India Morning Report: And it is clear thru to 6250 from here?

Most short strangle/ straddles would be in profit to have exited and is you have been a bit late you should close out here because the markets are going to have a position either way, mostly likely trying to forget the break between 6100 and 6250 as markets have been given the mandate to a new bull run, which might well start around 6250 again. For a change both networks are carrying investor conferences, apparently not the same but more importantly, the post budget rush to 6100 (more like 6150 ) came yesterday and was backed by real flows, the current levels thus likely to have fully bought in leaving a new index level before the argument over the direction for India starts, global equities being decided on the up.

The bet o f going short on the S&P500 is not necessarily linked to the single up move in Emerging markets and while the longs in Emerging markets continue, the shorts on the S&P will either become OTM hedges or extinguished as US markets also resume an uptrend

An INR 12.7 Tln expenditure budget is fair enough but the optimism allowed to him on tax revenues from a recovering India economy is likely to have brokerages just the right busy for traders and speculators to remain ahead on the risk trades  before being called out by their analysts. For example, yesterdays dissection of each such number as a “little too optimistic” finally seems to have gone unheard as it should in a believable bull segment. However, despite our India story being better than China, a sscal e of 10X will likely apply in comparing flows to the two markets alone and India will be able to win that argument for $10 Bln every quarter.

ITC, Bharti are not overvalued in the Consumer space. We cannnot see value in the HUL trade whose markets have matured in India. Other consumption stories never scaled anyway and that therefore is the limitation of investing in Indias FMCG story except the ‘other’ 2010 winners as titan and ttk remain down and the domino’s pizza is no longer the story as expected after the DD ride, showing up the absence of a secular market and pizza hut coming back out in investments despite the Dominos’ 65% share (Jubilant Foods)

Bajaj Auto may not have substantial price cuts that have  shown on the radar for Hero after the budget giveaway

There seem to be big earnings leftovers with DLF and ABB following on , ETNow catching them for a change, but one understands that CNBC mode better, having ignored these latecomers and even penalised them. Its definitely my strategy with such presenters. DLF has a 60% higher sales revenues , with or without their main contribution this quarter from the sale of Aman Resorts as costs remain high for the real estate company

IDFC, YES, PNB and ICICI correct after yesterday’s rush for buying the select list while shorts on Kotak lead the cut in all such Financial stocks. I will look to shorts jumping SBI again, but probably waiting to coalesce th ebull candles into a stronger up force. PNB is coasting at 540 post a week long correction mode after a day’s ibig wins in the post analysis.

LIC Housing is probably as good for the medium term as the Power NBFCs, all the 4-5 stocks at the bottom of their range and Sundaram and the Gold NBFCs unlikely tpo o be competitively buoyant. Axis Bank would support Bank shorts as Kotak and thus Bank remains available as a short hedge too. Cipla and Lupin present a new problem as they continue to activate a bundle of no good stocks they were partnered with in their defensive mode and are not trading bets as they reach the top of their range near 450 and 1200. There is no secular run in metals, none in construction and Tata Steel remains a buy with the auto stocks without Tata Motors or the Unitechs and the HDILs

Modi is looking at some obvious chinks in his own armor as he stands on a half poant English speaking tour, showing up equally worse off in Oratory as Rahul, but looking comfortable with one new round of Desi dose goevrnance for India Inc

From my end, Chidambaram was more than right in showing UPA’s 8.4% and 6.6% 5 year periods ( 4 year periods) against the 6.2% average, but apparently there are not enough Financially literate voters around, despite the preoccupation with growth

 

 

India Morning Report: There is no hope trade in sight

But I’d say keep accumulating as the indices break through a critical 6000 mark. Many blue chips, like in global markets offer extreme value in buys even as the speculative trade fails to take off on a delayed recovery.  Gujarat’s downfall over the small matter of a receding poverty line not helping the cause of the markets rich BJP is a puerile coincidence for the markets, but correspondingly there is no Congress faction left in the markets to buno the tanabana, Markets selling the stable BJP proposition backing out for an increased negative momentum(undesirably sharp)  on the downward side

