mid Cap index has on cue broken thru 50 DMA levels on Friday as well, broadening the rally as most index components and blue chips also continue to trade far below their final potential given the anemic recovery and continuing threats of a rate hike

SBI may also continue to react downward but the broader markets may not turn the same into an overall red tick recovering by the afternoon’s closing trades keeping 6500 marks to start the week. YES and the Power NBFCs could be still stronger with IDFC as buyers are likely to find their value case appealing for investment accumulation and Kotak likely to ride lower ticks to its 665 levels with Indusind Bank. ITC again looks like its not going anywhere at 335 levels while buying should continue in Barti all week irrespective of market trends

The Rupee remains stuck at 61 levels unable to move beyond that Friday peak and Fixed income markets continue to trade india debt a t 8.8% allowing more buyers to lock in that rate for India buys much before any Bond index entry is firmed up with current FII investment limits in Indian Gilts and other bonds good enough for now.

I agree, private sector banks will again be available at lower levels for buyers to come in the afternoon

India Morning Report: Markets start the Maruti short 1 month down

As expected, indices are holding and the degradation of Maruti’s role in Suzuki strategy has finally clicked into real trades early morning, that will probably keep the broader indices on an even keel, Maruti no longer a portfolio pick despite a 50% share of market and being the listed representation of quick and easy Indian growth components ( not many left there) as protected cash flows fail to assuage investors

A $2 Trillion GDP really bloated up India’s old economy bottlenecks and one needs to gravy the Indian infrastructure boat, but with hot money and leveraged inconscientous promoters the only steed, it is unlikely markets will try for that 7000 index just today

Cash equities have a lot to catch up with on the Futures that closed at a grainy premium, but I am not sure volumes are still low or if only one player is around, as India with 200% of GDP in equities, has deeper markets than most other Emerging markets including Korea and Singapore who still have a story to tell.

The traders picks continue to show six old timers without a growth strategy and apart from regular stories of restructuring on 1 or 2 of those stocks most others like Tata Elxsi may not be good trade picks either way

If markets are so indiscriminate and all mice come out to play on Friday before the weekend, there may be some reason to looking at short picks when they open dstarted in August and now for two months of 2014

I still worry about the Tech Mahindra story, apart from the possibility that they are playing with another i-banker to get the deal flow into a continuous stream. KPIT is a good pick but then insiders know when and till where 🙂 as PE picks up stake in the fast growth play with legs in embedded/systems programming/chip design and the normal outsourcing meat still available form more than one sector and not having been wasted on product /enterprise investments like at infy or wipro

Those foreign funds still underweight india will not get another chance to come and invest in India and may likely underperform Asia benchmarks at the end of the year, like HSBC Securities

Banks are hot again in this segment, and SBI shorts will strike before the end of next week as interest spreads across Pharma and some Consumer

In unlisted business, IIMA infra naming rights story headlined in ET is a late thing but a good start. One hopes there is also a base endowment fund when the Subsidies are let go from this sector. The Annual ioutgo from the HRD ministry could have well come for each institution from a single/individual endowment

StannCs back in an indiabull avatar but one wonders if there are beaten down sectors left this time for late entrants. Most Foreign investors who stayed invested over 2013 are going to score much higher this time onwards and one hopes this can become a doable tradition for the indian markets finally rid of old time ponies and bad trades in a new era

Unlisted Captives of Global Auto companies have the best chance to make a statement and increase Expoprts traction from India as Ford gets on it.

The Rupee has nowhere to go after hitting 62 from the up and Gold is stuck too even if they try to reverse the bear trend with some late late buying as markets can grab the precious metal at 30k levels itself for a good short and adding to equity trades

Indian residential and enterprise ( Retail Malls and Offices etc)  sector has some potential to add new inventory, last years smaller sales not having added new inventories at all. Chances of Bajaj Auto in the 2-wheelers producing positive surprises in next months data have increased but traders are right in clamping down on Hero, Bajaj and TVS as February data is released into the last months of deteriorating production conditions over most of the manufacturing sector as IIP uptick will include a negligible contribution from manufacturing. A new bite, though, the residential construction intel comes from one of our steel producers. Not the way to go , India so there iwll be another sad story down some months but I guess Jindal (JSPL) was a dead story anyway

India Morning Report: Les deux ex machina, et vous? Les fou de cirque n’est pa!

In singular, it would be the Ghost of the machine or the fool in the circus. A market of course has more than one of everything. Apart from that there is cricket too, where India turn a win opportunity into a clarion call to stay awake

Markets ‘jumped’ overnight to 6080 levels at the close, with US markets closed on Monday. The VIX trade is back again, 2 weeks from expiry, ( though the last week in Indian monthly expiry is usually the busiest in contrast to more deeper US and European markets that trade weekly expiries and expire by the Friday for Third Saturday in monthlies staying untraded the last week as most of the busy series are in the “next” month or new weeklies.

The banks are back with a bang but the Bank nifty trade is a good strangle range pick , even a sold straddle will give you a decent range (as Ashwini reccommended yesterday) as PSUs and SBI get exchanged out for new buys in ICICI Bank, HDFC Bank and Yes. While one is not sure of Kotak, PNB definitely has enough detractors yet despite the great performance with controlled NPAs and fully provisioned balance sheets at begin of year allowing improving provisions while releasing profits. That means PNB might again be a buy after the big run to 550 levels is cut on profit-taking.

I”d try a short in Kotak and let you know what happens. IDFC, Bharti  and ITC are great picks and starting from the bottom of the trading range while the Power NBFCs are ready for a move as well.

Bajaj Auto gets first mention on the Excise giveaways from PC’s last presentation, which was technically just a Vote on Account.

Excise Cuts on SUVs and Medium and Large Cars to 20% and 24% mean the gains in market will start for all automakers including the listed Maruti. The markets preferred Hero management coming out after the excise cut, but with Hero also biting a lost mandate for a grip back, Bajaj is still better off with Egypt exports hit by the import ban meaning less than 100K units to be recovered from the drop in excise duties.

The Indian Macro is easily the best poised for most fiscal adjustments to be burdened at this time and the VOA optimism could well prove to be PC’s gift to the parent Congress party in its new roles after the Elections as a fiscal deficit target of INR 5.3 T is not a shakedown or bleeding optimism in the projected Indian Balance Sheet. The nominal rates of growth at $1.10 T base in FY13 we assume may yield $1.26T and $1.44T targets for FY14 and FY15, that may very well be any other number at the realistic 11% nominal ( achieved in FY14, LV-CNBC) and 13% in FY15. However the 4.1% target look daunting esp as Food subsidies have been duly increased to INR 110,000 Crores (1.1T) and Energy subsidies understated at even INR 650 Bln (65000 crores) with INR 850 Bln scored in FY14 after the deferral.

A great Fisc performance thus at 4.6% will be greatly rewarded by the markets esp that includes INR 2.46 T and INR 1.8T only from Tax revenues but shows 100% achievement of Divestment (INR 400 Bln ) and Spectrum sale targets (INR 600 bln) and the new government make the usual drop down ravines for itsel fin beating the other government’s VoA, before trying to dump comparisons in the new Budget post general elections, All inall, not a great day in parliament for the new government as it would never sound better than boring humdrum in the whirring engines of growth that have to take over this year. A last note on India Macro stems from the continuing dissociation of Investment levels in the GDP at 34% from the true investment which has barely just hit 5% growth and mostly in the Consumer areas. Unconstrained Bank lending continues to remain available in India and interest rates are likely to continue down from here at a fair rate, allowing Fixed Income portfolios a bigger boost

There however is no comparison of the difference between any remaining expectations on Infrastructure investment in India and real participation to any other subject to kickstart India’s new millenium story, yet to begin after in stalled in 2009 and infra funds have to prove versatility in financing the new projects still blamed on bureaucrats or the Congress. None of the private cos as the markets have shown they realise, are in any position to take new project debt into these balance sheets at GMR, Relinfra or JP Associates and conventional bank lending is not the answer for them

Kejriwal and AAP brought the AAM AAdmi back but failed in their mandate by leaving from the aisles before the start of Act I.

Energy cos are getting the best possible deal with INR 1.1 T in payments despite the deferrals with more than INR 800 Bln already paid out , so they should have already been discounting much better levels, at least 250 for IOC for example as the fiscal did see a consistent unburdening of the energy infrastructure and a more rewarding marketplace, even as the Power regime gets more competitive

India Bank Earnings: SBI Q3 turns out the ugly parade

The bank created 39 bln in restructuring as INR 114 Bln added to Non performing loans in a single quarter, adding pressure even as the bank decreased provisioning in the last two quarters of the fiscal, to 58% in Q3 . However a 4.5% increase in Advances ensured another double digit increase in Net Interest Income to INR 115 Bln and Assets of INR 11Trillion with Deposits running INR13 Trillion at a 16.7% clip . Gross NPAs at 5.7% are likely just more than three quarters there yet and a Net 3.24% NPA looks ugly.

We stand by a 1300 price target to be broken on the downside in the short term now, 1280 levels heuristically offering the bank new consolidation. SBI PAT is down one in three to INR 22 Bln and aims to improve Cost and other income as the Chair announces post earnings NPA control committee restructuring. Administrative staff(quasi due diligence at best) has been deputed to front offices in measures listed. Technology may definitely provide a viable solution but Credit scoring of SME and Export credit provide unique challenges.

Employee interests may indeed warrant a look at buyback programs at this stage but the bank continues to need annual capital infusions from Government coffers as the largest bank in India. 15,297 branches with 40,344 correspondent banks, totaling a 100k outlets is definitely a great business opportunity for someone scoring the India puzzle.

As unlikely comparison and bank memes go, Barclays has turned out into a India phobe in the open, it’s Head EM Economist  using the required dissing of China to add the bumbling India quatrains to complete the report. Needless to say any such composition, follows the new meme to instead look for new EMsllike Mexico where one finds the bad mix of resource dependent Dollar imperilled markets like Turkey and Argentina.

Kotak seems to be a market favorite on this bet, if prices this afternoon are a suitable explanation ( with no other important news or rumors on the wires) HDFC Bank has finally taken off even as HDFC investment approvals are awaited. The mid afternoon score of 10250 is barely a tick as the street forgets SBI results.

WPI did make 5% in the December data release a 33% downtick from November’s spike but Core Inflation is at 2.76% . Bajaj Auto faces a revolution at Chakanypt (8%) and a ban on Exports in Eg and Sun Pharma has eased defensive buying , while the Banknifty rests at new 10400 levels with SBI’s degradation no longer a surprise, but the occasion serving a reminder to those indiscriminately picking weaker banks in the index

India Morning Report: India’s flipsyde from global correlation markets independence

All its successful recognition as a unique misstep of policy in trunk Asia investing, still leaves India a unique place in the sun, inviting specific negative correlation from trades and investors in asset markets, marking its independence streak. However, this is just a improbable hypothesis and an unlikely share for the Morning Report (in this form ) except that Dow’s 100 point rush closing yesterday is overshadowed currently by India’s own woeful exits with the Nifty streaking a negative 80 points making the Rupee start this positive Asia morning at the bottom of its current range. Likely this is the stage NDF price discovery also tail lights trends to be in extreme discovery actions and the Rupee easily could have been at 61 levels here with trade purchases and sales in the same range as earlier years Gold would be thus in a greater rush to complete a mini rally in the reduced taper euphoria.

I am apparently getting ducked on Kejriwal and Pepper spray much like I expect Independent Women careerists to, in the office today.  But markets could have easily ignored it and celebrated the successful Spectrum auctions and the India recovery data linked with global news of India’s importance in winning 2014 portfolios. India CPI ended under 9% as the urban CPI receded well into the background while IIP was almost positive with its 189 index score a big jump on the previous month apart from the strong consistent jump in utilities.

A secular Telecom industry uptrend excluding unlisted Vodafone (in India) , is likely after the media rounds prepare a consistent analysis of all players, both Idea and Jio(Rel) having bid INR 100-110 Bln, Jio adding monopoly of 1800 waves in its repertoire against Bharti which with Voda, focussed on winning back existing markets and prepare grounds for improved pricing. Idea having won price conversion over, is unlikely to create another loss making value bid in the retail markets.

In more humane form, India again loses its advantage as it starts off the recovery with an expensive rate hike, a shallow debt market and a doubloon of proprietary traders mesmerized with no good corporates and an officious monitoring and handshake philosophy engrained in Asian culture its common denominator with other closed end markets allowing a 5X US Dollar impact and shallow development hubs. India’s WPI announcements are likely to be near 5.5% .

SBI reports midday with another INR 6 Bln in provisions for pension, INR 25 Bln increase in provisions and INR 85 Bln from an ever expanding restructured asset pipeline in this quarter again but the stock will react further post earnings tipping off a expectations rally at its nadir as it comes out improving the NIM expectations in a better rate environment for lenders from 3.19% in the previous quarter.

ONGC proved great results yesterday along expected lines, profits to 71 Bln , sales at 208 Bln just 1% off last year’s data in the 30% increase in Net profit(28%). Realisations will improve substantially in the current year. Q3 realizations having dropped 4% at below $46  before depreciation earnings. Subsidy expense was more than INR 100 Bln up 10% making the 30% jump more creditable. The company may however get squeezed this quarter as the government defers subsidies with the fisc coming into an expected range.

SEBI added lines of caution on Executive compensation, independent Directors, Women Directors, public succession plans and a mandatory whistle blower policy into the Corporate Governance Code. Along expected lines, The listing agreements at the Stock exchanges will be updated immediately.

Employee stock options have been withdrawn for independent directors and nominee directors are not permitted the dual role of independent directors (DNA India, ETNow).

IT’s attempt to woo the markets with forecasts are likely to fall on deaf years as markets already topped the range on a half rush for new Rupee levels now more likely to be equated back with outsourcing jobs as Pharma breaks out in a good couple of years.

Apparently the stock of debt in Telecom, that can be shared publicly is more than INR 2,000 Bln.

In unlisted business, Kiwis have been bundled out for 192 and India will make sure it has one overseas win in its belt this time after a thorough bashing in all forms of the gamme. RCBs fortunes will be interesting to follow in the IPL with 4 marquee players and none of the local stars like Manish Pandey and Karun Nair.(TOI Blr) Lankans were ignored for an English Summer. Faf du Plessis went back to Chennai as the Gurunath investigation proceeds. Ben Hilfenhaus, will be the likely winner in relatively new entrants this year with TV Networks and Captains working towards the same objectives, Beuran Hendricks winning the Owners’ curse taking in another quality seamer. Dravid shaking down Nathan Coulter’s bid agst Delhi. The list on cricket next atill includes only CSK rosters, duh!

KKR had some money left over too after picking Manish and Debabrata (Ist Round Mitchell Johnson) while Kings XI and The Royals probably walked off , purses safe from prying eyes. This time, even as Shikhar Dhawan is down under, Sehwag bats for Punjab who have Shaun Marsh. KKR got most of the RCB slough offs after the  Fished Fisher dug himself out 

Royals kept Watson, Binny and Rahane, while Mumbai bid in Corey Andersen, Hussey and the Zed.

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: Is SBI adequately capitalised after the $1.2 B QIP

Of course on paper 12.8% Tier I is nothing to scoff at, however the bank’s larger book of advances makes its likely that it would need additional funding soon and now would wait for the government to fill up the tank on Capital. PNB on the other hand is a value play at 520 and Bank of India at 140-50 levels could be offering value for incoming investors ‘cept for the NPA monologues, not in play at PNB in this FY(FY14) where SBI and BOI would lose further stock with analysts

Meanwhile, the weekly closing will be positive, and the new series will see a build u of positive trades. Apparently Nifty and the Blue chis all fell 10-15% in the January series. The currency saga is also over with the post taper trade turning out a whimper and US equities smartly rallying in Thursday trades. While Asian markets may enjoy a bigger uptick on that rebound in Morning trades, Indian markets will decide as they go along with all stock specific trades holding

Havell’s has been a great story this year and will see 2014 exceptionally favorably. Powergrid and REC anyone? The trade wis ripe alongwith IDFC as Mumbai’s Monorail comes online in a late reprieve for the Mukesh Ambani group. Yesterday’s trades saw a sharp recovery at close to 6080 levels again because there were no trades at the lower levels, markets just waiting out the post taper reprise and increasing transaction costs for those creating shorts or withdrawing from their overweight Indian  portfolios, which saw no takers.

ING and OBC both report today consolidating the story of improving NIMs and a lrage profitable Asian market still delivering growth to incoming banks. A couple of measures deepening our presence in the Global Fixed income markets would do the Trick, if I were governor. Currency markets are back at under 62.50 levels for the Dollar.

Dr Reddy’s looks overpriced at these levels . HEro may also be ready to complete the black candle and get a big red score to end the week. Bajaj Auto will hold levels. Buy and Accumulate IDFC, Yes Bank, ICICI Bank and HDFC Bank at current levels. Stay away fro m construction cos. back on a dead cat bounce. Bharti, already up 2% yesterday can move up to 330-340 levels before next week closes. The Maruti short is about ready but will probably wait till Monday. Going in first precludes market operators from creating that position as hey are anyway prop. holders of the stok and are not using it for short collateral

BOI NII growth was stolid and the PAT hit should not hurt the stock sentiment desite the almost immediate post earnings reaction as the stock has been discounting its NPA woes a good six months of the rally that ensued in July 2013. IDFC results should se a muted reaction as its diversified businesses hold up and get ready for an aggressive 2014 ( The last three years have been bigger growth in the loan portfolios already) the stock offering great value at 90-91/-

Ashwini and Angel Broking are again fishing in troubled waters and most shorts should be avoided esp at 320 level son YES Bank

India Morning Report: Markets digest a rate hike and the new Maruti equation

India Auto ExpoYou heard it in 2009, Suzuki may go it alone:

The 7th Maruti Suzuki plant in Gujarat adding capacities to its 1.75 mln cars from Gurgaon and Manesar which has already seen union troubles in the North, will actually belong to Suzuki in a new Wholly owned subsidiary and as royalty terms have not changed the new production available from Gujarat in 2015 will improve MSIL’s margins. MSIL already is the dominant component of Suzuki’s global sales. The markets are however punishing Maruti for the loss of faith , the automaker springing the surprise from its ranks mid afternoon yesterday. Today’s morning quotes will be 20% lower and likely fall a further 5% tomorrow though 1200 is improbable. A Suzuki coming into India alone means it may be planning exiting its Maruti investment except for its commitments to successive Indian governments over the years. Maruti trade is being closed within this series as speculators likely get ready for a short trade in the new series after having been farmed in the construction sector. The Gujarat plant will supply only to Maruti production

Biocon is back in Volume breakouts from the switchout in cash

Rate Hike

Markets will likely digest the rate hike given good liquidity, as mentioned in Bank Policy Tuesday yesterday however the 8.5% and lower yields will now wait till end 2014 and at least one quarter of good growth with strong positive investments. The higher rate environment may not translate into higher retail rates and credit expansion may also not be threatened, but was it required? Yields did move separately from Currency markets before policy and thus Policy rate hikes squeezed the exchange rate back to 62.50 levels

Airtel again, Idea bhi

Airtel is definitely back in the mix, changes at the top likely positive even for Manoj Kohli who finally moves to the new businesses invested from the Telecom win for the Mittals over the years. Idea’s ARPU gains despite revenue per minute dying means both Idea and RCOM are also likely to see long trades and Bharti remains the back bone of he market as IT and Pharma break down. Tomorrow would probably be ITC again and the day after that Bharti

Bharti PAT is up 20% on quarter and ARPUs to 195 frm 192 spectrum auctions stamp their market print on Feb 03 and Feb04(post announcements). Africa ARPUs are up 10c to $5.80 or INR 360.