The IT trade coming into profit taking for the almost first time except for a pre results redenomination, there ae buyers out there who are ok with the premium on Infy to a low 3475 market price and HCL Tech is good for a move of Rs 100 or more. Thus if all sectors move together like the Tuesday open, markets could see almost unheard of hlevels receding to 2012 levels no longer required by the New Dolla r prices. That also means these exits will cascade the Rupee even as it holds at 62.50 to 63 levels , that being a new fresh level for the currency. However it is still possible that with DIIs coming back as markets sell off that the gradual sell off can indeed turnaround and complete the prophesied ( by certan others , also old hands) pre election rally in India. The sell trade on ITC will likely never exit 290 levels an such picks abound with limited downside even in the correction which will confuse buyers into making losing commitments so a wait and watch is necessary. F&O markets return back to index only specials and i the downmove is to be arrested by Vols at 14 this will be a small enough move, but that is unlikely leaving vols (India Vix) ranging between 14 and 16 till the first buyers return whence new VIX levels would only see increasing volatility

However as we were stock specific going up and DIIs look for bargains to pick up pieces, there are gaps in how the markets will rebuild momentum most buyers holding on to prior 2013 selections including the new Aurobindo and Sun Pharma trades( a great defensive for mopping up your prop liquidity) in IDFC at 90, ICICI Bank almost ready at 930 levels ( the next levels are around 871), Yes Bank ( bottom at 267 will likely not reach the same so accumulating should be ready  – like a dark pool premium),  Bajaj Auto, ITC, Bharti and no – not ttk and titan currently as there is much more going down in that specific market despite the penchant of the self funded margin traders in our domestic brokerages like Angel, SMC and Centrum including the overlap with commodities wealth accounts. There will be no dlf trade north, none in Jubilant foods, titan or ttk and none in HDIL or unitech much later. Axis Bank’s orphaned again being misused in the prior rallies, leaving nay of the F&O speculators heading there at great risk from those targeting their brand of stupidity after getting on the right investments. Trading as a game may try not to suffer though sharp bear phases and quick bull recoveries are not ruled out with brokers and traders living the cricket dictum of well left alone even for great value picks in Midcaps The trades are mostly in Spreads, Bear spreads in your choice made by buying Puts at the just OTM (ATM-OTM>= 0) and selling a lower put to part fund the trade. Bull spreads, which wold be due n a couple of weeks, go bought Call just OTM (ITM-OTM>=0) which reflects better liquidity as well and thus better premiums, and partly funded by distant OTM Calls ( nly one or two will have  tested and liquid quotes where you do not pay excess liquidity spreads)

 

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: 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.

 

India Morning Report: Bajaj Auto reaffirms successful transformation in September sales

Rajan Bharti Mittal, Vice Chairman & Manag...
Rajan Bharti Mittal, Vice Chairman & Managing Director, Bharti Enterprises, at the 2010 Horasis Global India Business Meeting (Photo credit: Wikipedia)

 

Sell Heromoto, Buy Bajaj Auto – A pair unheard in India trades till 2007, post crisis we have seen it win since 2011 and have been telling our investors. Of course September’s 367,000 unit sales could well have taken the sheen off festive season in October but the bigger news is that the company feels good enough about a price hike of up to INR 5000 and export markets have responded well, as he just quoted examples spanning Nigeria (46,000), Kenya and Uganda. Its RE60 may well survive most objections in India for an introduction before 2015 but even if there are hurdles, the company is protecting profit margins and market share in an uncertain situation.

 

September may in fact have seen sales being advanced from the festive season because of an extremely dull prognosis and Indian consumers are diving off consumer staples brands in general. However, one feels that this current secondary upsurge in inflation/WPI may well see better realisations and hence profits from price starved staples companies and so the queasiness around ITC and Bharti”s retail foray may well serve to mark the return of Dabur,Marico and these two bigwigs itself as results show better profits and earnings growth , any positive number would be  consistent with market expectations not th double digit growth consensus reached  earlier in the year. As for Bajaj Auto itself, it is protected from flagging sales year on year in festive October as it is going through with  new launch of Discover whose sales make up for it

 

Meanwhile, the market took 5750 /5800 levels as a sign to return to performing PSU Banks but with the punters preferring sinking ships earlier, the take off in PSU banks thu PNB and Bank of India is rather subdued even as Private sector banks make almost one off corrections between yesterday’s F&O buys and today’s trading.  Th incremental AD ratio of 83% actually is rather standard for India Banks as Deposits proceed to grow at 14% behind credit recovering to 18% thus meaning the RBI will be instead under increasing pressure to conduct OMOs even as banks hang on to over INR 150,000 crores (INR 1.5 T) in overnight borrowing from the Central Bank, washing off any advantage except the sentimental from reversing of more tightening measures in the October policy.

 

The Rupee pirouettes around 62 levels again but Gold prices in India falling , accepting the global prognosis sounds ominous for subdued growth in 2014 as well apart from meaning better diversification and disssemination of global fund allocations even post Tapering at least in equities, markets having taen to bonds again in the interim till the schedule for the Taper becomes clear.(Duct tape now that Octaper is almost certainly gone- Duct tape = December Taper)

The new ABCs of Indian stocks, listed as Asian Paints, BHEL and Coal India figred among those fastest and strongest in the rally to 5800. All three stocks have however lost their leadership of trends as 2 of the 3 fall into sectors creating corporate goevrnance hols and braking India’s development cycle prematurely. Nifty meanwhile keeps catching up wth the air gap creatd by its futures moving faster in the morning (bigger premium) in turn as Singapore Nifty reaffirmed no investors had left and moved quickly to 5850 and higher levels. The rally will again falter around 6000 levels and as the fight gets dirtier its better to dig your heels into the better stocks we listed including YEs, IDFC, ICICI Bank, HDFC Bank and Tata Global if ineed Starbucks follows thrgh with the plan to ramp up outlets to more than 200 this year

 

 

 

 

India Morning Report: The Question is if the Rupee has bottomed out

Full bloom
Full bloom (Photo credit: Wikipedia)

 

By all visible indicators of technicals, as can be seen in a shallow traded currency, the Rupee has bottomed out before hitting 63 levels after a sellfest/beatdown on Tuesday. There was no edition of the India Morning Report yesterday, but he essentials of the currency , awaiting selling pressure to find out sustainable levels, are that it will look for another step in its recovery after a potentially false decline in value since the Fed pronouncements in May.

 

 

 

Yet, we have noted that the Rupee seldom responds to Global up moves, like caused by the current global lowering of Oil price targets with any substantive moves without buyers in the currency. The Rupee thus will go back to 61 levels only from here. IF the Rupee does move back that brings blue chips and banks selling at value back in the limelight.

 

 

 

The equities moved north yesterday till they corrected mid-session and today’s move essentially will be another recovery towards 5950 levels and beyond though one is not sure that will just help F&O bulls unwind from sold puts to leave the September series wide open or bring back the bulls which is likely if the currency recovery gains steam in the afternoon. Crude has fallen further to 103 levels overnight and Brent is close to 106 levels as peace talks resume with Iran

 

Unfortunately without a catch up from banks esp the Private sector Banks, the return  of buyers into the market is now more or less questionable and that is one of the two or three big waiting games developing in market circles.

Lupin’s new deal in the USA seems oto be a sales and marketing arrangement that adds directly to the topline. Its mainline US market drug Antara has just gone generic and the company seems happy it has recovered lost sales on that front

 

 

 

Discussions on the Tata Motors’ domestc valuation being recovered by JLR $12 Bln valuation escaped some of my notice ut overall, Telco has hardly shown any change despite the blatant push in sentiment by buyers. Tata Steel remains a much better buy for 2014. In commodities, Dr Copper follows Oil south on the charts as the return of China’s production led demand fails  to rejuvenaate the sentiment as expected by us.