Sell 6100 Puts

If you are finally tired of shorting the market and Ashwini baiting from your camp you may join in too but ahead of expiry, 6100 uts are likely to look tempting and markets will close 6100 with such a huge magnitude of newsflow  getting hope trades shucked off by early market moves last week and shorts on DLF , Unitech and HDIL would likely be the biggest winners of the series. The days trading would likely see a similar mood sneaking into 6200 uts , which however is a function of the other market forces discussed with a 40 point increase in NIFTY being par and leaves tthe markets at 6160 and markets may not want to control further BEAR GREED till todays close whence the 6200 trade still rewards that additional risk

Banks are a big buy

10,600 seems to have done it for the Banknifty and investors are likely to stay glued to ICICI and HDFC Bank on the rise. Axis Bank fell 3% yesterday at the fag end of the correction ( on markets breakdown post Maruti announcements) ICICI Bank reports with India Starbucks (Tata Global) . Starbucks ma also prefer a new 100% investment in India after 25 stores have opened with Tatas.

After ICICI Bank’s clean sweep today, tomorrow will see earnings from Hero sandwiched by Bank of India and SBT and after the Adani and IDFC reports on Friday we close out earnings season with a fairly robust performance, near 20% profit growth still standard fare for the biggies.

Other Results

REC, M&M and Cox & Kings report on the 14th of Feb, ILFS Transpo, Page (and Lovable?) and Finolex Cable on 12th and Bombay Dyeing on the 13th. Lovable is doing well in the trade prioritiising for the New FMCG adds in 2010 IPOs

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: Predictably rational in the face of regional panic

Coulda’ Woulda’ Arvind Mayaram FDI, Note extinguishing before 2005 (25%) and others

While Goldman Sachs may have repeatedly missed good calls for the search for a political establishment in India, India per se knows better, discounting global EM troubles with considerable ease even as the Rupee inched up to 63. India should also probably try and make a bottom for the markets around 6200 itself, correcting SGX Nifty in those regular moves every year as EM withdrawals again translate into a wonderful opportunity for the second half of the year and India leading the hopefuls in market performance with fund investors probably again going to China and other markets just for rueing the missed opportunity? However that may eventually turn out, the Rupee faces considerable pressure and the RBI policy , a non event as expected, would not definitely reduce the pressure on the Currency. The worst culprit would be the deficit ridden Yen, apparently stimulus itself having lost momentum after month 1 last year having never come back. The second month of a huge trading deficit would imply that BOJ’s encouraging monthly perusal of the Economy just encouraged bond investors into JGBs and they are going strong for now.

There are not really ready funds/positions that can be withdrawn in this rally in India that apparently not just broke stride but flattened all kinks in the new year. Seriously for those feeding the panic though, Ranbaxy? buy trades? honesty now..Similarily failing countries facing high risk of default only count Turkey, Ukraine and Argentina, Venezuela and before that Brazil and Russia having recently faded from trading memories , dataless on India without trading in its bonds counting to CDS data yet, Korea similarily trading a very liquid 70 bp

Sensex is safe at 20800 levels and the Nifty safer at 6100 levels but that is almost totally out of the ball park if and only if markets are actually waiting for Foreign investors to reward India immediately for behaving stoically, which hoefully will not be the case when we close the week on Friday. Global market commentary should see those countin gHousehold debt abd Card spending in sovereign leverage counts receding again in 2014 but Student Loa mounds remain avalable high peak panic buttons back in the US.

Meanwhile Indian cash equities should continue to see accumulation, we still continuing in IDFC, Yes, ICICI Bank and ITC, Bajaj Auto and Bharti. GMR and infracos continue to deleverage and the rising valuations may not be able to bail them out before they complete that deleveraging extending the government’s troubles in looking at Public Private options for financing infrastructure, ever falling behind. The fiscal is already expected to come at 5.4% and is likely to improve from there, that unfed hope being snuffed out in this move on the Rupee( as expected , Turkey and some other currencies have already followed double digit losses after the yen refused to go back below 105 ( to 110)

Tickker updates before 9:30 am include Glenmark not revising guidance (debt at $500mln) and launching Crofelemer and all of Goldman’s merrymen could muster in their five years of India sponsored India bashing was to shuck out one Opto circuits from te ile, having bought 26% stake in the same.

We regret Karl Slym’s death as reported in the Morning headlines. Stay away from F&O baniding of the index and the 6000/6100 puts are no where being fully priced to write/sell safely

Bank Policy Tuesday would likely show india flows an economic condition stabilising with a health Liquidity position and no threats to the CAD with WI likely to fall again post policy on ag gained from the Vegetable price drop in November

Glenmark’s up 4% on 10 am trades (featured EarningsTalk/cxotalk on ET Now)

India Morning Report: It was Kotak meeting its maker again! (6250 again, naturally)

Thus the market turns south from 6320 levels though there is nothing to bother the market much.

Kotak’s mid afternoon tryst(just the 9 month report) could not shake off the market assumption that Kotak’s business is all but done and that does not bode well for it in an unbanked India Q3 results showed a grand INR 35 B in fees and INR 34.92 B in Net Interest Income yet again, not counting minute variations. Adding insult to injury, where the bank almost categorically does not expect to grow any of these businesses were the unravelling NPAs on a small portfolio

Improving NIMs at Kotak are heartening and CASA is up 22% on year. The split of the Advances column is a heartening reminder to others like Yes and Indusind evenly split across Corporate, Commercial and Retail (INR 20 B) and NIMs are much better at 4.9%

HCLT in the meantime has hooked up with CSC for Application Services Delivery centers in Bangalore and Chennai. SAP continues to explore India in the mid market Enterprise space with partner innovations. IBM recently sold Daksh back to local operators

Korean GDP releases later today will probably again reset India’s FDI expectations. Bank Policy Tuesday may appreciate the inflation correction and the increasing deposits in India’s coffers coupled with Government Borrowing turning out better than expected. Foreign Reserves are hardly comfortable but higher than usual allowing RBI to spend a couple of Dollars last week (January 5) on exchange adjustment. Bank Credit update will continue to show better growth.

HDFC , Dabur and Biocon may keep viewership glued to trading software and TV releases again. Arvind and Tech Mahindra are among the fabled Volume Breakouts of the season but we won’t be looking at them till FY16 as the model and the Distribution kinks for the former are still suspect. Aurobindo Pharma has post announcement made the splash on news count into hard stock price increases and will likely hold new levels. Biocon , if you believe in a generic thread of Indian Pharma , could still be the Indian Infy/TCS depending on your version of the morning coffee.

I am still buying IDFC and YesBank. Power NBFCs come out jst before their results break or in 2 weeks as the rest of the breakers are in town with M&M Fin joining Volume Breakouts today before earnings. CESC also sees a higher clip of returns on breakout. no Zensar isn’t making it anywhere..Lupin is still bussing up and let me know the others, it’s busy season outside the markets. 6315 was holding at 10 even with the Kiwis in trouble

Network Analysts or Gang of Analysts will do better with Lovable and Page Ind(no pun intended) as the scrips move into gear after the post ipo run meshed with a consumer rush and a dearth of supply in good stocks in 2010 . Prestige , Talwalkars and JP Associates are good for l.t. accumulation. PVR hasn’t wound down so the pie for I Sec finally broke out of the clouds and will keep growing (till it rains burgers and purple juice?)

Cymbalta apparently is a Torrent Pharma revenue which posted a good INR 10 B revenues yesterday. We haven’t captured its jumping fortunes earlier, Torrent Power sharing an equally unique business advantage in the utilities space (serving Ahd and Surat)

Davos streams on cnbc and or Bloomberg(us) could have well waited for saturday programming or the interview settings could have been suitablly upgraded from luxury breaks to business interviews for those at work

At 11am, I am shorting BOB, the 6300 calls are so cheap the 6300 straddle is the BIG WIN(Ashwini/etNOW)

India Morning Report: 6250 again, naturally! O-O O-O

Asian markets do tick down slightly probably because of no Commerce in the financial sector as US markets are closed.

Even without anything much happening locally, The Chinese GDP underperformance at 7.7% was unlikely to be the markets’ concern here our export markets in China safe and the 9.6% production improvement and signs of bullish trades in Copper and other metals. India’s 6% forecast is hopelessly over optimistic and thanks to the networks avoiding the entire China update the fact of FDI non interest is unlikely to bear on market sentiment, and today, and in all 2014, this is a good thing! WPI hit a sharp floor at 6.1% and may breach much lower lewels with core inflation already below 2% Core inflation was basically flat.

In the midst of results season, the positive surprise markets did not expect and despite attempts will continue to be marginalized, is Wipro’s back to back second quarter of gains of 27% on year on profits but F&O markets are trading that and the last weeks IT news pretty feverishly /robustly. However, this interest is mostly maintaining shadows of activity while the Bank stocks get reassessed yet again. The realization that Markets were going to hold 6250 was all too evident in the one way candle of Friday, the 6 hours of sloping down, accelerating wantonly almost after 1430 hrs to achieve 6250 marks

Interestingly, a well-developed hedge fun industry would certainly have seen a short strategy for IT esp on WIPRO from some entrepreneurial trader after this bout of strong results, esp with WIPRO tempting fate and unlikely to beat history ( like Morgan Stanley did, Friday night)

Bajaj Auto and IDFC are my longs this week and will probably score very high as new funds enter the market and get earmarked to the new universe of stocks added in the buy lists ( ET’s Volume breakout series is a helpful ready reckoner, but I doubt you’ll easily find those mix tapes /snips on the ET Now carousel. Go figure)

Actavis may be a strong boost for Aurobindo with almost $8 in earnings in the last four quarters. However Aurobindo is buying its European operations with a EV of $1 Bln apparently ( $320 mln in annual sales) and obviously an easy divestment for ACT and the news has seen a $14 or 8% jump in the week’s trading in the US. After hours trading added $2 on the news . The synergies come from the operations tie -up with the 200 strong pipeline at Actavis

Gold’s busy start in this year’s trades, enthuse Indians but they have traded less of the metal under clampdown driving prices down in 2013 and the story is likely to repeat from a higher watermark below 30,000 this week

Comm stocks lead the indices back after a quick crash mid week on ticker news. Isn’t Debt trading news looming from the Central Bank?  Meanwhile if IRFs had been actively traded the rates started the great slide from 8.8% levels and would probably close  a 100 bp lower in due course whence RBI will return to relaxing the 7.5% Reporate ( excluding the 7.75% last tick forced on by the new Governor) Floating Funds would have a few investors more and any survivors of regulations may have new FMPs to this sector, but will likely be late again. Meanwhile the 10 year can well trade below 8.5% this week.

Energy stocks looked good for this week as well, but it seems there is a new LPG subsidy likely on the ticker for them. Kotak and a host of mid-caps report tomorrow and Dabur and M&M(Fin) follow HDFC with Biocon also reporting on Wednesday.

Midcap indices will probably harness a lot of gains in the week, none of them ready for a harvest of Sell on news tomorrow or Wednesday Avoid the L&T trade tomorrow unless you are fairly clued in to a tepid results expectation in the market

Edelweiss also reports Friday but the crown in the jewel should be Glenmark, that has already up since last week from 500 levels

India Morning Report: Why exactly is IOC available so cheaply?

Of course, Infy will lead the bullish breakout on the Index, and the profit prognosis again at a Cons INR 28.75 Bln is much more to look forward to than the Cons Revenues of INR 130 Bln but the dip in Revenue growth , braked to 0.5% on Q2 Dollar data is still probably excusable. The jump from Infy to the Earnings season that starts in earnest next week.

However, IOC is as expected delayed on the divestment news but mainly because the Oil ministry got the fangs to file a dissent note as the Energy co’s price has slumped to lower than 200 (on the average of prev 6 month closing prices) There are many benefits to divestment and in fact a bargain such as IOC at these prices would be an investor bonanza par extraordinaire. BPCL (up 7%) and HPCL(up 3% probably) gain on the news of the delay but the question to who are the agencies involved in muting the price performance of India’s best navratna after ONGC remains important to answer unfortunately for the BJP fueled markets and the outgoing Congress government

The Delhi Power audit will also ensnare Relinfra as it owns 2 out of 3 Delhi Power distcos with more than 30 mln subscribers and three-quarters of the Peak Demand. Delhi takes in a huge 7.5GW of Power Capacity of the installed 130 GW nationally but the share is much larger in utilised Power capacity

The Pharma companies, the other beneficiary of India’s global largess in currency trading, will also be busy making aggressive deals in the US Pharma market while rejuvenating their domestic Pharma businesses, with Torrent and Auro completing deals this quarter in Elder (domestic) and Celon.  Lupin delivered another USFDA win along expected lines with Twynsta generic being allowed to both Lupin and Torrent. Fresh buying is impossible even in Lupin, Cadila ( 850-1350 nah?)

The market is not really ranged and while Infy may not be able to envelop all India expectations ever again at the start of the results season, it still clears most markers impeding a new rally post earnings. Bank earnings deliver the second infusion of realistic optimism on India Inc in a few days when the upward edges of the range are exected to stand up to better levels. Meanwhile Infy should crawl to the top of its 3400-3650 range benefitting the rare speculator who punted positively for them , most having to square out written calls, even as the markets face resistance offered by such shorts and Infy sets the grounds for more positive surprises down the line with NRN back at the helm. The changes in the Executive would be the easiest to explain.

A problem of plenty as I use images from Google with the syndicated image burner feed disappearing from WP?? 😉

The RBI governor would be probably hoping that the month end policy becomes a non-event considering the positive mpact just from holding rates and the challenges from inflation growing by his side. BofA’s Axis Bank ugrade may still be too little and too late as Axis battles NPA spam with PNB , counted for its days with the PSU crowd

Indices should not see a meltdown thus at 6150 and you should get one bang out of the score if you sell 6100 Puts getting cheaper by the minute at the open and even 6200 ones. If you cover them do cover them with buys in the OTM range(buy) at 6700 ( assuming 6500 in  a close future top of the market ) The bottom of the index range should thus become more volatile funding the shorts glued in to the market bearing down for over 6 weeks now but they will probably tire out this time, Vol allowing a long-range upside on its own nevertheless as India VIX continues to ride low on a stuck to the tea leaves recovery, which will still trend higher and not lower like in China

India Morning Report: Gold Loan Norms for Muthoot & Mannapuram, Infy at 3400

Markets at 6200. Nothing would seem to have changed during our 2 day break this week, but for the fact that markets after declaring tiredness have found the will to come back to 6200 from a dip , probably to catch some Deliverable trades in the wind down as the Shorts get their day but most are bought into the 6000-6300 range. Option ladders have given way to Bear/Bull spreads and cheaper strategies of any combination in OTM Calls ranging a 6200 with a 1:@ ratio call ( from namesake Amit) with 6300 ( neutral on cash) or  a similar strategy on puts at 5900 (ITM) sold to higher Puts bought near the range as the markets are not excessively bullish (6100-6200)

Meanwhile, true to last week’s draw ins to our short list, Sun Pharma and Lupin/Cipla/Aurobindo have taken off/ are ready for a big run discounted for the weakness of the rupee being their marker as the Rupee is at the bottom of the range at 62.1-62.4 alternately. Divis’ is a great pick and Cadila is still in but some market movers would put Glenmark on watch with profit booking in place. Ashwini is off Jubilant Food again for the same reason maybe, but he is trying Jai Corp today I managed to note. Aurobindo is still good but I fail to understand the hankering for Ranbaxy again with promoters from Japan raising the issue of misinformation and misgovernance publicly

In the Zee vs PVR vs Eros /BIG and the rest again I find the PVR cosmopolitan equation still daunting and Zee the only balanced out performer despite attempts by Sun TV and the sports czars like Sahara and Kingfisher. Private Equity has a chance to prove itself again in India in Entertainment, Media and Education, the Y sectors but as of now has come out only in select E Commerce venutures in over a decade

Muthoot and Manappuram would be great plays even after this first CB. As per the new guidelines, LTV has been rolled back to 75% allowing both to lend more on existing accounts and having also gained the RBI seal of approval for moderating portfolios.  Disbursals are still by cheque for high value cases ( Same INR 100,000 benchmark) Apparently Ownership Affidavits have specifically recommended by the RBI as NBFCs probably pressure customers /claim troubled custom for original receipts for Gold more than 20 gm

IT firms would probably end the correction as Infosys result day is now key with Infy at 3400 levels. Both Product platforms and Consulting have failed to take off for the new no. 3 of Indian IT. However buy in select Mid cap ventures ( for the same tired reason, MindTree is still an in) continues as the Rupee story has unfurled. The smart correction to 3480 may be safe but the range remains between 3420-3480  and any new rally pre-results would likely be sold back to these levels. Similarily the short on YES Bank (Mitesh) may again fail as Banks manage to boost their share outlook on Private sector and credit performance in this week after a very dull prognosis again prompted the pick by Mitesh Thakkar (TGT: 340) and others. YES will still be a good buy and IDFC is again available at 102 levels so both should be bought into at these levels. YES commentary would be key as Indusind retail portfolio gets colored by being mostly in the sharply down CV sector. ICICI Bank may not keep the elevated 1050 /800 levels in earnings season this quarterly review but will remain higher and be guarantors of Indian performance both in markets and in the overall Economy with IIP and GDP rates still subdued and inflation a big part of the continuing growth imperative

Except for trades on exceptional earnings and sell on news, select stock picking remains the order of the day, going into earnings season next week.  Infy for example will suffer if the promised margin expansion of 100 bp and higher guidance for the full year is not delivered with or without commentary on taking out the Executive council from the company’s governance model. Bajaj Auto may see new highs as it remains important in portfolios with new picks in the other Bombay car/auto maker M&M. Bharti and ITC continue to see some exits but have more or less become nerve centers of a trading move despite the expanding dichotomy between Mid-Caps and the Large Caps

India would be happy enough with $30 Bln stock of FDI in the Calendar year 2014 as well and marekt expectations do not include any redefining execution elements into the stolid infrastructure story nor any PSU ETF can bring bank PSU investors or the BJP euphoria in a hurry. T2 has been commissioned in MIL in time howeevr, taking capacities to 40 mln passengers per year, while KIA is already expended into T1A with an overall capacity of 25 Mln pass per annum. GVK in the meanwhile , tries the land monetisation plan first at MIA while GMR continues to consolidate international and national bids ( Hyd and Bangalore) in it aviation subsidiary, the only post MRT/Metro good news for the sector now four years into its relaunched modernisation drive, where BJP assumed it will get the mandate to do better, but it looks likely that the electorate saw it was equally impossible before the Election mania picks up (after the Vote on Account).

(Anyone wanting to edit the Morning Report is welcome to formally request myself and email the direction/editorial choice parameters as well as the time constraints)

India Morning Report: Market takes a profit taker’s slice of pie at 6400

English: Juuso Pykälistö (FIN) in his Peugeot ...
English: Juuso Pykälistö (FIN) in his Peugeot 206 WRC during the 2003 Swedish Rally. Français : Juuso Pykälistö (Finlande) à bord de sa Peugeot 206 WRC au cours du Rallye de Suède édition 2003. Polski: Juuso Pykälistö (Finlandia) za kierownicą swojego Peugeota 206 WRC na trasie Rajdu Szwecji w 2003 roku. Português: Juuso Pykälistö (Finlândia) no seu Peugeot 206 WRC durante o Rali da Suécia de 2003. (Photo credit: Wikipedia)

The cake was of course due, it being the market anniversary at 6400, and the sharpness of the cut a reminder of the buyer knowing he was due a big hole when he exited. It is still a relatively recent add back to the Indian market equations, used to absorbing continuing profit taking without such a market wide reaction

Ofcourse, the hint was in the stock selection to the rally to 6400 (achieved) and 6500 (planned) with the markets still believing in Maruti and AllBank , parts of the rally not to move till further into the recovery. Needless to say the profit-taking candle worth a 100 points before 2 pm(250 sensex points), also wiped out any chance of a further downtick as 6200 presents a secular buying opportunity and 6220 is as good as 6180 would bring if there was another day of correction. However, the important thing to note was return of volumes even though it was in breakouts suspect to last the full weight of fundamentals testing strong fundamentally valid scrips. Tech Mahindra, M&M Financial services were up on buying and IDFC and bank candidate LIC Housing were indeed weaker instead of gaining strength yesterday,. Today might see the opposite as Powergrid continues up and to me even IDFC does not look like ready for a correction at 108, let alone 105 which should see buyers crawl back.