 

 

 

 

 

 

 

India Morning Report: No Taper and Nifty on to 6100 levels

A rather unexpected reticence by the Fed, allowed Global markets to uncoil their expectations of a taper and the Indian Rupee opened at its best price of INR 61.5 today barely hours after the announcement. the shorts on banks disappeared overnight as did the opportunity in depreciation lit IT with the Banknifty finally moving 650 od d points to above 11000 today and the 7% increase in ICICI Bank to 14% in Yes Bank possibly still allowing steam in the rally to 6300+ levels and a long awaited rally in the banks with the liquidity measures likely to go away. (what if there’s no taper?)

Apart from the bigger damage to shorts on Banks, the rally has caught most by surprise and thus some may wait out for lower levels to start again, but stopping market enthusiasm at 6080 levels itself is likly to fail with the momentum of the event generated uncoiling allowing immediate 6300 levels. Also the taper remains on the horizon for the US Fed as it tries to tackle the question from a new structural cap to growth in the US and the  Rupee may be allowed to break below  to erase the damage since May

F1 Australia Grand Prix - Thursday
F1 Australia Grand Prix – Thursday (Photo credit: Wikipedia)

Indian yields are back to 8.16% levels. ITC and  Bharti have continued investor fueled upmoves at 350 levels, while Sun Pharma and ONGC and the Energy companies rebound to 2010 levels. Investors also found the chances to get back into Hero Honda and Maruti, both of which may easily by rejected later for Bajaj Auto in the Auto/Two wheeler sector

The Rupee might close a little lower but above 62 till 4pm and in RBI trades after.

India Morning Report: It’s Monday and all’s upsy daisy in waiting

The Indian Rupee opened near 62.50 levels, a 2% jump from Friday levels well likely to follow last week’s 2.5% crawlback and the prospects of a bleary liquidity hit SuperFed becoming a scrawnyScrooge MadFed retraced as Larry Summers gave in to a Democratic caucus on the Banking Committee, incl Liz Warren and withdrew presumably in favor of Janet Yellen in the Fed changeover. The Fed will go ahead with Tapering as planned and that news is in by Wednesday. Indian Markets of course are then going to take the opportunity to break away from the global correlation and set a few ground rules for an Indian recovery. The WPI at near 6% again and the continuing pressures of the CAD and Bank reforms are likely to cause markets some sleepless nights too ahead on the turn. But before that a 6000-run as promised is nigh and mostly the mark would even be hit in today’s session itself in late afternoon trading given the Rupee level jumps are not adequately referenced in the 70-point Nifty jump in the pre open

Banks , even the lagging PSU Banks are finally in the limelight and the resulting breadth available to buyers is likely to be good tidings for the market. Reforms in the G-Sec market may well continue as caps on FIIs even without auctions are much easier today and probably reflective of the real appetite for Indian debt at $25Bln G secs and $45 Bln corporate debt now allowed to QFIs

LIC Housing is back in the news but if its that banking licence then one is not sure it is right for the market recovery esp with the 80-20 disbursal rule out of action. IDFC may be done with shorts and Power NBFCs may be ahead in the lead. As more debt reforms pick up steam and remaining restrictions on G–debt are removed, it is likely the NBFC sector’s institutions will also increase in priority for the markets. As of now effectively there is only one on the run (lquid, current) 10 year security available and it is issued by the RBI.

Really, though markets are up the traders’ picks on networks could point to the list of mid-caps just likely to gain from the liquidity rush and may not reflect any real fundamentals and is probably sign that these low mid caps list in the traders favorites needs to be changed more frequently. Notably, Voltas, Jindal Steel, UCO and Union Bank, Future Ventres and NHPC are probably candidates for non performance and “no results” in their respective sectors and will be trgeted wins as market favorites because today nothing can go wrong for the pro traders. But many other pro traders now would pick the over NBFCs and other good picks not at variancce with what Foreign desks have also short listed in the last four – five years

 

India Morning Report: The Capital Goods chimera fools no one

Markets settled in to a subdued Friday even as the now almost regular double feature jump in Capital Goods sub indices in the IIP caused IIP to flare up to a 2.6% closelt following June’s 1.8% growth. Though the jump in Core industries reported last week too signifes a likely higher mark for GDP than the June bottom, the jump in IIP itself needs to be ignored with care as the Capital Goods number in the positive is now habitually likely followed by an equally sharpp negative in the August series when it is reported next month or at least before the October festivities mask production growth, if any For those interested, such volatile jumps are a regular in the Durables orders data series in the US and the component of Aircraft orders for example is thus repored separately rather diligently than a black box number up 5% once and -5% the next month almost without reason

Industry investments are not back and thus markets have given in to high PCRs (Put Call Ratios) retreating to 5800 levels in the Friday Morning trade. .Another consumption major McDonalds and on assumes the continuing saga of Walmart signify strained battle lines between Global majors and those who know India at the helm, all in the name of corruption and many other equally obvious slogans India panders to in the global arena ( Without being best at any) Connaught Plaza, seemingly owns not many restaurants and McDonalds obviously as always wants to be unfair while buying out reality partners an moving to another hase of growth,. The valuation battle will be difficult to disengage for any private company but a $100 mln ballpark looks more  feasible than the company sponsored $10 or $300 mln valuations and it is going to be a long battle. Walmart too is apparently not driven by valuation in its current revisit of the decision to Invest in India, at stake the Best Price business with $500 mln turnover and a prospective equity buy in Easy Day which will allow Walmart to become a household name in India

The Rupee is not getting any sponsors this week beyond the 64 mark, but with indices nearer 5750 or 5800 n Monday, it might be another bullish week of te Indian Rupee making up to the benchmark EM currency moves which are more than 10% smaller than India’s 25% move since May 21 in the absence of any buying or sustained investment into the Indian Economy

India’s Mid Cap IT like KIT and MindTree could probably use his time to gainfully grow in size but Enterprise space growth is definitely overdone for them and bigwig Indian outsourcing. IBM is exiting India CRM (Voice) centres too but in a misguided bid to grow portfolio profitability without a synergistic picture as is the Elephant’s wont.

Power NBFCs started the week well an may well help the banks lead Indian equities into the 6300+ zone as the dismal days are following a very standard script and business could be booming before you know it without improving the Savings rate at an all time low of 30% currently

BTW, the PMO mentioned most PSEs (94%) have hit the Capex targets for the June quarter and Government expenditure, well targeted could keep us generating that sub 4% peg of growth on which Private sector investment may build. It’s a long weekend though and Oil could also be at a much lower level on Monday

 

India Morning Report: Rally enters fourth day with steep move up to 5850 levels

Line up the confetti balls and the piniatas as the fourth day of the Rajan Rally engenders new Slumdog Billionaire, Kaun Banega Crorepati and a successful Indian Badminton League probably mean the start of another even if the 2014 Airtel Grand Prix at the Noida Track is under threat and the IPL is sstill al knotted up from the Hawala Masala

 

Historic Valuations, Trends disregarded as flows rush in

 

Leo Pharma
Leo Pharma (Photo credit: Christian González Verón)

 

Piggybacking the global weakness of the Dollar, investors not predicately assuming to undo damage to the Rupee, nevertheless brought the currency back into play for the 60 mark to the Dollar on Tuesday with a 64 open as flows returned to India debt and equities. With INR 1600 Crore returning in debt and 800 crore ( more than 25 bln ) in equal measure into the chosen investments in stocks, the IT and Pharma largesse from the Dollar was no longer the defining mantra of the market by Friday itself.

 

As the 260 points in the Nifty to 5850 on Tuesday at 11 am show, the market may well take the indices to 6000, bring India firmly to the centre of the 2013 and 2014 investment maps as was three months ago and thus probably caus ethe currency to further climb back to 60 levels again as there are absolutely no buyer or seller levels in the move from 55 to 69 in the last three months and 10 odd days.

 

And much like it was Matt Schaub and Andre Johnson for the Texans in a star filled roster or the veterans Dravid and Ganguly playing India in on one o the many English conquests last decade, it was veterans that stuck to the India script rushing the momentum early morning into India with ITC back to 330 levels and still worth a few moves and Bharti and the banks not far behind, moving secularly together as rates fell below the 8.25% mark on the 10 year paper and ECB short-term borrowings interest rose again from Rajan’s moves to allow FX swaps at 350 basis points (on deposits till November for now).