Cornered buyers of the rally looking to add Hero, Maruti and the PSU Banks like BOI an others may again cause a flutter once the markets reach 6350. If they decide to take up cudgels , investors and positional traders should move out of harm’s way gong to 6100 Puts, buying out their  6300 position in Puts. Also transaction costs should preclude move outs from 6500 and 6600 Calls especially as the longs have some more to look forward to , allowing them to expire such calls on the hope while buying more ATM calls if they wish to go long. The Rupee was the most hurt from the lack of new picks for the bull run, the breakdown at 64 finding bears waiting in the currency which immediately lost almost half a dollar to open at 62.40 on Friday. Fixed yields remaining at 8.8% instead of riding down to 8.5% probably signify a large shot interest even as the Taper passes by.

The unwinding in Bull Futures seem to be taking place a tick at a time so the new concentration has probably cottoned on to new interest in 6100 series as well as we can confirm after 2 pm. However if you have indeed exited (updated before 11 AM on Friday) Exits may also not reinvest in Defensives like Pharma and IT at current levels though those scrips are maintaining levels

The ICICI TAB campaign will indeed live up to its hype in 3-4 months as Banks come back to lean on retail deposits after cycling thru pressure updating on Salary and Corporate Savings accounts, as a loose ready reckoner for focus, with retail lending probably also going off a cliff in 2-3 months at the inflection in the Economy where Investment has to take over and the consumption uptick will slump hopefully without further rate hikes from the Central Bank Meanwhile with the PMI above 50 in December, Q3 looks like a good number for GDP ( having battled first seven months on negative IIP) and the IIP in January next week will still report for November which should fool no one .

The India Services MI follows on Monday likely to show an uptick as China battles another new slowdown in Export Orders which again is something India has skipped in this month’s report due Monday. We warned you on the Tata Motors trade, December sales underlining the company’s longer term woes and JLR eating up all the Cash flow for its design investments. Bullish trades will again focus on a new spine of infraco and telecom even as Voda pips the public Bharti in the battle for subscribers with a DoCoMo conversion Bharti’s 200 mln base could thus even rejuvenate flagging growth back to number 1 in a few and till then news of a recovery may have slowly trickled in to a mass of ‘hysteria’ buoyed by the coming bull earning reports

Given the continuing bottom up buying approach into the rally as it continues from 6150 levels at worst, this would be the widest base of new fundamental picks identified as winners and more of the traders’ favorites fall by the wayside, making Axis equal to ICICI Bank and HDFC Bank in the coming rallies for example and even Cadila and Glenmark correcting with the rest of the market till the new rush consolidates.

GAIL could be a great add to the defensives as well and should help if you are finally ready to rid yourself of the HCL Tech and All Bank, with me being a little uninformed on Idea and the new defensive volume breakouts TechM, M&M Financial(hopefully the information risk is not going to be staple for the market)

YES Bank and IDFC remain the continuing meme from the 2011 rallies while new fundamental picks could be bolstered by the gold bankers Muthoot and Manappuram mid-caps even as Gold does slide down in 2014 with Oil as a continuous shrinkage from the Fed bites the Gold and Oil trade. I’d still bet on LIC Hsg and Shriram

Hero’s December ‘comeback’ could be another harbinger for the goo pickup in rural trade as Bajaj Auto again underlines that Hero is the loser from the Honda sale with Honda having caught up to 300k in December at 60% of the Hero figure.

Zee could sill be a good pick in this term and Adani Ent and Adani Ports could be good shorts even as their fundamentals improve on a tiny, not just small base. Infy has tracked buyers after diping below 3500 but there isn not mor than 3-5% on the upside

India Morning Report: Building up that range between 6300 and 6500, Energy Cos let fly

Call buying in the new year has resumed in 6500 and 6600 strikes underlining market confidence in making the upside while 6300 Puts define the bottom of the range (Sold puts always in a bull ‘candle’)

Also non food credit growth signifies Banknifty has less pressure on it to buy up its PSU components before the secular recovery takes hold in India Inc., right now recovery prospects led by better performing banks and corporates, even select Mid caps. BOI and All Bank seem to be in the buy rush but buyer beware doctrine applies nd we remain happy with PNB as March shows the having accounted for the bad losses and survived with better provisioning.

The Energy Cos are way ahead in the New Year esp if you include the rally on 30/31 as the pace of increases in Diesel prices and the increase in Non subsidized LPG confirm better prospects and however also confirm that the battle against the Fisc will last a long time unlike the chutbhiyas fighting it out for an ex Infy startup tickets in Bangalore (AAP gets a dirty linen in the streets fight with Pai and Bala joining against Nilekani)

Infy did start back at 3500 but there is a further downside risk from the fracas probably enthusing electorates and markets in its incipient hour tonight. HCL Tech is a great short right now to save your Bull Dollars. Cadilla and Glenmark remain the important buys with IDFC, YES and Bharti and ITC leading the Bull charge. Bharti tops its trading range around 345 and the ITC breakout is still long way to go in January.

Maruti sales hit rockbottom in December, so  I would have waited two weeks to confirm the trend for January before including them in the Volume breakouts. Sales at Toyota were down to 12k and Maruti a paltry 90k, this trend much like our Maid in Manhattan and her UN immunity spawned employer Devi Khobragade a little too ahead to go with real recovery trends, even belying equally bad sales in January too perhaps?

IIP ticks up again for December as and when data is processed but bank credit jump is part of the lag with no new projects expected in December – March and WPI will remain stressed near 7 levels and higher even without the customary poll sops in this season Indusind is not a good buy and that with the lack of buyers as volumes return this week means the bull ticks will be slow except for Power and Oilcos

India Morning Report: A tough hand dealt in the Financial Stability Report

Loan
Loan (Photo credit: LendingMemo)

The Interconnectedness of the Indian Banking system, might have become prioritised for a global caveat emptor learnt but the Indian system has much more downside from our desi PSU style profligacy in SME lending as haircuts on even 50% of that stressed portfolio would take the government out for a long walk in the woods. Delving a little more indepth into our favorite subject, most of the stressed portfolios in India Inc’s first stress tests were found to be in Infra, Mining and Cap goods sectors or our core Infrastructure series components and those would anyway need to be treated differently than Ordinary term loans . Such loans constitue 54% of the Stressed assets identified in the FSR.

However as the Financial Stability Report remarks, there is a fundamental risk to about 60% of the credit stock in the Banking system collapsing banks even as they have primarily not created a laconic lee side for the Ghat monsoons in interbank lending primarily one supposes thru traded CDLOs and real lending on larger accounts  than derivatives without a defined underlying as in the global case. The risk as highlighted in the FSR come from defaults in lending portfolios of Banks skewed to single corporates apparently among other details one has to study from the disregard of concentration risk by lenders with the 20% to single corporate and 25% i think for group key limits to be tightened and enforced duly.

India on the other hand has to grow the Securitisation pie  from here and where the Central Bank would be trying to control INR 1.7 Tln in repayments due till 2017-18 from the next fiscal onwards (FY15->2014-15) , India would indeed face an uphill task the markets would do well to ensure they have factored in. HDFC Bank too never got that approval for added FII investments even as Axis Bank application was cleared last week(to 62%).

Back to the mundane diary of the Indian markets for the day, Markets trade leaving the upside intact as shallow trades characterise the last trading session to 2014, much like last week’s record low of INR 740 Bln in the full day of equities and derivatives trading on the NSE and BSE and Cash volumes are likely to stay below INR 30 Bln (the last week low was INR 50 Bln) probably. US and European Markets are closed on New Years Day including Fixed income markets (at least in the USA) The other thing to highlight from the watchful Fiscal Stability Report is RBI’s worries on the Growth – Inflation dynamics not working out as WPI continues above 7%  which we led with sometime in November.

Net foreign inflows continue to sweeten the deal for India inc into 2014 with a 1.5% CAD (FSR score 1.7% and a FY14 achievement score target of under 3%) and the Fisc even if the virtual spending shutdown (as in the last 4 years) from January will soon find another yawning gap even if FY 2014 indeed perks up reasonably. Hopes of a stable post election scenario have almost been crossed out in case you did not notice in the New Year’s eve  celebrations and the infra pack, high on investment hopes and leadership from IDFC, and a deleveraging trio incl GMR Infra and JP Associates with the Relinfra people facing their first AAM Party audit

Apparently new year’s eve also sees an uptick in Tata Power and Reliance , which one doubts will last esp as Tata Motors is receiving its recognition only for its minute share of the TESCO-Trent JV like in fact here was such when Starbucks burst onto the subcontinent scene. The Starbucks venture is well-defined however, and the ware tastes well, drawing in big crowds in now 3(Three) cities in India

Redesigned logo used from 2011-present.
Redesigned logo used from 2011-present. (Photo credit: Wikipedia)

What probably did not get highlighted but was tried earlier by RBI, also needs to be monitored for results as Foreign Banks continue to skirt the Living Wills issues at Global HQ and continue to rethink their strategy with regard to entering India. Apparently Gross NPAs will start trickling down as we long suggested but Fitch and a few others are still hoping the PSU disaster will play out to bigger stakes and at a faster rate to make a return virtually impossible ( especially if larger Government injections are requird to keep them floating – KV Kamath). However, I would just depend on the investment recovery and the credit growth performance by Private Banks and probably PNB as Deposits finally outpace credit in the last bi monthly reports on the Banking sector in Calendar 2013 and the ICDR hopefully comes back to respectable levels without Banks having to constrain such new lending in India’s recovery phase

Also don’t take me to be a cynic but Torrent and Lupin’s timed leaks about Pharma’s assault on a generic version opportunity for Cymbalta may be better timed but is still probably a few months away from translating into Dollars and one fervently hope ( and cannot claim to otherwise yet concretise) that the generic provides an opportunity to us more than the cookie cutter $200-500 mln with or without first mover advantage.

India Morning Report: Markets reach the 6300 mark, will it hold as the new bottom?

Knowledge market BW
Knowledge market BW (Photo credit: Wikipedia)

Eventually, 6300 may also hold as the bottom of the range and so armed with this knowledge market rangers on the Bull side may ordain the mark sooner this week and next but for now markets will trade it bullishly on Monday.  Pre Open saw a shard of pricing out in Bank of India again, sinking to a bottomless pit quote 30% down, bu tas of now the PSU banks remain the biggest risk on the downside ( esp if they catch our fancy as the markets go up, they would underline the lack of options in such a wide market with 3000 active quotes on NSE alone.

Deposits were finally ahead of loans in the report of week ended December 13, growing at 17% (INR 75 Tln) with Bank lending at 15%(INR 57 Tln). Non Food Credit stock is INR 56 Tln, making up most of the growth stock in lending (INR 320 bln out of INR 360 Bln)

As we mentioned at the cusp of the rally, infracos and IT remain sectors in which stocks have to be decided for the winners and losers , both right now moving in single file, IT moving together with a losing rupee and infra moving up together on good hope for policy day, like this week. However, IDFC for example has a much more bullish trade accumulation appealing to at least three class of investors including the passive institutionals and the active hedge traders in small infra hopes.

Traders continue to hope for the non obvious trades in each of their not so blue chip large trades which technically may no longer belong to the Midcap story either including Cairns, GMDC/NMDC, Hexaware/HCL Tech. Barclays did up the growth forecast of India Inc ahead of results season, but more on the lines of MSA’s war cry for an automatic upgrade to 6-7% growth for India Inc with positive Investment flows, because the deed is done, which sadly has still to unfold surprises with statistics belying the temporariness of this recovery without the requisite investment flows except the Net Exports as we wipe out the Current Deficit and markets cornered the shorts out again in December.

I could buy a few puts on HCL Tech just to wind them up and carry home some profits on the announcements as results start pouring in. That would be really the closest to a sure winner this quarter as the Ruee digs its heels in at 61-62 levels. Infy shorts will not bait the stock till 3600 probably and if you are bullish, the up move is unlikely at thse levels despite the oevrall atmosphere of continuing good news in the sector, and that will not extend the winning rallies of Mid Caps and Product companies like KPIT, Hexaware and Persistent either.

Glenmark and GAIL seem good additions for stock watching in 2014 to our already brilliant portfolio led by IDFC and YES Bank. Mining and Metals as also L&T are likely bad trades to start. Pharma remains the best sector for bulls in both Domestic and Exports stories despite the NPPA pricing policy implementation, a higher double digit CAGR growth assured in the domestic market, I’d say. Banks despite giving up the gains early on Monday, look like making up for the sobriety shown this quarter in 2014 too but stock selection has becom critically differentiating strategy between the sub par equals as well as the Private sector leaderboard.

India Morning Report: It’s the banks, stupid!

The January series, with three days to go in the New Year, has started optimistically and apparently is in no hurry to trade. however within the two trading sessions including the first 15 minutes of today, Banknifty has already managed to 11600 levels without undue weightage to the losing PSUs. That being the target no one probably wanted to exit the 70% of India’s banking in PSU Banks forever not served by the State Bank of India or the PNB recognised as winners earlier separating them from the sick pack.

But given this start on the Banknifty this time, one would expand the role of the Private Sector banks in this rally to 13500 where one first probably evaluates its value score in terms of future March 2015 earnings

Meantime, Havells and Idea seem to be the scrips to nod to given their position in the trend and coming FY results as December numbers get reported only after two weeks and more hints are sought towards the Fiscal close where India would assess its gap in Economic terms as well, having assumed at the start of April that they would be much closer to a 6% GDP recovery

The infraco trade will like to preempt more hopeful whispers from North and South Block, the fate of the Congress government precariously hanging in balance and the hope outlasting the pushing back of most important decisions and any spending to post elections, a Vote on account coming in February to last the interim period

India certainly batted the 2nd Test well but with rains likely to spoil two more days of that game, its a virtual close to the year on a less than even score having barely eked out  a draw in the first to save face.

Happy-New-Year-2014-HD-Wallpaper

 

The LNG hike in Delhi seems to be a good marketing strategem launch timed to last throughout 2014 and players in IGL , GAIL and Reliance that starts producing under the new price from April 2014 sales. Diesel cos lasted most of yesterday with more than 1-3% gains fo rthe reported news of increasing the gap closing of diesel subsidies at INR 10 per Liter

Food inflation has shifted from Onions to potatoes, but will tick down the overall cPI before the fuel inflation statrts up in Q2 FY15

 

India Morning Report: Energy Cos, FMCG follow into the bull segment in January

English: tata steel lake black and white effect
English: tata steel lake black and white effect (Photo credit: Wikipedia)

The news of breaking thru to better levels in the next segment have started crystallising on expiry day as OMCs and  Tata Global catch up while Aurobindo is a strong candidate to become the trader sentiment fundng stock as it battles the challenges from a local branch of the US FDA in its new avatar(US FDA’s new avatar)

Divis’ is another if you think it needs a scratch to win the Pharma segment in 2014. However there still is significant (75% +) investment upside in stocks like Cipla, Lupin and even Sun and Dr Reddy even as they review their competitiveness in the blue sky territory (Ashwini/ET on Aurobindo) for their stock prices.

Mining and Metals are not going to get a broad rally and may sustain bear interest but Tata Steel and a few others are definitely heading for a better future, Jindal Steel on the flip side continuing into the nether. IOC  and BPCL could be strong picks, HPCL having compensated for the lack of interest within the sector in 2012.

The long stretch at 6200  now sees thinning out PSU bank trades and new investors looking for the non Quantum broking “hidden gems” i.e. analysed not in this block of 5 years but surviving the negative glare other trader favorites have been subjected to as Bank and Dealer trading rooms get increasingly traded out of the select short list making the back bone of the as always overall positive prognostication for the Indian Markets as a steady uptrend of more than 15% gain in 2014 has been divined for the overall markets. 

However the FMCG jump backs identified in Talwalkars, and Jubilant or even real estate newbies in listed trade like Prestige or earlier RKJ picks NCC have already shown their limited stamina in such rallies and the same applies to a McLeod Russel or any other such Midcap picks and Tata Global will probably lead a pack of 6-10 such winners . Others likely to be included in such a cross section of winners would be the winning infra trade from IRB, Lanco and even the blue chp pick IDFC,  and another from GVK, GMR and Reliance Infra on better leverage news in 2014. The ones rejected for quitting on the bank licence race or just trying include Shriram Transport and LIC Housing. ITC and Bharti are not good for the day but remain part of this segment of winners to provide fairweight to sucha trending portfolio unlikely to be able to depend on Maruti or Axis Bank (probably just because it was tired by traders thru excessive lay in 2011 slurring it as a bulwark of the bada$$ trader instead of India’s flagship trade) Punjab National Bank alone is making up for the required breadth in Banknifty underlying/components along with the usual volumes in SBI. Seemingly, Powergrid is also nearing a FII limit at its current aproved 24% part of the overall sectoral limit.

The Power NBFCs are good for the rush, HDFC Bank is not out of favor and REC and PFC continue to lead this other mrket spine overall, but the other spine/splines(if you read) would come back in Powergrid and GAIL. As mentioned earlier the L&T and BHELs (esp the latter) or the metal and mining Hindalco and Hind Zinc may not provide such an alternate portfolio enough weight to survive the daily storm in 2014

Also, on the overall, like Reliance in the earlier years from 2005-2010, one should stay away from a Kingfisher like future looming for Tata Motors as cash gets reinvested at luxe rices into JLR and it is fully matted in domestic markets

 

India Morning Report: Rollovers underline a strong Thursday close, Merry Christmas India

English: Eugene Fama receiving the inaugural M...
English: Eugene Fama receiving the inaugural Morgan Stanley-American Finance Association Award from Rick Green (Photo credit: Wikipedia)

Inflows have been strong in second half of the Calendar year and Net Exports have been rising (nice, Manishi RayChoudhuri/TV18) . RGR was a brave face as he shot down the traders bamboozling him and the follow up interviews by the Guv on both CNBC India and ET NOW are great hits but without Investment to the real sectors and not real estate or Financial markets the return to 7% growth levels is a shard unwritten.

I hope he can stay off some future rate hikes too even as the auto sector underlines that the recovery has not happened tomorrow or this month(January) either. Fixed income yields still have a chance to return to 8.5% but then thats me hoping in counter balance to markets hoping for free money on a tree, any tree! (lolz)

New Open Interest at the start of this week even makes a 6500 close to the series possible but probably we will stay at around 6350, no less. HDFC Fund”s INR 150 mln-200 mln purchase of the Morgan Stanley funds is like showing up how tough it is and will be ,  while hiding the almost nationalisation part of the transaction, allowing a stuck Foreign fund an exit from an incalcitrant (Recalcitrant plus contumacious plus that commission factor?) market it is unable to grow not unlike Fidelity as entry loads bring bak the downselling to th slow growing asset markets that have still grown from INR 5.5 Tln before the crisis to almost INR 8 Tln today, the indexes barely having moved on the round trips in between. HDFC Fund’ last big buyout was when it got the top performing Zurich funds and till now has been masticating these previous transactions without any growth and is unlikely to start growing from here despite the 400,000 new customer accounts left high and dry. Market sentiment is indeed positive and getting better and may the DIIs forever looking for a bargain keep cash and money markets running to good demand for Indian paper.

Back in equities, the markets are busy rolling over their bullish positions on the penultimate day of trading in the series and the shorts have to probably fall out except for the 6500-6800 Calls on the Nifty which can be written with certainty till expiry, now predominantly in the January series, given the markets are eager because of the safeplaying, to turn boring January into a contest of Fireworks from both bulls and bears but probably with a 6300 bottom till some big negative news plays out not counting out inflation as Rural CPI may still sike and Vegetable inflation may still fall behind the news of prices going down last month

YES is a great buy even without a new IFC contract signing, IFC’s co lending probably its most profitable program in the subcontinent and its return augurs well in the last decade and more in jumping up Investment in India but with intthe currency hanging it will probably take a few more Dollars from them to move the trend to the Indian waters this time around. Hopefully, EXIM Bank does not need allocations from the Government in this quarter either to move export credit and keep double digit growth in Exports on track even as the gains from a gold clampdown disappear

Individual stocks

The sells on Jubilant Foods may not be needed for substitution of ITC into buy portfolios betting on the recovery nor do straddles get anything in the 6300-6500 range in January ( Ashwini still out of depth a little like the DIIs without a correction, though there  has never been any benefit to markets in acceding o their demand for lower levels , tabs , whatever. Interesting downtick in Volatility this week, One thought/heard positive volatility had disappeared totally. The only remaining downside risk to the market now building up is the jump in Canar Bank stock and such investors and advisors now again rooting for select PSU bank stocks.

Update price not disclosed, the MF purchase cost HDFC Funds upward of 4% of Debt fund AUM

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: Bad Boy shorts in more trouble, Rupee at 62.50 ‘lows’

Green Energy (narrow)
Green Energy (narrow) (Photo credit: Truthout.org)

Dow corrected its Wednesday closing reaction welcoming the taper and Indian markets will likely realise they had shorted the markets unnecessarily and move up with IT stocks back to 6180 levels on the last trading sessions of the week. That means bad news for Angel Broking as Ashwini with them, keep digging for lower levels and markets hold above that 6150 support and move back to 6200 levels.

IDFC and Reliance are special mentions in the Morning Report today. IDFC as ET and CNBC18 report struck the alarm bells when hitting 50% in Foreign holding took it out of the bank license race. It would be applying for bringing down the foreign holding limit to 49% from 54% now. The overall foreign holding limit will be bumped back if the Central Bank refuses them a bank licence

Reliance GAS price hike of $3-4 per MMBTU seemingly translates into a sub Re 1 increase in Power Tariffs(Tulsiyan, CNBC) while Reliance increases profits on its current 20 MMBTU production (CNBC) by INR 25 Bln but its production does not increase till FY20 materially and it will thus shuck out of the Winning XI again by next week. The Gas Price Hike was approved today allowing gas availability issues to recede from April 01, 2014

On the diplomatic front, I think serious gaps between diplomats have surfaced that take the India US relations South as the focus has shifted to getting the charges dropped. The US side will thus focus on legal issues as well, where probably the real issues of employing domestic help in the US within the Embassies should probably be addressed more in the ‘face saver’ agreement, wilfully skipped by both parties showing up both sides in the Foreign Services not being live to real issues in the quick and quiet undercurrents that matter so much

Powergrid says it will be worse off by just INR 1.6 Bln on new CERC availability regulations a very small road bloack and that gives us at least 3 sectors going strong apart from the ephemeral IT and the longer term moves into Energy and metals which should completely rule out any shorts on the Nifty which continue to ride December series. Pharma is good for immediate trades, as is FMCG including ITC available at trend lows at 310-12 and Bharti at 320 levels as well as Power which almost welcomes the hike in its Gas prices as that is definitely more realistic than the $4.20($7 incl taxes) rate expected per MMBTU in the MSAs esp at the GVK Hyderabad plant example which would also benefit from the Powergrid reconnection in the South.

The India Rupee has likely bottomed out again at INR 62.5 levels

India Morning Report: The gradual Taper encourages a rally, India indescribable yet?

English: Skyline of Mumbai from across Back Bay.
English: Skyline of Mumbai from across Back Bay. (Photo credit: Wikipedia)

India seems to be locking itself into a no man’s land as the nations punters join the global hordes celebrating the slow Taper on Bernanke’s going away announcements yesterday. ET Now in the meantime has continued with finding obscure (GRE: obfuscation..) commentators on key event dates. CNBC 18 wins again. The issue we are raising is at a different dimension(d-axis) than the assumed obstinacy to be different or that of even the fundamentals of a recovery being spelled differently this side of the Himalayas.

Meanwhile what is looking risky even as Asia applauds the thinking behind the taper, that India’s currency markets try the haywire trade still hoping for an aftermath in the Rupee as the Rupee opens to 62.30 levels. Equities will start the day at 6250 levels and while others posit a rannge of 6200-6350 , the day might yet spring a surprise or two before noon trades. Anyway equities are back above 6200 and GMR is back among large bidders even as they exit Istanbul. Also, NSEL promoters in J Shah and Financial Technologies have been duly censured and MCX would soon be owned buy another consortium of Indian Institutions. Taper could have been abslutely a non news in the Indian currency markets too and the open quotes are a sign that shallow trading costs a lot in adverse selection prmiums to the currency’s bid ask spread.

HDFC Bank’s application for  increasing FII limits to 49% pends with Axis Bank’s application for a relaxation in a similar ceiling and both will be leading bullish plays today.  Assuming that currency markets just wanted to explore the possibility of a significant negative impact of global liquidity being withdrawn , India’s preeminence as a investing destination in the new post crisis world stands. The $34 Bln in FCNR deposits aart, because the Infrastructure situation in the country is unlikely to improve from current vies of coalition governments even for the BJP, the risk remains that India investments will remain confined to a NDF market in currency , smalleer Indiab Bull boutiques with no presence otherwise and at best at 50% of the pace China specific and China sympathetic investments in South East Asia. Singapore and Korea too are not looking for more than a flagship investment or two to artner with India in ther growth run. However, none of that impacts the fundamentals of India Inc and the rally we have outlined since August is rel and given US and European Banks and institutions will increasingly be constrained in the coming months given other investment and Capital constraints, or the recalcitrant DIIs recognising any new levels, Real investors have to sustain this rally, neither retail nor from OECD institutions.

The Yen also got a boost from the Taper trade, while India and other trade partners have increased trade with China in the last few months over its traditional partners as both Industry growth charters in China including European imports and Resource exports from Australia and Brazil have been sidelined in the build up to lower trade surpluses and higher retail growth expanding not just Landrover but also our franchises from Cotton and Agri exports and a new market for Management and Consulting Services in China and South East Asia.

The Taper past ( it will last till September 2014) and India starting on a recovery path, markets have to recognise the Depth in India as speculators continue to keep coming back to old favorites that were not more than tangentially aligned to the new Global equations like the frog that sips back everytime he succeeds in taking a new step or two to get out of the well

11 AM Update: (I agree with SS on CNBC 18 again), One should just wait out the falling knives and start buying towards the close of day today after 1400 hrs instead of the rush to sell 6200 calls or especially Axis and ICICI Bank Calls which are well worth buying (ATM) 

Fixed Income markets contrary to expectations of the 8.75% yield on the Ten year bond losing again because of Fiscal impacts in the last quarter of the year, may in fact move back behind 8.5% lines as Spending cuts materialise to balance out the missing $$$ in Rvenues and Disinvestment charges ( which may still come out on top) However equity indices will depend on only inflows into the select basket of scrips including Bharti and ITC in FMCG and IDFC , ICICI Bank, HDFC Bank and YES Bank, or other midcap selections outside earlier.  The Power NBFC trading range for example is a very wonderful opportunity for those willing to wait and watch on India.

Indian Pharma seems to be retaining market interest as $200 mm molecules have more than a dozen opportunities every year in a 2012-2016 period even after the first few Big patents have come and gone as more than 30 $ 5 bln patents expire. Teva’s first few generic applications being rejected upholding current patents in the USA may also not stop them from coming out on the winning side in revenues on the vast US market opportunity, while  Indian domestic business is still less than $10 Bln and probably can grow 5-6 times from here.

Banknifty has a bottom at 11200 so today’s snap southward may not hold after 1400 hours in closing trades before the last session of the week tomorrow. Gold swipes big losses in today’s trade as the Global liquidity shrinkage impacts runaway trades in Precious metals led by Gold and one assumes even Crude and Real Estate markets at least outside the USA. However, even limited trading volumes for importers, ne does not expect India investors allowing anyone here a win with significant short trades in the metal. International prices of Gold may well breach the $1000 per pound mark. They are currently trading at $1200 post taper announcements.

 

Bank Policy Wednesday: India stands PAT on rates in December

Even as RBI shows concern about the retail inflation, it has probably factored in the welfare sustenance supply chain requirement that has necessitated a higher tick of Food inflation likely to last till 2015. Even though the jump in core inflation to 2.66% has reached worrying levels, the RGR regime has played it on the level, standing by the current Bank rate at 7.75% . As banks have already moved off the higher MSF lending or the last quarter, banks would anyway be unaffected by the lack of change but the markets can seriously take the impending rally’s mechanics from here .

The FOMC reports later in the India day, closer to midnight when they can , we agree, start with an early taper. However, The Fed meeting is likely to also be a sendoff for Ben Bernanke and so any such major policy announcements may be skipped for Janet Yellen to attend to in February, April or even June 2014 and as the Fed has managed so adroitly, the Taper would not mean tightening. Though the Dollar remains weak, the Taper is unlikely to still avoid the Dollar strengthening into a vise like grip on the US own Economy.

On India’s Policy announcement, the 7.5% mark would have been even better but as noticed concerns on Food and Primary inflation are real and may spill over to Core inflation unless kept in check. The RBI Governor notes that Vegetable prices that jumed 99% in the Friday WPI report may fall sharply.

Yesterday’s Review noted, in the overall scenario

In India, the pick-up in real GDP growth in Q2 of 2013-14, albeit modest, was driven largely by robust growth of agricultural activity, supported by an improvement in net exports. However, the weakness in industrial activity persisting into Q3, still lacklustre lead indicators of services and subdued domestic consumption demand suggest continuing headwinds to growth. Tightening government spending in Q4 to meet budget projections will add to these headwinds. In this context, the revival of stalled investment, especially in the projects cleared by the Cabinet Committee on Investment, will be critical.

Banks have garnered $34 Billion from FCNR Deposits and India’s FX reserves have jumped at a $5 Bln every week from $277 Bln odd at the end of November and now at $291 Bln. RBI continues to flag the negative output gap and even a slowdown in Services

Also factored into the December decision is the virtual shutdown in Spending by the Government from January as revenues remain not so robust, which would strain interbank liquidity (LV?CNBC18)

It is good that RBI has returned to not being overtly reactive to the inflationary economy and GDP in March could have a larger chunk of the good news premium Indian data has been lacking since the year began.

India Morning Report: TESCO gets in the door, Another rally on the brink and a few kinks in the Bank Armor

Whatever be the State of the Bank Champions, Banknifty has bottomed out at 11,200 effectively esp with HDFC Bank hollowing out the tube on a 2% cut in MSCI weight to just above 5%. Coming back to the fundamentals then, it’s a beautiful morning when Banks and lendees have to get into line for a little justice being served. Though ET very adroitly , slipped out of mentioning any of the technical line items by the NPA sub-Comm at RBI Headquarters, the NPA guidelines will go a long way towards getting the banks to wake up to a new, faster era where they cannot use just proximity to the promoter as cause for underwriting. Specific colour coding of the timeline to NPA forces a beautiful transparency onto the banking system.

Currently Banks are prone to getting CDR notices around the 90-day deadline when the loan assets sour into NPA and the current accounts with more than an INR 100 Lac overdraft exist in such plenty that they are not duly raised as line items fraught with default risk for the bank. RBI draft guidelines also propose red flagging the Promoters and Directors of such businesses that are prone to turn purple in 90 days from the first Default so they are not wont to hop from enterprise to enterprise or engage lending officers into such a scheme that encourages adverse selection.

Au Bon Pain logo.
Au Bon Pain logo. (Photo credit: Wikipedia)

ET actually would be one such enterprise forever on the brink that has to prove its Financials and its intentions and has limited its own borrowing capacity but that may not be interfering with editorial ethics and it is not unlikely however that the same will be one of the discussions in this CDR friendly patch of Indian Banking’s jump across Futures and Fortunes from the casual officiousness of the nineties to the brisk professionalism with Corporate , SME and Retail borrowers in the 21 st Century post a global crisis

A last rate hike is coming and the rest can be entered in the post policy announcement today, in a few minutes as markets last without any cash trading in the first hour and some.

The IOC divestment is good news even as Markets drive the stock down to possibly the lowest realisaations from the stake sale. The Trizivir approval is coming through for Lupin while  the same USFDA has akso approved Lupin and four others including Sun and DRL for Cymbalta($5-6 Bln per year) generics in the US domestic market (anti depressants ) Sun’s SPARC lost a generic application (LV/CNBC18)

Auchan
Auchan (Photo credit: Wikipedia)

IDFC and ICICI Bank as mentioned yesterday have righted the price trend amidships. If you are looking  at other rate sensiives suriving the coing high interest regime and leading thus this India recovery, apart from ITC whose core business showcases highly inelastic high demand for its products any consumer staple business especially in Foods is an equally good proxy as Food inflation will continue strongly thriu 2014 whether rate hike or not and GDP growth restrictions continue to bracket very few non performers except the NPA ridden PSU Banks. NPAs in the system rightly would correctly jump to 16% of the assets in the high rate scenario

And yeah, I belong to the minority that likes the sharp reaction from India to US trapping of Devyani Khobragade. Even PPP does not cover half the gap between Service costs in the US and in India

TESCO right timed its entry apparently in JV with Trent. The London based retailer is a welcome substitute for Walmart in a touchy state -Center source of friction in an iportant policy hot pocket. TESCO lands in Maharashtra and Karnataka with its first two Large Format stores ( though thyey are really bigger than the Auchan Hypermarket format) Other non stock market related news for retail came from the otherwise listed Spencers’ owners RP-Sanjiv Goenka who are taking Bangalore’s own Au Bon Pain national. They are the first Master Franchise looking to own all the coming India ‘stores’ of the Coffee/Sandwich chain (QSR). Apparently national footprint for Au bon Pain entails more 1800 sft investments whereas they have rationalised on size in home district of Bangalore except for the flagship restaurant on MG Road

The Bank Policy Date goes by without a change in rates as the RBI advises against an over reaction to the good news while they wait for data

India Morning Report: Icky Spider on the Wall, why is this the fairest of all?

Česky: short straddle
Česky: short straddle (Photo credit: Wikipedia)

An unheard limerick, coined by yours truly, till some claim is authenticated on the same, roposes the current scenario and the base reasons for the same vacillating non volatility trade winning 6200 mark again. We had planned a kudos for the F&O analyst for proposing the 6100-6300 straddle ( Sold put – sold call) after Vol (India Vix) reported a low 15-17 score befor the weekend and 17 on Thursday. Though the Economic data is baked in however, the index challenged by us to stay the course around 6200, is finally hanging on to its gains after some again ventured freely on the shorts ( even the short straddle is a double short but bets the markets are ranged in 6100-6300. If the markets indeed die at 6200 the strategy would be a magic marker for the India F&O market that will be a good point of reference to repeat in any new intermediate cycle  or waiting time as the case may be. However as of now, the strategy is a little stuck in the mud. Also when switching this strategy in a bull market currently, one can even sell twice the 6200 puts as the never yet suggested bull exit indeed comes to fruition

Long Straddles won the day marginally(Long 6100 call, Long 6300 Put) and Sold 6200 calls are also in the money over the weekend( Open-Open comparisons) The 6300 Call has come down from 270 to 30 from last Monday (Open – Open)  though OI has decreased in the market after a hopeful Friday Ramp by a 3/13 ratio and sold calls would have generated

”                                                                                                                                                                                                                                                              ”

”                                                                                                                                                                                                         GAIN                                   ”

An option payoff diagram for a long straddle p...
An option payoff diagram for a long straddle position (Photo credit: Wikipedia)

INR 24,000 per 2 lots (100 Nifty underlying) as vol has disappeared from intra trend highs and turnover is steady though considerably lower than the bunched OI at 6200. A 6100-6300 short straddle would have gained 1300/- from Friday Open to Monday Open with the 6100 Put losing 700/- [All calculations made at the same 2 lots = 100 Nifty underlying each leg of the straddle].  A long 6100CE/6300PE straddle would bother an INR 26.1K investment and would have been worth INR 23.4 K on Monday morning.

<– LOSS 

Good volumes have been traded in Havell ( as the Morning report comes to you late today for unspecified reasons) as the scrip gets select attention. Similarly NB, PFC and other select universe scrips have seen important moves from Friday levels upwards even as Nifty Calls seem to specify maturity of the short Calls especially at 6100 (still at a premium above 100)

The Rupee closed at 61.75 on Friday and is a t similar levels in Monday afternoon trades and both banks and infracos have seen significant moves after a 25bp rate hike has been priced in by the markets at 8.9% yields as the Bond Index entry for India issues is also under review

The Tech M sale announced last week as Executive (insider sales) Vineet Nayyar, exited half his shares ( Sale of 500,000 shares) timed perfectly with the peak price for the stock and as we expect bigger shorts in the scrip , one should expect the longs on IT to continue iling into the doddering scrip nevertheless.

The Title reference, to dig into the simile, shows up the underlying insane spells in the India markets, showing u more in skeletal volumes and defining why retail and even Domestic institutions have been priced out of this market..I am still to design any research around such a proposition, but it is likely not difficult. Let me know if any of you try.

Tomorrow might be much the same after a second day that the Market opened near 6200 and returned to 6150 before closing trades were executed. HDFC Bank has hit a 49% foreign investor ceiling nd is  losing purely for lack o f allowed buyers today. PSU Bank investors will not be returning for a significant part of 2014.

India Morning Report: I wonder if this freewheeling, Really is an enlightening thing (Dubious , Vikram Seth, NDTV 2013-12-14)

English: syndicates @ work
English: syndicates @ work (Photo credit: Wikipedia)

Homage to Sec 377 controversies apart, it also expresses the universal angst and one shot propositions(Sec 377) that refuse to delineate the difference between the Buys and the Sells and the Holds and the currency and the coin) SELL THAT MIDCAP now (and come back another day)

The markets tried again in the Pre Open today and will sooner than later again snare buyers on a higher price near 6200 but till that happens, Bulls having just defended 6000 levels in the Option premium market, not underwriting 6100 or even 6200 that they had started last Monday on, it leaves an uncertain gap in between.

Market buying will of course definitely ride a 6.5% WPI data in November riding the gain from Core industries lasting around 2% for almost the entire year now, and Primary Articles skewing the deal with a 15% tick, also underwriting that retail inflation is not wont to come down at all in the coming two years of a changed fiscal and political regime either. In India, we follow the natural order of things, yes and in the long run we are all dead , definitely, but increasing rates because Onions can finally be sold for  a better price, it is more autistic than you think and once we are part of a Global Bond index, such follies will get a force multiplier we do not worry about / or disavow when we make that policy.

GSK deal again caught buyers on both sides even as a 30% arbitrage was available on the GSK Pharma stock which closed on Friday at 2400 levels as GSK Consumer tumbles from speculators exiting at 4500 levels. Both scrips are closer to the offer at 2950 and 3500 respectively in the pre 9.30 trades on Monday. Any open offer in GSK Consumer will unlikely exceed 3400 and may even be lesser after the INR 64 Bln is spent on GSK Pharma. Apparently the Midcap deal buying Elder off Torrent leaves Elder with the low margin API business and Torrent stock is unhappy about the value bought over while Elder stock is not so happy about he cash coming in/debt closing out.

Anyway, before we proceed, the other starting up sub text today was Sell the Midcap. A sure fire winner of a strategy given the markets vacillation, as those who are Hungry are bound to die till they are served with Capital inputs and Market responses that allow a rally

Wednesday’s rate hike will probably peak out the ill advised strategy ad retail inflation will continue to iron out the poor gap even if the government can’t spend and hopefully no party feels like lifting the Gold curbs too soon. Europe’s death spiral should wean out some hot money before he Euro peak s out but the Dollar will continue south and thus the taper threat will pass off unnoticed by the non market watchers in the middle of the week. Did you notice the flurry of big bank settlements that have passed us by in November?

India will act decisively to set the global context in 2014 reflecting the markets outperforming in 2014 while US markets follow tamely yet maintain last year highs. The Europe sell off about to begin soon, will leave us unaffected giving the world another chance to dig theimselves in, but ignored india will manage with another $20 Bln – $40 Bln in portfolio adds in 2014 as US Bond yields rise to meet the challenges of a real world.

Also Ashwini is a the cusp of a rash with all his misplaced bear picks again, and you should buy into the banks now. I go with SS(CNBC18) decision on the trading rink, markets waiting at 6175 at 9:35 for the confirmation that 6150 bottom holds and markets will move up thence. All that shucking, it is finally closed so the good guys we all noticed are set to move up ( and no IT moves are expected from here),. ALso, th last headline PSU Bank investors are not coming back, holds.