 

The 5750 mark was expected to hold in the morning, the 20,000 mark on th Sensex seems obvious now on the BSE Index and

 

English: Amitabh Bachchan photographed by Stud...
English: Amitabh Bachchan photographed by Studio Harcourt Paris Français : Amitabh Bachchan photographié par Studio Harcourt Paris Harcourt Paris (Photo credit: Wikipedia)

 

thus 6000 is almost a certainty and as inflows measure interest and levels, there is no reason for indices to now fall or turn from these levels even if OMCs have not really gained till now on the Oil basket prices in India’s PPAs vis a vis the refining margin impacted by the appreciating Rupee or if no exporters seemed to have been selected for the overall CAD gains except for Bajaj Auto and It and Pharma are still available for substitution. Even if Infy has  new target of 3500, a balanced indian market is unlikely to let it reach the same in any hurry with value available across sectors, including last months star sector in metals. Sesa Goa weightage s increasing in Nifty by under 2% and Tata Steel is still available under 300

 

Kaun Banega Crorepati 2013 started last week on Sony with another veteran Amitabh Bachchan returning as its iconic face in the Indian version of “Who wants to become a millionaire?” (kbc.sonyliv.com) One Taj Md. Rangrez has won the Jackpot in this edition in episodes shot till now

 

 

 

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

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

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

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

India Morning Report: The President of Rollbacks, and the nadir of the Rupee

Economy
Economy (Photo credit: yourdoku)

In an extreme show of brinksmanship..India has been taken for a ride by speculators and brought back in an equally unorthodox fashion. Depending on the moolah you get from your editor and or Academic Dean or the strength of the victuals of your audience and that of your economics philosophy, the average high end Economist could turn this review into a one a month policy piece. Any number of breaks can be introduced in the sentence we started with to fill the essay, Ajay Shah for example saying (TV18) “none of it was required” and again falling through the cracks of mainstream and outliers alike among Economists. In any other normal Economic critique of philosophy, one would have added a qualifier “likeminded” before Economists here.

(sic!) Thence we avoid the other tricks of the trade to assume a daily weight to each day’s weights and wait to lookback on this month in a decade and hopefully for that our parsimonious allocation of just a Morning report time-length shall justify the deeper review whenever we do return to full time writing. Right now, Economic necessity of this individual calls.

And in that light, The Rupee hit 64, yields hit 9.5% and like a rubber band returned to pre-crisis yields of below 9% yesterday itself and 8.33% today showing trades have returned to the 10 year bond. Active Demand returning to Fixed Income of course means the Rupee move is a goner and thus one should assume, we will remain at these 63 levels for years to come before the next deep cut moves the currency related victuals of the Economy by double digits again. Incompetency of Exports apart, that takes care of India Inc’s static export volume issues on keel , the government has managed to turn the trick with Government spending too, focusing on the growth in Services in Q2, ET reminding us in time in today’s op-ed pages inside

Another funny one has been the markets stuck up attitude toward, India has FX reserves, it should use it’ almost like a mouse trap the NSEL was, (for unaccounted cash in wholesale transactions). Money stock has largely returned to the mainstream economy through Financial devices alone and it is hardly a coordinated supercomputer timed perfect metamorphosing of the India problem and its solution.

The markets can in the meantime thankfully return to investing in banks, PSU banks likely to score on their 20% of book(Advances) in homeloans. BTW, Rajan is silent because he takes reins formally in September. The King Chidambaram and President Pranab in the meantime look askance at the sharp turn because it does no bring in a single dollar inflow. imagine the glee of reformer in queue Narendra Modi and his ilk

(tribe(n): thefreedictionary.com: Biology A taxonomic category placed between a subfamily and a genus or between a suborder and a family and usually containing several genera.