HDFC Bank ticked in the early bull report on Advance Tx, but then HDFC Bank was always expected to headline bigger growth numbers than the rest and it may well be the contraindication leading India Inc to slower revenues for the third running quarter

Any others eager to read the Drama Queen by Suchitra Krishnamoorthi, it’s a good idea this broadbasing of Indians’ views on their own history

Achha, what’s the deal – Jaspal Bindra wants clarifications on Subsidiarisation? HSBC, StanC < Citi and that other, will they ever come back in India and China retail or is it just Transaction Banking now

India Morning Report: Markets slip as PSU bank investors stay away

Is Inflation the Real Problem?
Is Inflation the Real Problem? (Photo credit: Wikipedia)

Active index and Banknifty balancing in a stable India economy above 6% growth involved the usual confidence investing in PSU banks a two thirds of the Banknifty to and or xis, HUL and a select set of defensives , that have disappeared as markets fall thru additional support levels. Apart from the loss to Ashwini Gujrl’s set of picks seen over two – three weeks post ‘shucking’, any other impact on the markets is lacking. One feels the confidence shown in non leveraged High Operating Leverage businesses in small and mid cap sector is also misplaced. Such High Operating Leverage Businesses with more than even 75% Op Margin in cases have time and again shown that less than 1 in 20 such businesses , even with deep pockets like Jyothi Labs, convert into a brand and a business like Bharti.

Bharti and ITC lead markets back and Lupin has a lot of strength left in it. Expectation have come back to a 360 Cipla to kick off the game for this rally segment and ICICI Bank and Axis are also losing ground from a probable low yesterday as the Banknifty sinks into 11,500 levels. However, the end (of the shorts) is nigh. This observed bear extension on Thursday is a direct concomitant of a stable PCR near 1 levels leaving writers hungry for more and writing calls is always easier than underwriting puts at new market levels

Tulsian’s faith in the ‘shadow stockings’ ahead of Christmas is also back, but we don’t think  UB Ltd will be compensated fr not rushing returns in the merger and bankruptcy melees of the crisis Olympics. However, it would be  good idea to sink into HDFC and Siemens.

Also Barclays Capital, as we have been following got in  5 out of 7 the same selection of 2014 picks. We already made it clear Tata Motors is a big sell on 2014, probably bigger than the Jindal Steel breakdown which will stop out of the ‘bear cartel’ push at 225 levels The Energy trade should be pushed but the Fisc is already distressing and the release of Fert subsidies at INR 50 Bln  was already a razor edge detail for the Corps watching India’s clawback on global fortunes. Assuming NTPC would not be ready to immediately step up on reform gear and leverage growing efficiency, we would disagree with buys on NTPC.  GMR is back in the big bids and the big bullish candle moving GMR, RelInfra and IDFC together with JP Associates should land on the next bevy of drones.(any independent rally segment up or down can be ascribed to a virtual set of drones picking the right calls). Bank of America, the other who nailed the Economy without attention to thoughts of a wavering Rupee (more than required) will also be worth tallying scores in 2014

The 15% Food inflation and the 12% contraction in Consumer Durables (read our earlier monthly commentary on PMI/Inflation) put paid to any thoughts of a recovery improving despite news of a Q3 debacle already factored/expected for October 2013 and probably till December 2013 s this includes our festival time data. November Auto sales disappointed for all though retail inflation has been strong (good demand indicator) in Consumer durables items on existing stocks as production has been subdued for more than 6 months now

Again, despite the policy tightening, banks are unlikely to need rate hikes as they have weaned off MSF rates. Also retail inflation will continue fueled by higher Food inflation , in double digits due to supply and other economic concerns for small and rural businesses. onion rices have corrected sharply in the meantime and Food inflation data for the month was likely overstating facts, returning to lower double digit levels in the remaining 5 months of the Fiscal.

Oh yeah, we may have forgotten, in the search for Economic employment, the Global recovery of 2014, is not happening except in US Equities as Europe proves its a dead continent and a usurius currency. China thus also fails despite a better share of its own currency in exports again and that leaves US and India and the ROW without business ends to close deals beyond a hygienic rise in Trade led growth. US is also stuck at 3% levels despite the mentored lower trajectory for Currency and rates which a good motivator but the currency is unlikely to be allowed to get eweaker at least from the current Dollar Index levels, probably never below 78 in all of 2014 even as Oil imports stop for the Superpower of the 20th century. And that, is despite the taper.

India Morning Report: Will India follow the midweek ‘Global Gotchas’ now?

Chinese Bank of China
Chinese Bank of China (Photo credit: epSos.de)

The small budget deal ‘induced’ sell off in US equities as markets talked big about another expectation of a grand bargain gone south was a chimera and institutions maintained trading volumes in the last month of business. Level watchers probably look for any excuse to start off the markets in 2014 in a position to beat the hitting target level under 10% gain estimates for 2014 and is nothing ore than the correction as a big rally build up ensued since November in the Global markets. However, Global and Asian impact correlation aside, markets are due for a bigger move south from India itself to the 6250 levels as the NSE universe of stocks has been totally blindsided remaining the same in the current shucking of picks.

Most good picks maintained their levels in the open and the NSE A/D line continues to show deeper gashes while the BSE transient update continues to hold the open as around 45% advances at 320-400 on last watch

With Capital outlays lagging business recovery, the 38% IIP reported in the core industries ( Infra index) lost the entire 8% and in September while the trade data was positive on yesterday’s release (updated yesterday’s report)

The inflation data will remain strong and so RBI will likely continue with its contraindicated stance of increasing rates into the recovery till Capex comes back ( well into the second half of 2014 ::CY). HDFC Bank leads gainers as ICICI Bank and Axis gets into consolidation while YES and other midcaps react to the economic indicators expected to shoot back up into December’s reports from the gainsaying we have had around a recovery.

The bitcoin logo
The bitcoin logo (Photo credit: Wikipedia)

Bitcoin has made big inroads in the meantime on the global scene if you want your computing time to be used seriously while waiting and we remain on the verge of over-thinking in the rally instead of neglecting weak vacillating December cues from global markets with the Indian Rupee caught on the precipice.

A 9% interest rate is not doing anything great from the Bank and Auto led cyclicals either and not surprisingly at such a time the Bajaj Auto – Hero pair trade has reversed to favour Hero probably to catch up to the gains made by Bajaj Auto in the secular cycle though Hero continues to cede share to Honda in the two wheeler business and this will be estopped in two months to the secular pair trade favoring Bajaj Auto after the markets right the discount on Hero’s final achievements of a sharply focussed new strategy in the Honda break aftermath

IDFC remains a great investment pick and markets are unlikely to follow this day’s downtick into Thursday as markets correct the desire to correlation. Some market watchers already see no further FII inflows to add to the $17 Bln already entered into in this Calendar Year (most of it since April)

Paper Heroes Location 2
Paper Heroes Location 2 (Photo credit: roadkillbuddha)

India Morning Report: Markets catch the flu , ‘one sneeze games’ continue

Rstps2
Rstps2 (Photo credit: Wikipedia)

A single stroke move at  the start of the week followed by one barely hanging Tuesday and the markets are a volatile potpourri. Despite the pre ponderence of institutions, markets have come out of 2010’s downturn having decided to be a one shot vaccine for India’s Economy woes every morning, tanking a 100 nifty points today to 6250 levels on the every thought of having to continue at the new range without a hope of an immediate rise to the promised lands at 6500

As Dominic Barton reminds us this morning, India is not on the priority lists of investors at the moment, anda scary thought to encounter in one’s portfolio despite inflows of $5 Billion since September.

Vegetables in a market in Singapore's Little I...
Vegetables in a market in Singapore’s Little India district. (Photo credit: Wikipedia)

NTPC could well have started the way down an its bounceback probably is just an aberrant move. However give the broader markets would be at an index of 6250 before 11 AM, it is easier to plan for an index going up again tomorrow and traders would be wont to get their choice picks in banks with the Nifty at 11,750 on the Banknifty.

One hears of some news on Bharti but the stock is continuing a slow rally from its 300 lows to 340 levels probably unaffected (LV/18). Coal India also continues down after the new CERC guidelines.

Rumors of an apolitical volte face by the party in power with Nandan Nilekani following on Manmohan Singh’s tenure as PM and a Shashi Tharoor and few other young ministers, seem to be “TOI’ like incendiary flames on the post election fires.  IT recedes as a defensive in rare down trades and shorts on HCL are probably the best way to cash in.  Breakout innovtions apart, undoable extensions on the startup model like being attempted by Just Dial in enabling services are proven time and again to bleed out such fragile new businesses. Energy rice raionalisation continues with easy increases for LG distributors to match the new cost structures.

English: Railway network connectivity map of t...
English: Railway network connectivity map of the populated regions of India. The Indian Railways is the world’s fourth largest railway network spread over 64,000 kms and transport 30 million passengers a day. (Photo credit: Wikipedia)

Most investors would accumulate ICICI Bank and Axis on shorts made today and shorts would probably exit at current levels. YES Bank remains an investment bet but policy is around the corner on Thursday next.

The Fitch warning on fiscal indiscipline is unfounded while the US sartups ranking updates IITs as a Top 10 force in the coming Economic rankings of the world. The Dollar Rupee however looks to be on the run to 61.50 and not 62 levels since Monday’s single Candle move up.

11 AM update: Exports have receded back to under $25 Bln and the deficit is a heartening $9.23 Bln with imports under $34 Bln, Rupee catching the worm before the 2-m/5pm RBI update for the reference rate, OIL bill fully paid and UCO (The Iran Bank) coffers full, Sajid and Ruchir fighting hard , taking turns to stick to their recessionary discipline induced by Bombay duck speculators in their circles waiting for the taper to break the straw on the Camel’s back.

Invisibles were a humongous $116 Bln as Samiran points out, only $20 Bln – $40 Bln from foreign inflows on a full year basis and Defence Imports aded to the trade deficit just $15 Bln, leading to a CAD score likely under $45 Bln. Oil is confirmed as having a lower tick in the second half of the year too. Non Oil data has dropped below $21 Bln from above $22-23 Bln in the prior months, an unhealthy increase)

Hopefully Stanchart traders have changed their call in time in the Q3 parts and there is liquidity following the bullish rupee trade outside notoriously trend lagging wealth bank forecasts(Julius Baer/Chris Wood week ago) trying for a share of the NDF trading volumes

Equities are in the meantime marking probably the time in FY15 when Gold and Silver imports at $1 bln in November , come back to pre curb levels

India Morning Report: Market correction sows signs of split down the middle?

English: Human Capital Investment Model!!
English: Human Capital Investment Model!! (Photo credit: Wikipedia)

The correction from yesterday’s opening highs continued into Tuesday, as markets have opened with Banknifty below 12000.

What has transpired is that the correction and the realisation of the individual mixed fortunes of investment sector favorites like L&T and BHEL have combined with a strain of distraction from the recovery as investments into the real economy continue to lag and the same has seeped into the other Capital investment beneficiaries including drilling and project engineering stocks like ABAN and others, forcing the markets into a rumination on whether markets will resume any bullish candles in the remaining days of the week settling in at 6350 levels for most of the interest additions till mid series. Pressure on markets will however ease as Put Call Ratios trundle up on every such small reaction and saturated markets will only unwind shorts. Thermax is definitely on a stronger wicket compare to other Capex companies

The FII portfolios had added $5 bln of flows in the market rally since September, all being attributed to a BJP vote and change in government since Sunday but the production data coming towards the end of the week and the RBI rate hike designs may likely be sullying the recovery for the markets. The Fixed Income yields are down again to 8.88% after showing the strong surprise in splitting from a strong rupee back into the historic strong Currency /Bond markets stream at 8.88% yields after Rupee also lost most of the gains at 61.25 in the morning’s trade.

The RBI’s cause to not live with Inflation seems surprising as also the increased likelihood to get the MSF higher to 9% in next week’s announcement with a corresponding 25 bp hike. However as Rajat Monga points out in CNBC TV18 snippets, the banks are quite comfortable with the current liquidity given the policy rates and the bond markets at 9%

NTPC struck 10% lower after CERC guidelines announced take Power Reform to a new level. NTPC has been utilising the gap period making up for unavailable guidelines by showing tax activism towards consumers which has been hit b the regulator primarily as it also moves towards Generation based incentives

CERC reforms have hit ancient contract ridden NTPC which continued to charge differential tax rates to customers while paying lower rates at a much later time , an arbitrage blocked by new CERC guidelnes. Distcos will not be impacted as much with Hydro projects enjoying a 35 year useful life along with the Distcos and Powergrid will be connecting the South grid adding Power to shortage marred Andhra and TN

Comment period lasts till Mid Jan for these guidelines whence other clauses impacting the Power companies will be clarified but do not impact the ROE assured by CERC for 12% on older PPAs and up to 16% on newer pricing including PPAs

English: Image depicting Central Electricity R...

 

India Morning Report: Markets open week with 6500 in sight, India hits stride (Business as usual)

Discontent emerging in the divide

The 30% electorate hiding underneath the planks of a whirring Economy in erudite and the shadow economy, showed up in strength to drive home their preference for a non political vote, loosely coupled to issues and worryingly coupled to AAP’s own concoction of manifesto promises at the local level. The markets however are apparently celebrating the vote for BJP led stability in this trademark play. The Rupee has already retracted to 61 levels after opening near 60.75 levels and equities have opened at record highs around 6400. Yields (10-year) have traded up to 9.13% including the days trading as the RBI policy announcement is just more than a week from now

Midcap and PSU Bank investors are standing by (Quant broking and Nikunj discussion on ET NOW) but the stock selection has worked wonders for the confidence and at long last the pockets of the FIs investing into India at the bottom of the cycle unfazed by DII sales and worries of a failing Indian economy

Markets could keep these gains again even as volatility trades remain impossible with strangles holding sway again at the new levels allowing writers to walk away with a rapidly growing Derivatives market in terms of all profits made. F&O trades have to be switched to a 6300 sold put and 6500 sold calls for the time being, with unhedged writes or hedged with weak end of the rainbow OTM strikes befitting the large volatility moves

The return of the L&T and BHEL trades in a universe of very few great stories shows up India’s hand n the markets and markets are unlikely to go swinging up from here as well, markets moving in block moves good for probably the entire month and 6500 a likely try for traders from current open levels

AAP’s apolitical mandate is likely to grow in other stats as well but political options are likely to change equations in the next General elections, a big risk facing Modi backers from here. Congress has maintained most vote shares especially as Chhattisgarh results showed and MP and Rajasthan ar e notoriously aligned to both sides of Congress and BJP in successive election decades, cycle spanning 2-3 General elections and state elections. AAP should consider formal linkages with likeminded hell raising Tea Party’ians in the US Congress

ICICI Bank and Axis Bank are good trend trades on the upside with levels unknown till the market tires out without funds flow supporting the euphoria by next Monday, while IDFC has come back strongly , this time without Citi and Macquarie portfolios running it or their being any strong correlations with the non infra realty pack. Midcap stories continue to be generously endowed with interest as the consumption take off continues to ramp up and make the inflation story insignificant. Congress (and BJP!) however has repeatedly lost with strong cries denying “accepting the verdict in all humility” but it seems more transparently this time a vote for stability. India should  finally learn to emulate the Rajasthan model in the General elections and go with the winner from the start instead of getting into another era of desi hotch-potch coalitions

India Morning Report: Another US FDA bird hit, US GDP caught with high inventories, Markets broadening base

World map showing GDP real growth rates for 20...
World map showing GDP real growth rates for 2010. CIA world factbook estimateshttps://www.cia.gov/library/publications/the-world-factbook/rankorder/2003rank.html as of Januay 2011. (Photo credit: Wikipedia)

 

Jubilant Life got another US FDA warning taking it closer to the brink though the numbers in the same year (two) may not suggest deepening of in its case a contract manufacturing problem and the plant is located in the USA

 

In the meantime a flat market keeps its promises to the India VIX after a big ‘corrective’ rally yesterday bringing the bull trend forth to another dead in the water lay up at 6250. The US GDP report yesterday was the second successive sub 2% score with inventories taking it to 2.4% in September(for June 2013)  with a 0.4% contribution and 3.6% in December estimates counting 1.8% from inventories in the September quarter. More on the US markets impact ahead of the all important Jobs report at advantages.us

 

Asia and US trends will be the next to break correlation with the India equities, that have corrected most other vulnerabilities with continuing inflows and a 100% vote on chances of a recovery from here. Rate hikes also are behind insular shield for this market as are even coalition credentials despite the markets correlating this BJP win with a bullish market’s highest scores. 6000 levels offer almost single digit index PE within the year and Energy and Metals are ready to support a bigger sustained rally momentum while Bank Nifty seems to be discriminating between the riht banks and the wrong banks without the markets showing strains of very few good stocks as FMCG and Pharma also continue to have backers and brownfield FDI regulations have been recently firmed up while Pfizer and Wyeth merger in India puts more domestic competition on the cards. The first good sized shorts on HCL have appeared even as the Rupee remains ranged at 61-62 levels unnerved by the non story of steps for a fiscal deficit bridge, which from Reagan’s days seems to be again left to the market performance to cover, all expenses being important and budget cuts or clampdowns signs of ceding to another government

 

CLSA remains on the losing side with a seat on the fence and to us a tell-tale indicator is preferring Hero over Bajaj in these market conditions, most such investors and commentators that still prefer the Hero stock preferring to see themselves as waiting it out

 

Powergrid remains open for a great investment opportunity for retail. Just Dial ‘s great success will definitely rejuvenate stories like Prestige, Jubilant (Dominos’ India being its second largest market globally beating the UK) , Talwalkars and even Prestige which remained in most buy lists during the period when Jubliant was still seen as over valued

 

The Power NBFCs remain another isle of prosperity in the compromise between various market factions (opinions, nothing sinister) and with Bank lending revival meaning better traction for NBFCs and banks with distribution power, the banking and financial services sector may offer investors willing to jump in without waiting for decisions like New Bank Licences or overtly waylaid by the habitual topping up of PSU coffers by the government admittedly on time despite H2 pressures on the Expenditure side as it revises its divestment targets upward. India’s GDP reports had good signs with Electricity and GAs picking up 8% in Q2

 

PFC, REC, ITC, Bharti, IDFC and LIC (Housing) remain thus the favorite weekly and positional trade picks.  As mentioned sometimes earlier, Traders on the networks (Network analysts) have cornered on trader specfic plays that seem to be any good company will do kind of trades powered by ‘old hands’ but we do not have expectations from trades in USL, TVS, ttk , Wipro, L&T or BHEL at these levels. We would also prefer SBI get derated before it damages market expectations in sweeping strokes with its abysmal performance bells ahead in the next two quarters or even more. Adani is back in play with all the Adani stocks including ADANIENT, Adani Power and other

 

JP associates is a little silent as has become customary after the first lead of any new trend rally since 2008 but infracos look like getting back in the game hopefully enough for leveraged promoters to exit at fair value else the same can truly damage the markets later. I am not sure if trades in Siemens and HDFC (not the bank) are ready to dial in but Tech Mahindra would be a conviction SELL and i would not touch KPIT and Persistent but they seem to be ready for a big swing up

 

Oil prices will follow Gold’s euphoric comeback into the upper sphere where it starts hurting the Indi story soon, but may again remain weak because of the overall commodities cycle as Europe leads the way down and the Chinese recovery may yet again be short-lived without export markets, which also caps Indian exports in Copper Silver and non-agri commodities.

 

Cipla and Lupin would be good trades on the long side.

 

Futures and Options continue to see volatility trades in straddles ( Buy Put and Call on the same strikes ) but the Nifty seems to be giving strangles ( not Vol sells traditionally but profitable in a flat market) an equal premium so those not in the inner ring or actively monitoring terminals should  wait for better levels in the Banknifty series before jumping or sell Puts at 6100-6200 levels on the Nifty

 

 

 

India Morning Report: What a 7000 index(Nifty) means for India Inc!

Gold Bar and Investment Jewelry
Gold Bar and Investment Jewelry (Photo credit: epSos.de)

As Neelkanth Misra mentions very credibly on TV18 and CNN IBN, coalitions v. stable governments were never a questions for India Inc and as we have avered since 2007 on these forums, India has been a story run despite politicos in power , as much by the burueaucratic mandate of the time as the populist opinion of what the market economy will and can do.

The latter of course is more uneasy on the shoulders of a government but as a democracy we are habituated to arguing out our investment and business decisions deciding the underlying philosophy for example, the extent of WTO requirements or the Tax regime in the current milieu which are longstanding items awaiting a market verdict even if a fractured government or a single largest party wants to decide. That also means the young ones are communal / secular agnostic probably.

A schematic map of the Indian Railway network
A schematic map of the Indian Railway network (Photo credit: Wikipedia)

The 6800 mark if it comes in this rally may be just a market verdict and a bubble rally to boot without investment spending kicking in, but the same levels would be underpricing Indian markets in 12 months when investments are underway a s corporate earnings have shown. I think that weight is enough for one day’s business. To Neelkanths(Credit Suisse)  credit too, if Powergrid indeed commissions in TN and Andhra, the Indian GDP based on contribution from just that Southern grid will shoot for the skies

Meanwhile another journo got the better of my market specialist verdict,catching that the more leveraged the trade, the better its performance. By the end of the first flush of 5% increases in banks and all other stocks, one was able to catch HDIL and realty not doing well as also Stride Arcolabs hitting the lower circuits, (down 10% at 10 am)

Rupee finally appreciates this morning to 61.50 targets and Gold investors have been satisfied by the BJP’s coming , growing the metal to 32k levels in these few trades.

Delhi’s 67% turnout is another India investment indicator that has hit the scenes and well, in defence of the incumbent which delivered at the State level, Delhi-ites might still see a AAP – Cong coalition post counts as BJP  is a pariah even for the Anti corruption front that has probably garnered the 20% of the vote that educated Indians had stayed in vacillation , having to vote for politicians ( not just a half joke, probably i would go all the way on this one)

The Nifty rally is strong, Banknifty leading again, and as Banknifty is a well traded index ( or one mis spell may say trading index) it will likely return after a big rise to same 11,000-11500 leves for a new rush of bullish trades as this rally lasts the mile. PNB leads with ICICI Bank on the Private sector side and bulls seem to be cornered in YES Bank for the same election reasons, otherwise I do not see any capped upside in YES Bank either. Axis, ICICI Bank and PNB are all good for a 10% jump from today’s 9.20  levels itself(or 9 am when 6400 was tagged on the index in the pre open)  but if other PSU cranks, muddy the Banknifty at higher levels instead with a sharp irrational step up, they might see lower targets around 1150 for ICICI and still atleast 650 for PNB

Even a vote or BJP might be just a part of India’s reform behemoth, having carried India thru fiscal and industrial reforms more in hope than in action in the first flush of growth from 1998-2007. India is very different from other EMs and even China with an autocratic government despite attempts by even passive investors to blur the differences. Witness the Apple China Mobile deal (rumored) and the comparitive with an Airtel – Apple deal in terms of what volumes mean for Apple.

Investment cycle will also remain weak under the new government for some time but as we mentioned any 7000 level on the Nifty 50 will be a value play within 12 -18 months of these levels signed into this rally by the markets L&T is a slow elephant but the Power sector would showcase a great score, REC may have topped off  and Powergrid ready to carry the rush with PFC, PTC and others and as the requirement of the sector more Financing power and utilitiy pricing power (12% /16% CERC pacts) or mega power signings

On the global front the Euro has started moving up in vain obstinacy as contraction and deflation strikes in tandem in the Euro 17 and the overall 27 nations that encompass the European effort, double signing into the deflation and the Yuan has taken over from Euro in all important trade finance contracts, making the competition between HSBC(volumes), Deutsche Bank(!dealmaking!) and StanChart(price) that make up the Asia carveout

Professional Disclaimers and Opinion/Fact checks: We agree with only 8 of the Goldman Sachs dozen ond one o of five featured Credit Suisse picks in this rally as published in November and December 2013(today on tv18 for Credit Suisse references). 

The Rashtrapati Bhawan which is the residence ...
The Rashtrapati Bhawan which is the residence of the President Of India. (Photo credit: Wikipedia)

 

India Morning Report: Volatility(India VIX) has another 40% upside, the last series is a rush

Maruti Temple
Maruti Temple (Photo credit: Terry Hassan)

When markets opened yesterday, the PCR reported was an even stevens at 1.0 and the rush for Open interest additions in All calls from 6200-6800 or all puts from 5800 to 6200 by writers meant the VIX continued to jump in a flat market remaining at 6200.

The trend continues today and with a bull spread easily assimilated, Bullish positions will accrue in the flat market till the written calls can jump the markets near a 1.2 PCR level which means actually a lot of money to be made in this derivative series in the last month of the Calendar year as the Dow unwinds most of the gains in the previous two weeks.

Indian markets will drift but look like making all time highs sooner than later as the bottom catches up with 6200 while the VIX continues its move up. If you notice, in the calls for a saturated market the buy calls today are  a distinct extension of the same stock selection begun in August 2013.

PNB has finally been given the green light wth its better provisioning implying a bigger bull weight to the stock esp as PSU banks remain a big no and that means a lot of exits. The market saturation commentators probably used the SBI series to make the point but the same is more an indication of a fundamental disavowal from the State Bank stock as it remains a primary conduit in the highlighted Asset quality factors Fitch underlined in yesterday’s report to 15% NPL levels by March 2015.

ICICI Bank remains a buy on longer terms and if indeed it is available cheaper from 1080 levels it will be at the erstwhile 1035 for the day traders and accumulators Delhi goes to the polls tonight and next Monday counts will be in from the State Polls, lending  strategic beginning for the incumbent Congress and probably its last chance even as Modi makes a fool of his self in oratory and may cut his speaking engagements towasrds the end so his work record can be taken to the elections. A distinctly uneasy feeling to hear that sound of voice and it is likely to set in as a big fail for BJP on the national stage in some vaguely deviant way wihth a confused young electorate holding the keys to the next Government in Delhi ( Centre, not state)

Back in the cash markets, stocks selected are likely to gain fast colors soon as the Manthan is almost over and equity inflows substitute bond outflows near the next inflation rate hike as Money supply remains subdued and counters the rate hike rate cut philosophy underlining the wider disenchantment with trying and making money esp in India and the recovery looks to run sharer this quarter bringing banks back into mainstream picks without the PSU weighted Banknifty dragging individual winners

HDFC Bank has also suffered in the negative sentiment in aut markets and while the CV market and its loan portfolios like NBFCs and Indusind Bank remain sluggish and give of fthe all pervasive urge to cut weights in India, the rest of the retail Auto markets and Finance majors are probably set fro an upturn. November sales were especially cruel on Maruti and even Hyundai even as Ford rested on a steamed u 4000 units i export, resulting in almost 12k units for the month near its best yet.

Domestic shares of auto companies continue to shrink for everyone vbecause of the troubles with buying a Hyundai a Tata motor product like the Nano or anyther Three cheers to Darashaw Technicals for catching the exit point in HCL Tech. Notice again, the veracity nd the preponderence of select buy calls showing the winners of India Inc, this is the time to build the portfolio. Motherson Sumi(speaking on ETNOW) is one of the select auto ancilliary mid caps that will also build a market catch all in this specific turnaround time with strong order books and improving margins.

India Morning Report: Powergrid 78 Crore shares on offer, LIC and IDFC better picks

A bond from the Dutch East India Company, dati...
A bond from the Dutch East India Company, dating from 7 November 1623, for the amount of 2,400 florins. (Photo credit: Wikipedia)

The Rupee in the meantime and the bond markets again showed up weaker to announce that India investors remain Hedge funds and non standard  investors ( read hot money) already exited commitments when day began (  on any day) even as the US taper possibilities receded ahead of Jobs data but bond investors sold out just to drive the point home to the US Fed as well, keeping their pressure on after being denied a just reward for having supported the Fed when they expected the taper to start in August – September. The Divestment program is likely to continue in Coal India/BHEL (5% on offer). The Oil swaps window has been closed by the RBI in light of required action being completed ( Second Quarter Q2 economic data near the end)

The quality of India investors in the offshore markets/or of the so called Foreign Institutional investors aside, Indian markets enjoyed remaining flat in the session up to 11 am (We try to make the India Morning Report before 9:45 on most days) and ahead of the European markets enjoying a year end surge of interest as US gets Holiday fever.

Powergrid seems to be well received though no data is available yet for the first of its three investor days. Retail investors can continue to apply on Friday. Post issue purchases in Powergrid are also likely to stack u despite institutions having saved up on trading in the stock for this week of buying, and one can accumulate the stock with excellent India business prospects. The additional 7.8bln shares men 1.9 mln new F&O lots in the NSE. In the US markets in derivatives in Chicago that would have been 78 mln new lots of F&O contracts possible on the available floating stock itself. F&O shorts in Powergrid and colgate currently are likely to peter out and are bullish with individual series’ like Glenmark that is powering ahead already

LIC Housing and IDFC have finally become part of hot pick baskets and infact one or both will be de rigour in all market portfolios including those with stock derivatives strategies as both are actively traded, value investors may still find game in the two that can really build up volumes in play to the period till at least June 2014 when they might lose the value tag eventually.

6250 seems to be a good mark for a breather and may even break the monotonic correlation with Currency and Bond markets allowing RBI to consider more options than a rate hike threat for markets governance. Auto sales reports were as disappointing as post Festival month readings could be with people also postponing purchase decisions to the new year in India and the CV/Truck segments crashing through compared to last year. Traders 20 scouring reveals good shoting skeet in NMDC, GMDC and TN Newsprint (ETNOW, Lancelot D Cunha, Rakesh Gandhi)

Stocks like Lupin and M&M fin also show restless investors in the trading tick showing south while Rel Cap and Rel Infra are back in the good books. As of now Tata Steel continues to just about outperform Tata Motors but soon it may be immaterial to play Tata Motors anyway as Global steel markets relax a vice like bear grip and stabilise with some Chinese Demand pushing up. Commodities including metals are also bottomed out as end of month Chinese data confirms a better November

Exports are stronger even as Domestic Auto markets slow but the winer would be Bajaj Auto and not Tata Motors from our vantage point. The wai for a mid-cap boom seems to coincide with other rtail traders entering markets

The Trade deficit for the quarter was an almost non existent with remittances helping the CAD to a low $5 Bln or 1.2% but the Rupee seems more under slag for equities which will continue to move up regardless. Rupee thus cannot be pushed down now either with full Oil demand in play. Q2 also saw Debt outflows at $5.7 Bln in the quarter though Equity inflows according to Bloomberg ( carrying the GOI press release) are upwards of $17 Bln

This may cler the way for the Rupee rally eventually as Exports showed up above $81 Bln this quarter and imports stayed under last year’s usurius figures of competin growth beating Exports additions as Gold imports remained virtually stopped at under $4 Bln in its biggest market, global rices continuing to hold $1245 marks. Indian trade deficit at an average of less than $12 Bln may see this as the botom in the years to curb when Gold import curbs would be lifted. That reduces the prospects of any Rupee rally

Also, though no affecting any listed stocks Unitech has completed asset transfer to Telenor for the uninor licenses according to reports

A news report (ET ) yesterday highlighted the change in investor tastes in Auto as Bajaj Auto has grown 6X times from 2008/9 while Hero enterprises has exited Honda and grown 1.5X times to now equalise at 800 levels. The pair trades if anyone dared in the initial period probably because of the changeover for Hero are still a fair trade for years to come as Bajaj comes out with a 20% + motorcycle share with much better margin stories. Hero has announced a new JV with Magneti Marelli

 

India Morning Report: A GDP score of 4.8%, financial services up, tourism fading?, The Jet Etihad minority opinion(onion?)

Monsoon Clouds
Monsoon Clouds (Photo credit: Intrepid wanderer)

The GDP report was an easy one with Industrial production no longer  a riddle but  a low 2% still below potential as manufacturing remains muted. Services sector GDP could have been above 7% led by the revival in Banking and Financial Services and hence lending, however it was not just Hospitality sector, which is going thru a low in line with a Global slowdown, but also in Community and Personal & Social services that the GDP for the sector and thence the overall report was muted. Mining and Agriculture have recovered though expectations were probably higher in market watchers. Gold price for example have not really fallen from $1240 levels, supporting their way of a Hindu rate of growth/recovery like old days and furrowing my eyebrows while assessing if the recovery has indeed begun can actually remain muted after the 6 months markets are willing to wait

While utilities also jumped back , both Financial services and Utilities (Elect. & Gas) coming back to near double digit scores for Q2 FY14, the Community services cut could point to further pressure from Government spending coming down. The HSBC PMI for November has returned to a positive 51 ( 10.30 AM update)

Budgets for NREGA and other Welfare schemes have been cut with a reduction of INR 100 Bln in the rural development ministry and INR 50 Bln in the Ministry for  Human Capital but the current Fiscal Deficit target of INR 5.45 Trillion (Rupees Lakh Crores) has already been spent to 84% of the target in the Fiscal period from April to October, leaving the last four months exceptionally painful, even as public spending is up to nearly 30% more than the Planning Commission contributions in the budget or INR 600 Bln with the October deficit itself at INR 300 Bln.

While India’s Capex companies look outside India for elusive new orders, (L&T/BHEL) welfare spending will now taper off if deficit is to be reined in even as Electoral spending profligate and wilful, takes over for political equations that remain murky and public spats making the BJP/JD/Congress campaign closest to spaghetti /cesspools more recently associated with Banana republics/Southern partners in Euro(pe)

 However, with other reasons seen as impacting Banking profits the well timed thrust for Banking stocks is weaker this morning and the 6350 target itself may remain an elusive slow mountain but shorts also have time to mull and wait. A word of caution that might have filtered through earlier from us, the sector substitutes chosen , except for Crompton Greaves /Greaves Cotton ( just maybe!) remain almost as wild an imagination as 20 years ago when FII franchises and brokerages had  a hard time keeping the India story transparent or represented in Listed stocks

Markets might consider moving back after the news is traded to 6250 levels (GDP at 4.8%) further expectations of an even better Agri GDP cannot be relied upon but the India investment story rekindled in the post June rally is safe and thriving though on lower volumes till January and may not even engender a big jump back in the Rupee from 62 levels, waiting for the Q3 / December earnings season after Bonuses have been announced /distributed in MNC India

A jump trade in Private Banks incl ICICI Bank and YES Bank is probable in the afternoon, the other option being stronger infracos and we sill do not think Dabur and Marico can replace ITC and Bharti though HUL is on the other side of the trend as an almost defensive again with core inflation in control from the GDP arguments above and pricing power in retail extending to domestic pharma as well before the quintessential control from Government pushes its way in. Wonderfully, the Diesel decontrol is moving on nicely without a break as Diesel prices close up to 60 levels and the Oil ill discussions for this fiscal are probably over leaving the Energy companies in cahoots with the Metals on the strongly bullish stocks led by Tata Steel. Tata Motors and Maruti attempts to breakthrough last week, will be the genesis of the immediate correction(in consonance with Mitesh Thakkar , ETNOW)

The Jaswant Thada mausoleum in Jodhpur, Rajast...
The Jaswant Thada mausoleum in Jodhpur, Rajasthan, India in the early morning. (Photo credit: Wikipedia)

Idea may also benefit from the weaker spectrum prices as the government strengthens its revenue shortfalls with the Powergrid mega FPO going online tomorrow.

USD remains weaker, making bears at UBS and CLSA a worried lot ( if they have actually ut any money into biting the Rupee on their pessimistic prognostications) and Crude at its lowest has fully enjoyed the Rupee weakness, turning to 6000 at similar levels when it battled 4500 a quarter ago. So who is going to the first dozen to really move into rural, assuming the first three slots are HDFC Banks and the Automobile Finance companies that started in 2009? Yields may dip below 8.5% to the final top of this rally before stabilising around Governor’s further refinment of the maintenance policy for FY14 and FY15 as recovery is awaited

CCI okays Jet Etihad Deal

A lovely informed review of the Jet Etihad deal, on our favorite The Firm (CNBC) and other forums shows the combinations Commish, Anurag Goyal left in the lurch as the CCI went to great lengths to ignore trouble brewing from the deal. After the deal, Jet keeps 50% of share in flights from Delhi to Abu Dhabi and 55% from Mumbai while its dropping of Dubai means big trouble in the sector flying from Kochi/Trivandrum to Dubai where it had a 69% share. The Majority opinion assumes a 2 hour reach criteria to assume a single market across Abu Dhabi , Dubai and Sharjah, showing th limitations of  20 years of hyper growth having left in official mindsets especially as such ‘arcane’ topics are probably not as interesting a conversation in Delhi and Mumbai despite the attempt a t modernity

Road to the Monsoon
Road to the Monsoon (Photo credit: Karthick Makka)

India Morning Report: A thorough shucking, and 6200 it is

English: A 10 rupee 1902 stamp of India.
English: A 10 rupee 1902 stamp of India. (Photo credit: Wikipedia)

A week of thorough shucking and more (unfortunately extending to free enterprise attempts in the Indian markets, that really got shucked these five years) and JP Associates is in the lead for an extended period after a long threefour years where it played an also ran stock to many other daily trend leaders, and none of the rerated stocks over the last 5 years are seen as rising further from here, keeping the best dozen in abeyance.

Despite the perseverance of these players however, the stocks selected are not really getting through, and instead the residual charm of the retail economy from Jubilant Foods’ era competitors like Talwalkars to the Jyothi Labs, the new Quetiapine powered US launch from Jubilant Life (looking healthier, everyday than its similar named cousin in pizza) and the MNC phama stocks celebrating a new strategy for domestic markets with Pfizer and Wyeth getting together meaning the delisting mania is probably done with  at least for this trade

The Rupee is ready to move on after the post festival haggling and Oil demand is the risk India will watch in 2014 when tapering happens. Now Rupee should be able to break back into super 60 zones as the Infra party gets totally dissociated from realty plays. Thankfully retail and FMCG is back, and Shoppers Stop is definitely a deserving venture.

Glenmark Pharma and Cadila remain the better picks from their strength in Domestic markets, ITC is likely to be bet ton to at least 350 after its upmove. REC has tak first rund of Power NBFCs again to 222 levels but has no potential to break into the 40s let alone 250 levels from here

Chetan Ahya’s(MS) predictions(and analysis) are also resonating with the market. He showed that a 3.5% expenditure growth in H2FY14 will push India to its utmost if fiscal disciline is still at 4.8%, and probably PC won’t get an out despite the good CAD achievement given a sluggish revenue Q2 after an equally discouraging Q1

The Darjeeling Limited probably does not have much sway right now in the markets with most strains of stocks bearing Midcap or Corporate Governance issues now on a defined negative list. On the other hand the tourism industry fix seems to be deepening and India’s Hotels are getting the short shrift fter a long decade of seat increases coming to a head in the next two years ( in Deli and Bombay from n ET report). Occuancy rates of just 61% in a business destination that does not even have the extended holiday season the world enjoys is a petty misnomer for India’s effots to exit this detrimental global cycle as Europe falls off the investment (origination) map exxcept for ECB(External commercial borrowings) debt

The times of Robinhood are no more? ___________________>>>>

English: Remains of village stocks in the chur...
English: Remains of village stocks in the church-yard of St Mary’s church, Honley, Yorkshire (Photo credit: Wikipedia)

India Morning Report: When the woods are lonely, dark and deep..

English: this is bajaj pusar
English: this is bajaj pulsar (Photo credit: Wikipedia)

Don’t Flip the lid though. Markets are finally moving on last call on Expiry day, to close at 6100 in November but the standoff till yesterday taking deep positions at a sell from 6100-6000 may not transpire, the play being caught and a reaffirmation of positive  moves from 6000 usually good to  start the rally from 6000 levels.

Also, as we usually are easy to predict, Kotak Institutional picks and that of some network analysts are again the wrong crop and definitely not good for harvest. L&T a late harbinger , its results likely to lag India Inc general investment recovery ratheer than be a sign of the same.

Axis and Bajaj are good again though the banking sector must face a few questionable glances purely in market valuation terms as Tatas withdraw on the question of operating ompanies esp outside India not being allowed to make a banking company in the NOHFC guidelines. M&M also did not want to move around its Finance companies as posited in the new structure directive but the structure is sound and not getting the desired response again. Also the Foreign banks had to be given concessions despite which they are not responding to the RBI invitations

Bajaj is favored by the continuing robustness in Rural GDP even as a farmer suicide on the same Sugar support price highlights unevenness in the national picture between rural and urban areas. CV sales are down 20% affecting both NBFCs and Indusind, or the auto industry majors relying on the sector. Tata Motors ahas effectively exited the sector along with a dismal Nano launch in the retail segment

Yields keep dropping back from last week’s 9% levels , starting the day at 8.67% . Buy picks on the Power NBFCs are instead good to go, with REC and Powergrid both alternating strikes on the bulls sides IDFC will also see big buyers taking positions in the new series and the only thing stopping ICICI Bank at this point is the lack of Banks to short further with Banknifty keeping to 11200 levels albeit on expiry day

US Markets will stay out of action till Monday as Thanksgiving day is here and shopping season is seeing a lot of uptick with cheap iPhone offers

The world's toughest fighting man. Yet, deep i...
The world’s toughest fighting man. Yet, deep inside he is just a lonely, homesick kid, praying for letters from home. – NARA – 535228 (Photo credit: Wikipedia)

 

India Morning Report: The mechanics of T-2 trading, USFDA, GMP withdrawal

In the spirit of all that is wrong with overseas monitoring of drug manufacturers and the known woes of overseas drug manufacturers quality plans, Wednesday started with a bang for Wockhardt as the GMP certification was withdrawn by European agencies last week and USFDA followed up with an Import Alert. Apart from hurting an export rich sector of the much tarnished Indian Economy, it remains an isolated play in the day’s trading.

However despite ranging puts and increasing percentage of the next series participation in Options etc now appearing towards the end of the series, the waning decisiveness of the Nifty may continue into December as markets deign to rally intraday and close above 6100 as Monday forecasted an easy reach for the same. Slow and sluggish markets despite the strong rate recovery action in the bond markets in the illusion of changing from old benchmark to the new has kept shorts in business. Markets are on wait before pushing the Banknifty in the last two sessions back to 11k levels. The Banknifty levels are definitely encouraging for a rollover induced good beginnings to the historically over priced next series (December in this case)

However back to things that can be read as making sense and are a watermark for the next events in India’s robust Financial markets, seldom confused with the Fragile Five before the preponderence of retail investor targeting left only Institutional actors in play over emphasising index trades as the only safe flows.

The December series again will continue the experimentation with sectors trying to avoid known good plays in Energy and Metals as brokers and agents seem to have set a high benchmark of participation while trying a little of this and that and that will impact rollovers as Index options go out of play and passive funds remain shortlisted on a very high ground with ITC, Bharti, IDFC and Banks like ICICI Bank, HDFC Bank and YES alongwith Axis Bank and LIC Housing Fin.

Traders are also unlikely to let LIC Hsg off without it reaching below 200 levels so buying should be attempted only around 197 levels and if 196 breaks then 192-4 levels. REC, PFC and PTC have also made investor lists only though they execute perfect range trades between 188-221 for REC and corresponding levels in other scrips. Cipla and Sun Pharma remain good scrapbook material for traders too and trading will return to the banks if robust flows are to be had in the markets while FMCG, Pharma and Energy and Metals present strong sectoral opportunities.

Despite the new midcap entrant Just Dial and Jyothi Labs where prices are robust if not trading volumes, Midcaps remain a Notice to stay away from India with the inability of research to overcome stop and start news flow and sensitivity to just one factor in most individual midcaps that keeps money from following the opportunity

However the mechanics of the T-2 trade, remain to find the level at which to screech into the next series optimum levels or in more mature months with broader flows optimum entry levels which usually allow shorts a large window to stand in, but once they are caught playing with fire, there would be no stopping this market having just woken up to an Indian recovery around the corner. Investment flows looking to be the harbinger however is a cruel fallacy esp as it lets investors on to the Capex companies like L&T and BHEL which in line with Global conditions are nowhere near their recovery with flagging order books and delayed execution.

Remember Modi is only one of the shortlisted candidates in the POTY sweepstakes at Time Magazine (Person of the Year). Investment positions should continue to be advised strongly in IDFC, ITC and the selected Banks you trade. Also Tech MAhindra may be an easy exit from MSCI too after an easy entry this week, within the next 6 months and markets wshould note missing fundamentals in pushing volumes into any such specific counter as it brngs a laser focus on to the players, used to making a mover out of a Satyam or a Rolta. Most money flows have safety in following Corporate Governance reports and big contract losses do not help as the commodity marke flexibility does not spill over to equities or even Real estate any longer.

Lupin, Cadila and Glenmark continue to get quick drug approvals and also make the cut for bigger investments

India Morning Report: Nifty switches up range to 6100-6300, Is 6200 on the horizon

Anjum Bharti - 05
Anjum Bharti – 05 (Photo credit: Adarsh Upadhyay)

 

The Aside of the day comes from Network Analyst picks, with Sandeep Wagle who is seldom wrong on the trend change running with his bearish bet till 5950 which he had to exit. His buy picks have come in sleepers like USL and Kotak, both of which we think will not deliver much this year.

 

USL sell off of Whyte & Mackay while being a cash boon to the debt on the Balance sheet, is still a sentimental stab in the heart for that scotch brand could well have created that elusive broader market for top of the line alcoholic beverages in a market addicted to imports at usurius prices, showing in profits in the F&B  in the Hotels segment

 

Meanwhile, Compatriot Mitesh Thakkar has been better endowed switching Sandeep’s non run scoring cap ex giant hope L&T with BHEL and I think also his TVS Motor was better switched with ”

 

Philip Capital (USL defender but long term buy on the stock, not short or intermediate) also had good FMCG picks and though Starbucks has opened in Bangalore, one thinks the same Longer term view is true for their FMCG picks including Tata Global Beverages and Dabur. Ashburton, despite the India specific commentary seems to be an index based fund across EMs and India

 

Sun Pharma is back in the bull basket of traders with an announced buyback being the post election surprise and the Bank Nifty has settled in at 11k marks probably gathering shorts, thrown out of Nifty in a big lurch on Monday. The Cairn buyback is bigger news but with outstanding results still away, one may not get the bang for the trading buck there

 

Markets have hit back as of yesterday and the new 10-yr bond trading has immediately rushed yields back to 8.7% in the morning, Rupee revitalised to 62.3 by 10 am, showing the potential untouched as markets took the yields of an expired bond so seriously, it was probably to the extent of a ‘not funny’ slur on the extent India deserves to be labeled a Fragile Five member ahead of Institutions making fun of the Tapering business on networks. US yields will rise and the Taper will not happen so soon, all that has happened in between is that Janet Yellen has been confirmed and she does not think a $5 Tln balance sheet can say Taper is a bad idea. The Rupee propably making this entire year pre taper more a challenge test (agnipariksha style)

 

NREGA will be a nice hit to Election pandering ‘in-throne’ incumbent as BJP struggles with a cause and high turnouts could indeed be another factor for Congress to weakly hold on to in making a comeback election happen. The media dissing of Congress can still hardly be ignored despite the survey technology of the wipe being more than 3 Fridays old

 

NREGA wages will be increased based on recommendations of a committee led by India’s Chief Statistician Pranab Sen

 

Yes Bank was bit by the regional bug in a sudden switcheroo by the markets on the Banknifty, trading still at 350 as it seems to have showed its Punjab hand in picking up the Title Sponsorship for the Indian Hockey League. However, they would still be a national brand, as would be Field Hockey as Zed comes back to bowl the Pakis out on South African soil. My generation is probably not the best to assess cricketing talents of the new look South African, Aussie and English teams either as they all look uniformly weak in the deluge of fresh faces, making West Indian whitewash by India a mystery incomprehensible. Also, Yes Bank may have not given such a signal to the markets or such picked by them, this being an erudite observation only to my eyes as I equate the game with a certain neighbour of Delhi in the north nor Yes staying bak with the media team push of the game sponsorship.

 

The Energy trade seems to have finally hit GAIL and the other LNG stocks as Oil stocks enjoyed a big relief rally on Monday and one last month

 

Big is back in reckoning in banks with ICICI Bank showing more uside. I would also recommend to continue trading upp in ITC, IDFC and Bharti. Bharti is singled out today leaving Bajaj Auto breathless only for the day as Bharti gets out an ECB card from its PR team before the final date of the Spectrum auctions, where they have certainly won themselves a near value for money tag in the relicensing forced on the huge Indian market and avoided a lot of unnecessary expenditure if the CAG report had indeed come out on the winning side.

 

Meanwhile Lehar follows Cyclone Helen on the Eastern coast but the Seemandhra and Telangana GDPs are pretty much safe, except for the large scale destruction of seafaring life and human villages near the coast .

 

The Sugar trade is a lost cause, the volatile commentary not helping the midcap stocks with limited contribution to India’s humanitarian and Western Export which hold the key to riches and a better CAD till 2019 when the next General Elections com around and China would have found a new normal it has ‘founded’ last two-three years

 

 

 

India Morning Report: Record low PCRs mean a bottom at 6000, Iranian Oil to be feted in markets

Goin' to Iran
Goin’ to Iran (Photo credit: Örlygur Hnefill)

The Nifty already ranged by puts and calls at 6000 and 6300 is likely to consolidate signs of moving up as the 6100 puts start looking good for a ramp. Despite the global cues, including an agreement with Iran, the market seems to show the Call writers have finally suffered from overconfidence for the second time on the trot this month and second time this rally after having been caught in October. The Rupee tantalisingly at 63 seems to be a factor too but Traders and  other market experts seem to have decided not to wait frther to buy into India. Citi’s MD, Mr Pankaj Vaish as much said so about institutional investors too on the weekend.

Even as Jindal Steel makes an exit from the Sensex, markets are finally separating the grain from the chaff, KArl Slym and JLR not helping the failing Tata Motors cause while Bulls continue in Tata Steel, probably widening th ga before the Ratan Tata vehicle Tata air and Air Asia get into the fight in 2014

As mentioned above, Nifty decided against trying further value levels aand opened around 6050.

Worth mentioning n fellow Network Analysts’ would e that despite the preponderence of buys that favor Bata and also repeat Tat Global, some have decidely loved the short on Bajaj Auto. Again Bajaj Auto was the genesis of the bbull trap last time around and Bears and shorts will pay heavily esp in derivatives for remaining short on what is likely the most of all bull trades in specific scrips in India after Pfizer and Wyeth as Banks remain on the back seat. In PSU bank picks to short too, TRaders 20 on both leading channels showed the kind of mistakes that can be made as BOI may not yield further in the short and a UCO Bannk may already be at the bottom after a year long short on the scrips, the last month rally in PSU banks (unfortunate) never reaching UCO Bank

If played along the ground in the sessions till Wednesday the markets may well try 6350 sooner than later before Friday close, but shorts digging in at this high concentration seems to me an isolated uncorrelated event worth researching as the US VIX on the other side rules at all time lows in low double digits and ready to try new levels ona new high from last week.

Good news for Axis Bank as it enters the Sensex 30 by December 23. If Banks do respond to that as  a secular class, despite Axis Bank hit on the FII ceiling of 49%, it will not be a big trend to ride but a one off, as the Fitch/Moody’s restatement of NPA woes is a twist anyone following pSU banks was having a hard time swallowing and markets were eagerly waiting for a turnaround in Q2 results let alone letting the slide be ignored in the DEcember and March quarters as provisions likely shoot up

IDFC and LIC Housing Finance seem to be walking away with the cake and short term traders continue to ignore a wonderful opportunity as investos stock up on both playersI would back picks on All Bank and Andhra Bank apart from the return to weight for PNB and BOI as ICICI Bank comes back to 1050 levels i n morning trades

Gold’s probably going back to 27k levels if not 25.5 (‘000 per 10 g) and if Fixed Income yields spin back to below 8.5% aided by the exit of trades on the older benchmark, things would get smoother for cash equities and the December series. Polling is underway today and counting would unlikely bring any shocks next week. Bank nifty would be stuck at 11,000. Oil prices will continue south after the Iran deal for 6 months makes arrangement for Iranian repatriation of oil profits, oil sales and humanitarian trade i.e. export of food and medicine among others to the India favorite (trade terms)

 

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: Lets get some money from call writing quickies – Mid November hubris

Siège nord américain d'UBS
Siège nord américain d’UBS (Photo credit: Wikipedia)

It’s probably the limited upside, but mostly the markets were pretty itchy at 6200 in the middle of the November series and so the shorts have worked out. Also importantly, none of the good to great outperformers/strong buys like YES, ITC, IDFC or Bharti and Bajaj are down except for the Bank trade again weighed by PSUs hurting Private Banks in the dominos game and ICICI Bank remains a leading call writing target . The new 2023/24 bond being released day after has meantime ensured the fixed income shorts for yields look at bonds above the critical 9% mark inciting the sceptical trade on India deepening Money markets and Fixed income trade

However, that move in mind, this market could have easily moved out of the woods at 6100 levels,  and will probably do that before end of day today. Despite UBS and Credit Lyonnaise (Bhanu Baweja , Fixed Income and Chris Wood , Strategit of favor levelsst), markets move to 5900 and not behind 6100 will be that bottomless pit one wants to avoid sticking cash in.

Power NBFCs are good buys again. The Reliance Infra trade probably also opened two way liquidity where one side of the trade is actually close to breaking its margin wall, thus tempting predators with no downside targets in mind, led by Ashwini Gujral  (perhaps unwittingly) and as I mentioned the ICICI Bank trade (SS). Currency is stable at 63 levels. Any hits to 70 levels post elections cannot be avoided as a fresh slate of CAD and Fiscal worries are definitely hard to wipe off the scoreboard without real investments, Europe cannot make and the Taper that will come. Staying invested rather than exiting with Cash and Gold is however the strategy at this time. M&M springs to mind and one fundamental intelligent strategy would be to limit exposure to depreciation stars like IT, esp third tier players like Infosys and Tech Mahindra

Those rushing to Mid Cap rerating up are also fresh out of ideas. The real factor steaming down market levels which one can separate in the meantime is the fundamental variation of the 2080 rule playing out in the mrket. Instead of just the select 20 stocks in the large caps rising we have the other 80(Eighty) being almost disbanded to permanently(seemingly) out of favor levels as evidenced by yesterday’s A-D line. This “acceleration of reform” undertaken by the market segment needing to justify shorts, is misguided and ll only bring the other 20 to shaky two way disrepute as good scrips add on unwanted volatility

Today will thus see an unwanted spike in volatility which will test these new found memes laser focussed on jst the best 12 or 20 scrips that are equated to yesterday’s “Sure things”. And, of course ( with no thought to grammar as you read this as spoken) , the bullish State Bank trade or the frustrated India shining trade post Jet Airways sell out to etihad or the lower expectations from full priced aviation going forward, SIA or Asia Airlines Tier 2 town strategy

Welcome home to India, expats. Less than 10% of our current imports are Chinese

 

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

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

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

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

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

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

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

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

Modi? Bad experiment!

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

India Morning Report: A sudden rush for crossing 6350, nipped again

Corus trein 823 Tata Steel train
Corus trein 823 Tata Steel train (Photo credit: Wikipedia)

The Banking system’s woes are fresh wounds , blisters nary a bluster with NPAs at most PSU banks except BOI and PNB likely to cross 5% on Net level. Despite market’s favour for State Bank vintage in equity markets , the SBI scrip may provide most fuel for the Domestic Institutions who prejudicedly also treat the scrip as the holy grail along with operators. As we noted earlier within this fortnight, the results showing bolstered by reduced provisions for banks generating PAT growth mid year is a mirage.

Apart from the fact that NPA and AFS loss impacts have been spread over the remaining two quarters to March 2014, provisioning may be updated one shot by FY14 at all such banks and as yields continue above 9% the results will speak for themselves.

However, that is not the reason to be bearish at 6200 levels, neither is the bluster on ITC and Tata Steel by Network analysts likely to bring markets back to last week’s 6000 levels again. ITC is a good trade and Tata Global and Tata Steel seem to be capped for now. AS expected, YES BBank has moved on trading supports and IDFC is also maintaining 108 levels instead of 100 a week ago

Results from Sun Pharma last week, though not the digital upstarts like Sun Tv (SpiceJet) and Dish TV (reported today) are likely tobring rosiness back to the markets. One winner as markets tie of the Maruti move at 1700 levels will be Biocon, both scrips from disparate sectors, especially found in favor in Institutional and ALt trades looking for the India  Shining flavor along with the alpha ( which undoubtedly is missing in both stories) However a rerating further upward is likely only for Sun Pharma, having posted 58% growth on last September and having grown some claws at long last in the Indian Domestic market and margins of 33% (ex-Protonix) are good for the mile. Six month FY 14 EBITDA margins are a healthy 44% and the stock can well bring Cipla and the Midcaps out as well into more international baskets. R&D spend is likely to increase in the Indian markets in the short to medium term but current provisions, reasonable as % of sales are not good for a longer brush in the generics and domestic markets. A lot of those investments across the rest of the industry are likely lost in Process repair having been cut by FDA riding them even as Brownfield investments in the quarter exceeded $1.1 Bln and guidelines have been further revised allowing more such investment again.

India Morning Report: The “growth-inflation dynamic” is getting flustered by the rates

English: The Classic view of Saving & Investment.
English: The Classic view of Saving & Investment. (Photo credit: Wikipedia)

While the equity markets are back from 6000 levels making up for those missing trading days last week, starting the week at 6150 levels, an ongoing investor conference revealed the likely India bull among banks getting the short trade for not being able to lend in Europe. CLSA Chris Woods asserting that the challenged growth inflation dynamic has not stopped inflows into the country. Similar assertions from Barclays in the morning, who quite track to our Top dozen picks as revealed in the last two-three months (previous trades though in very similar scrips are NOT ACTIVE) underline the fatality of Indian policy as presented to the new generation by Foreign investors coming to India at the bottom of the global cycle.

As we have written before India could well find a way like the Phillips cuve in Keynesian Economics to survive n the high interest Economy, but those waiting for a revival or reveling in China’s continuing misery would have realised by now that India having chosen to jump rates in October is now intractably going to ride up the spiral killing off any motivation for investment growth from the bank rates while the rate differential continues to press on the ECB borrowings and increaase pressure on the deficit. One way we still think, out of this spiral was to learn the importance of holding rates and a HOLD at 7.50% would have done the trick. India’s diagramming in the investment /Savings trade are rather inelastic on loan fund supplies or demand in the main stem however and so growth will go on.

However, in the meantime, WPI has hit 7% and so there will be more rate hikes not impacting the residual growth GDP. Rest of Asia struggles as well with Israel cutting its GDP scored in September to 2% and the Oil economies or Africa the only refuge for high growth dependent Capital businesses. India with or without the Modi-nomists has done precious little to ramp on to the unaided infrastructure growth and is barely getting back to fiscal discipline with ratings still stuck in the 80s mode regardless of reform. The etihad $450 mln + investment in Jet including the 24% stake has taken agan crucial time off the managements available turnaround strip an India Inc is also running out of time stuck at 5% growth levels, now probably locked in till June 2014 without an escape hatch

JP Associates is a prime example of price negotiations being a sordid affair in India, Manoj Gaur doing well to hold on to deals on its Cement plants and others despite the markets probably looking for an even better price on the sale. The rresults showed again continuing growth without improvement in the CEment business. Monssoons good impact on grain and thus any residual impact on lowering inflation is again a sordid wait seeing as it is unlikely to stop the farmers or traders from spiraling up our food prices for the time being. CNBC 18 did a good focus spot on Pharma stocks in the morning, and they are doing well in this cycle, including Cipla and Lupin, the still funding trade stocks and IPCA it seems has rerated to 17-18 PER multiples. I hope they have a new drug or corporate news on the horizon. Again on inflation FinMin so can’t do anything about imroving supply lines for agri in this nation

ITC is finally back up again from 310 levels itself and is a good trade. IDFC is done till the election frenzy despite the Fin Min noise for infracos which unfortunately are still running their family businesses on the margin trade of their own stock. Network commentators have underestimated performance potential in Yes Bank and overestimated it in State Bank. The Maruti trade though is back as the Yen spirals down(up) into the hundreds again for a likely couple of months, taking care of the whole quarter

Automobile expors are doing well again so JAnuary will be quite a celebration of the tough times with Consumer Staples (Non discretionary, food and other FMCG) able to avoid pressures to reduce margins and not pass on input costs.

Last but not the leas, we are not issuing more Buys on Tata Steel but it remains a Biggie on the Buy lists and those deciding to take profits with the Domestic institutions at 380-90 levels will likely be deprived of the real cream on the cone.

India Morning Report: State Bank and Maruti not the best indicators for India Inc

State Bank of India was feted for its increasing NPAs as fresh additions stoppd at a huge INR 80 Bln instead of INR134 Bln in the linked quarter and again markets celebrate banks that fail to provision correctly, while punishing the good PNB for the same. I would switch that PSU bank trade to PNB and take some of the Satte Bank trade as well. Meanwhile after a good ‘pakao’ hour with ASK, Emkay(KK) did well in its 5 minute bits of glory on ET Now as they pointed out to a few good picks a nd a flagging MAruti. We eblieve too, the December quarter would be a big shocker for those putting faith in Maruti as it posted a 295% rise in PAT on the Yen trade in the quarter just closed

Markets could be closed for Muharram tomorrow. The coming Winter session of Parliament will again get washed out in the coalition of noise. Cipla earnings erformance as usual gets lost in it being the funding trade for the market back in the bull sights

Sachin smiling
Sachin smiling (Photo credit: Wikipedia)

Natco pulls off second court upset for Pharma

Natco Pharma scored again in courts, this time against a gag order requested by Teva Pharma for a generic of Copaxone, the appeals court upholding the ruling which ensures the Teva patent expires in 2014. Taro’s contribution for the quarter in the meantime was nothing to be scoffed at, and even as SPARC takes off without Taro and Pfizer contribution, Sun Pharma reports later today. Naco also makes Nexavar, a drug patent denied to Bayer in India under the compulsory licensing regime for 3% of the cost charged by Bayer.

ONGC may pay off Oil swaps in Rupees

Rajan (RGR) in the meantime talked the Rupee Swaps into Rupee as payment currency again and the Rupee is obviously back up below 63 levels. The Fixed Income markets also saw welcome buying but the rate hike is coming as any move above the 7.50% pre October was bound to trigger. I still think the MSF channel could have been 100 basis points without raising Repo rates and with Exernal debt being an overhnga nd domestic debt unlikely choice of Corporate Treasuries used to world class Cash management and Treasury Bankers, India Inc growth is tweezed harder from this rate creep

Sachin in 200th Test appearance

The Sachin 200th Test begins today with West Indies being ut in to bat and the last of India’s renowned Mumbaikars taking the crease at home near Shivaji Park where both Sunil Gavaskar and Sachin Tendulkar learnt their Cricket. The game has also changed tremendously in these years an Sachin will continue in a key role with Nita Ambani in the Mumbai Indians

Meanwhile the KG D6 row has granted Reliance a reprieve in that the 20% left with the firm is being reported the most lucrative and thus market will expect a quick turnaround on that 50 MMSCMD mark promise being touted in the whispers

WOTD: Tata Steel shines in Gold Earnings season, Banks shine 

Tata Steel , however was definitely the shining star even as Banks make a comeback led by State Bank and PNB and ICICI Bank on cue from 1000 levels. As SS pointed out on TV18(CNBC), Axis is definitely in the stars during midafternoon trading. YES Bank and IDFC remain on BUY lists importantly for those willing to invest for the coming 6 month bang

Tata Steel was rerated up at most brokerages, Deutsche Bank taking the cudgels for a push to 525, as the sector rerating turned into real numbers at the Steel presser. Arcelor Mittal remains subdued on European market woes but Tata Steel doubled Gross Margns with rices picking up in China and SE Asia as also domestic demand pick up form Automobiles. Steel prices in the US have firmed up and Tata Steel scored a year on year 20% growth including NAT steel in Thailand when global markets for steel grew by a robust under 5% score at 4.7%. rice realisations apart, Steel markets also favor diversified roducers like Ttata Steel for the value added flat and rolled product ranges they can produce. Apart from new flat capacity added this year the producer will also e adding capacities in Orissa in 2014 while competitors like Jindal and the erstwhile Ruia behemoth stay busy in Crude Steel volumes

Manappuram Flash Earnings Q2  FY14

Markets may go all the way to 6300 in this uptick but are unlikely to go north of that mark as results for which ever camp from state elections, murky up the coming khichdi government prospects for India to ride into the 20s

Power NBFC results yesterday were in the expected direction with 30% increase in Topline while Gold NBFC Muthoot reported a Flat quarter last week. Manaappuram reported a 11.78% margin again this quarter, o fresh disbursements of INR 50 Bln but NII significantly cut back to INR 2.5 Bln this quarter. The IIP hoo haa turned out to be a damp suib despite a 8% growth in the Core 38% as the IIP for September was a slow improvement to 2% even as the Electricity sector was back with a bang as Durables joined Cap Goods in along drawn ‘winter’ of demand led production.

One would have thought that should have seen higher Gold Loan volumes but apparently the Gold consumers are able to hold on to their holdings despite a poor economy prognostication as Gold prices remain subdued in a CAD challenged year. Global Gold prices are still headed south from last week’s 1280 levels

India Morning Report: State Bank gets ready to report with PNB carnage still fresh

English: Wordmark of Tata Power
English: Wordmark of Tata Power (Photo credit: Wikipedia)

 

PNB ofcourse claimed to stabilise NPAs again but with INR 50 Bln more in restructured assets that are  now INR335 Bln on the Books, the bank has lost a lot of investor stars in this quarter. However, the bank seems to have acted as per strategy to release larger NPLs ramping up provisioning and so even though Profits were lower, the NIMs are 3.47% an industry best and NPAs at 3%  might yet be excusable keeping the bank firmly in our buy list aheadof Bank of Baroda. PNB bulk deposits are down a huge 2/3rds  at INR 220 Bln from more Than INR 900 Bln

 

State Bank will report much lower than expectations however as market expectations onthe scrip have been unnecessarily optimistic, its being in the buy lists always a function of its special charter and its exposure to SME always a much more risky diet for investors than even BOB, BOI and NB but the bank is the biggest in India and has been trying with great returns for its size in the retail lending markets, not in NRI deposits

 

PNB will continue trading higher provisions for lower PAT as the coverage is still 55%, lower than others in India and the only risk factor is its high reliance on the restructured book which for PSU banks has turned out to be  window dressing game, skeletons of which cupboard may be expected to be found industry wide in a couple of yearswhen they are reclassified a s NPA instead of standard assets. PNB may perform better at that time when actual results are available  and its Treasury revenues ( Gross of INR 339 Bln) remain best in class

 

Currency and Bond markets are still twirled up in a tizzy and the Dollar Index at 81 levels may continue to rise though confirmation of continuing EM inflows will change the sentiment positively. Indices flagged off below 6000 levels and Sensex may well see sub 20k levels keeping short itches alive this week after a seeming end of the line earlier in the week as trade data was seen in the right light. 11 more sessions in this series which hidden to most, has even seen Ashwini Gujral and the Institutions change their staple trades, IDFC and YES back in lay as mainstream sentiment carriers

 

I for one consider the State Bank to be fair valued at more around 1400 levels, a purveyor of bad asset quality for whicht he rub off on PNB and BOI is almost unfair and that the State Bank can be punished isolatedly instead of crowding each and every constituent of the Banknifty

 

Food inflation should e allowed to continue at 10-12% levels the CPI component having come in at 12.56% yesterday. The IIP at 2% was well below what could be and expectations cannot be lowered to where the series presupposes to lie in the coming election months. Tata Power has irrationally picked up its pair with RPOWR and Reliance Inra again, turning south after Reliance boosted its results fr the companies earlier this week

 

 

 

India Morning Report: Everything is alive and some more are back in play

An unusually late report from our end again, but the markets continued flat after having a scar Friday afternoon closing at 6080. The markets traded closer to 6100 in the entire session and the yields again turned back up to higher than 9%

and the Rupee stabilised at 63.5 levels. Any move int he Rupee above 64 is as good as the other breaks markets are looking at and the Rupee wll in that case skid till it hurts around 69-70

The month’s IIP data reports are apparently still awaited at this long hour and markets have been trading better consoled by the slowing down taper jitters and getting used to the “NO BUY” mode at DIIs and Funds. Power NBFCs have more or less completed the rally with REC moving into 220 levels while the cuts on ICICI(1010) and ITC(310) are also probably done with equity shorting again replaced by buy index hedges in this Short trade attempt.

“Pre-emptive Open” sessions on the Nifty saw the markets trying to guess at low levels for almost every other scrip and the muscle contest was a no show as Emerging market ETFs may be out of inflows too soon in the series but it is unlikely that they will actually see outflows or even if Fixed Income asset classes get more attractive than equities it will not see any equity flows jeopardised by the same desie any attempt to rationalise a link between the two markets

Mauritius and Cyprus being targeted by  India does ht hot mone yflows and in fact probably bodes well for the REvenue Department hose hands are tied especially as they already tried an illadvised reetroactive taxaion of deals like Vodafone, from an era when FDI rules were much more amorphous than today

Tata Steel may see profit taking but that and SESA Sterlite have reported true to form fgood results and with disparate sectors reporting today from Hindalco to MindTree and Reliance Infrastructue who has turned around on their Power revenues woes with Multi year tariff agreements the rally can move around a variety of sectors without paucity of defensives and without a tight upper limit or short duration limits on BUY trades

Seriously, a little gold buying or the returning of Oil demand is not a cause for a BEAR traded on these unvdervalued markets a s long as you have the money to sit and sip a cupa instead of fliing it too fast and creating positive notes on the VIX. One expects a dip in OI also as the short positions exit during this week and the F&O series will probably see more robust trading when such exits have been completed, more probably for next Monday

 

India Morning Report: A little late and not better for it

Definition of Sub-Saharan Africa, according to...
Definition of Sub-Saharan Africa, according to the United Nations institutions (Photo credit: Wikipedia)

The Rupee reaction petered the rally at its 6200 floor well before the November series was out and so things do not look well for the downward pressure building in, on the news of the “cosmetic taper”(Marc Faber) deciding to take the markets for a ride across Asia. It is mostly as ET reported, because of the perceived lack of quality stocks and globally because Dollar bond yields need to rise regardless.

Yields at 9.12% do not really threaten the India story but signify a sell down which given India’s small base in FX, Currency and even commodity markets where a single import continues to equate the Indian equation to the underdeveloped Economies of Sub Saharan Africa if only in market perceptions. Moody’s and S&P mandate for India apart, this as we mentioned last week is just one or two players and hot money choosing a quicksilver trade and the Rupee as a target for such trade does not necessarily mean another big cut in India markets. Trade should pick up around 6100 levels only and the Rupee should not move to any risky levels above 64.

Gold investors will remain in surfeit in this stage in the Global markets and that need not be correlated as strongly with Growth as other crises jumps in buying.  Lack of Indian Investment demand for commodities an lack of demand at the pump in Oil in the US has still meant good overseas investment demand for Oil and Gold given the new lows

October data for Imports in this Fiscal at $280 Bln is down 4% and Trade deficit is still high at $90 Bln. The NRO/NRE Deposit swaps have apparently collected enough for a number around $20 Bln to balance this trade deficit as estimates for the CAD have been already brought down to $60 Bln. The October deficit is however just $8.8 Bln and Exports a healthy $27.7 Bln, the MOM increase in deficit probably immaterial.

The Sensex started the day 135 points down at open and is currently trading nearly flat from Friday’s big cut on Nifty and Sensex. Also, the Tata Motors trade on the positive, post results trned out to be a dud bag as we said . Shorts on the market can however pitch in, shorting the Index though IDFC, YES and ICICI Bank are quite done in independent scrips and Pharma being defensives are also on the secular buying list apart from being good India portfolio picks. IT sells will roll back in this leg as they benefit from the “India, Sell” tags

However, one still feels the /Indian yield curve and growth story were back without threat of inflation and the rate hike affected in October and to be repeated now in December to 8% on the Repo rate is the mindless exercise which is triggering this spiraling of yields and only strengthen the rating agency view keeping India stable near junk than giving its due and correcting the rating’ own regional imbalances and prejudicial biases, still favoring an untenable proposition like Brazil or Russia and a market failure like Turkey over a stable story like India.

Is India really fairly marked for a NBFC only kind of play with the coming high interest rate scenario?

 

India Morning Report: Pass around the peanuts :: Losing 6200 now(not really), I am sinking, No EMs aren’t a great buy or great “SELL” either

corus / Tata steel IJmuiden velsen beverwijk
corus / Tata steel IJmuiden velsen beverwijk (Photo credit: Wikipedia)

Choosing a daily headline is a challenge, quite so. Instead of helping and supporting you are acting like a pack of chihuahuas who have been given more than enough to eat . Write back on every post , this kind of reticent observation posts on my writing are not helping your cause (Dear Readers)

The Sun Group results, mostly Spicejet, tchah why would i call that or the iPhone launch a headline in any subdivision of this country let alone online with so many obervers, NRO accounts and eligible bachelorettes. That’s another franchise down the drainpipes. (gutterball, say!) I am not talking IPL though Sunrisers also went down rather for the same mismanagement.

Debt worries may have more to do with Spicejet losses, I would hve said on a cursory glance, so I leave that one to you . I am probably wrong as Bad Debt is definitely not my worry till I am operationally efficient and thus viable again. The entire new industry of innovation relies more on such mis-accidents and so any bank with an innovative model though feted by the markets would continue to go down in the melee and PSUs are not required to instead encourage losing sectors for Export

Each “Quimvadanti” above is a torture for any reader without ad libbing the rejoinder mind you

EM analysts are right that EMs have been scoring negatives thru 2013 and that the same will be recompensed without a Bull run though. However, India is getting inflows thru November and the so called funding trades are now just shorting down a blind alley every time for the heck of it as retail and DIIs stay away from buying. Portfolio buyers are alerady selecting known performers.

JSW Steel production counts are up to 12 MT for Crude Steel but I think the ratio of value added products , at less than 10% that in each variety ( 1 MT ea for 4-5 product “SKUs”) show the limited potential despite the use of advanced technologies in these traditional EM sectors where India does score over the more volatile China, Russia and Brazil. Rio Tinto had to recently leave after a small project to review the potential of Diamond mining among others and POSCO / Mittal have been exiting the Orissa wilderness, but the so called Economic loss may well be a gain. BPO lays claim in the mean time to furthering urbanisation as Tier 2 players post out their Top talent to the 30 odd 1 mln pop towns .

UB, according to ET, has lost 20% of volumes in TN also even as Fosters and Carlsberg move up in alcohol markets in the North. Beer and Whisy markets have plateaued in India again despite a crisis in the last 5 years , an early maturity we have long commented on , in India’s branded Consumer Staples (Discretionary) United Spirits is an easy sell though any pick on news is unlikely to last till Monday close and open positions over the weekend should be avoided, easy pickings for alt Asset cronies stymied for hedges and funding on a flat index

SELL on Private Banks like YES and Indusind or ICICI Bank (Traders 20) will fail again as the banking sector carries the seed for a lot of outperformance out ahead that India guarantees. Credit growth cycles need not renew as they are already back in India at 18% and longer term impacts in East Asia and Singapore are unlikely to trump local Indian growth in the sector as again it guarantees credit growth without the Europeans . Draghi’s rate cut though deserves a mention and the Euro has returned to growth again rapidly losing 1.38 odd levels to end at 1.33 before today’s London open. The London FX probe primarily started around the EUR-GBP cross trade ‘fixed’ by leading banks as sort of a ‘tradition’ as all global banks get busy in another imbroglio obviating the need to explain their non return to Asia.

Muthoot results boast of 620,000 gold accounts even as Gold Assets obviously went down in a bad year for Gold. Consumer recession or inflation impacts would have seen a spike in these assets held as collateral by the bank hopeful

JLR volumes up 32% are but a drop in the Ocean but any uptick post-results will impact Tata Steel holdings till Reliance results come around at least. Hold and add to Tata Steel positions

Siddharth Tewaris appointment is welcome for at least the continuity in policy it guarantees and one in fact hopes that RGR’s futher appointment as Governor indeed sets a precedent , a steping stone as CEA very visible to critics and friends and allowing a testing period for future governors and more importantly a cogent monetary policy

 

India Morning Report: 6220, then, true bottom, market move up please.

Namma Metro
Namma Metro (Photo credit: ashwin kumar)

More impressive than Horn OK Please, but then two wheeler riders deserve beter(sic?!) or not, National Highways are safer for Trucks and Four Wheelers and so no, this headline is not about the mow down of two wheelers or by two /three wheelers in the urban meltdown. The 1000 odd rich families in the People’s Republic are treated with such disdain twice as vitriolic as attributed to the rowdies on Indian roads and they are definitely equally cognizant of the traffic rules as the four wheelers. As I write S&P seems to have marked India’s rating to stable.

More often than not, these urban snarls on the way to work have lately been marked by spots of new construction hanging because of bankrupt cities and states or other EPA/non EPA but documentation relation bottlenecks the construction crew is pretty used to. The BMRTC however, continues to break the mould in setting the benchmark for delayed and inept project handling, while the Bangalore Metro remains the only pristine mass transport crew in the world, after 15 months for nothing else but the 3.5 km distance it covers in totality to the CBD.

A “Dadi Balsara” inspiration that could work for the city and other Indian cities, is to break Bangalore into 3 different urban entities, not a loose conglomerate /federation of municipal divisions/organisations like in Delhi but cities with passports , if required, to travel in between. Singapore has managed very well with the urban transport problem and along with the Scandinavian cities that started it, London and Singapore remain great examples of how to create and grow a city infrastucture and plan urban Transport

But then, I am in the 9 to 5 mold like most Indian 18-40s and more or less wait for work to come to me because that is the smart thing to do.

English: COMPULSORY SOUND HORN sign
English: COMPULSORY SOUND HORN sign (Photo credit: Wikipedia)

Markets are dull, lifeless and the nose is pointing up as 6220 held and will declaim into the biggest rally yet as Earnings season successes have put the GDP growth residual to the crisis into a proper perspective, India becoming one of the most undervalued domains and like US equities, the depth of the market gets its own sponsors while Currency and Fixed Income woes almost strike a t will, the lull taking again a single seller to push a sharp toll on the incumbents, the currency lopping a wide ball to 63 and yields kissing 9% . The RE60 quadricycle will be good for the Indian soul and perhaps sponsors like Prince RJ will even push for it to displace the 800 (in the minds). Bajaj Auto, suffered a setback despite  adding export numbers in October as markets remain uneducated about its portfolio and expectations are at variance spurred by the single line item hope of the return of Hero in this Festive season. Three wheeler sales are strong again and M&M is making a comeback in the Global Auto sector citizenry where they have made a unique impact ( not from 60s history but here and now)

Those who watched it will be carrying it home as Rajeev Gowda handed the BJP and CNN IBN an apt rejoinder on the Poll /Survey action initiated by the CEC ahead of state and General elections. Results season is over not just in the USA but here as well. The remaining PSU banks and Dhanalakshmi Bank and Dena Bank report over the weekend. Next week sees more MNC Pharma results and Sun and Stride Arco labs  report big earnings quarters, Sun Pharma closing on the 14th. Both Cipla and Sun Pharma report on the 13th and Sun could wait for 14th morning before appearing on the networks as Stride Arcolabs reports. Tata Global (Starbucks) reports with the Reliance pack on Tuesday/Wednesday

RBI guidelines on Foreign banks entering thru the WOS structure plug in the statutory gaps  but cannot more than show their good faith and welcoming arms for Foreign banks who are already staring at cutting themselves out of more regulatory capital holes cropping up to bear the expense of global expansion hitherto unfathomable in an industry used to being welcomed on the strength of an opaque global HQ without farming Capital to such “territories” Even as the regulations are required and Indian Bank sector will expand and mature with a growing debt franchise , India has already been bracketed into an “exotic” category with the likes of Brazil for its reliance on traditional lending products in the credit basket and the split from shadow banking ties or one still believes even the lack of depth in wholesale funding. Also none see India as a pioneer for having always kept the inter bank market to a minimum as global banks fight the war with regulators for drying up the inter bank market. Credit continues to contract in Europe at near double digit levels, the single most factor affecting banks even as they stabilise the new era of growth and the best in class retain double-digit RoEs.

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