2.  A political, ethnic, or ancestral division of ancient states and cultures, especially:

a. Any of the three divisions of the ancient Romans, namely, the Latin, Sabine, and Etruscan.
b. Any of the 12 divisions of ancient Israel.
c. A phyle of ancient Greece)

India Morning Report: The Apple does not fall too far from the tree

India for old times’ sakes again proves IMF, Brady bonds and Latin American Economists wrong, going it alone with currency curbs as more visible Asian and even Turkish economies also try to get back the democracy equations into their control matrices and China parrumpums down the road of domestic consumption. Net effect for India, at least in Brazil they can afford three years of Bread and two years of rice for about four bus fares and /or a ticket to  World Cup Match from the new popular stands at spanking new stadiums. The G3 have each other to fund but India first has the poor to feed and then the loans to make to urban dwellers for auto, house and pretty much everything on EMI except the kindle which unlike the Blackberry will actually never take up with Indians

However, the new interest rate regime is not done with just upended 10% short rates in the overnights and the kingdom will get more expensive even as credit growth comes back and markets give into a little bear now and then to mull over the water in the wine that is their domestic production and consumption, waiting for investment to come into the Economy.

English: Logo of ITC Limited
English: Logo of ITC Limited (Photo credit: Wikipedia)

The higher rates as we discussed once earlier in 2008, could actually keep the domestic economy chirruping too, but then it is not going to be that long lasting because even if repo rates start going up because there is no growth and private credit growth slows down much from its barely 20% levels we would not get to long term rates beyond 9-10% to the eighties when these were a habitual 15-20% across shor 3 year and long 10 year maturities and are still the norm for consumer credit outside auto and home loans, currently apparently giving another cause for markets to expect higher rates for corporates and even banks Or maybe the EU still has what we want despite being a dying market (PMIS actually crossed 50 on the upside this month but markets are shrinking not growing) and like the EU and the 1% jumped British we might adopt 50% tax rates to get the right liquidity for the right causes. We would still not be a banana republic.

Back in the markets these above are probably not even water cooler/vending machine or m&m talk as results look like as we said, india maintaining those few precious growth stories that make it a well run, academically productive, encouraging for services, lean mean welfare fed growth machine.

I for one, liked ITC results though markets will ignore for another week its INR 20 Bln FMCG sales growing at 18% much like it earlier chose to ignore paperboards and agri business growth which also continue to be drivers at ITC while its asset management business (hotels) continue to be stable at INR 5 Bln and the bread and butter tobacco sales have just underperformed growing by 13% instead of the expected 18%++ More than one business school campus in India is looking at a gift horse in the mouth this year venturing into 400= batches at Ahmedabad, Calcutta and now Bangalore and Kozhikode too but then thats just the suspense kiling everyone.

Coke, Apple, Starbucks have already reported their June quarter performance globally and they will continue to vaunt(flaunt) their India investments in the hope of rightly placed analysts and commentators to catch the drift of their global potential and the flows that have decided to come to India at the “fag end of the recovery” ( at the begin of it in India) and will stay the course.

Yes Bank, Indusind ( esp with retail growth) and Kotak will survive the high rate environment and force growth pretty much par for the course and as we said it is foolhardy to expect ICICI Bank to fall from 940 levels but the likes of PNB could still be the weak chink till the trading equation metabolises the right values for a bigger rally cup. Jet may be as good a s gone from India but its FDI plan which will never see Indian inflows is probably the last gate allowed by Indians in the promise of the world they live on electronic channels and the internet broadband and should not pass muster with regulators allowing real FDI proposals to burnish the brand into local populations and etihad can stay the course in the knowledge that it alongwith khazana (Malaysia0 and Maxis, inched in through the small gap in India’s regulatory armor till here

As of now the Rupee is maintaining 58 levels and the indices have moved up after slipping to 5900 ina directionless market but we are infact recommending bullish trades but not for a quick buck in this market, still precluding any money for the bears/ shorts at these levels as mos stock levels reflect deep values available to buyers. Remember, there is no new outsourcing business coming from the developed world. Thats all there is to share.

India Morning Report: Markets swing to international sentiment on India

Pivot table NSE Banknifty PSUBank index scrips...
Pivot table NSE Banknifty PSUBank index scrips from OJN for 20110609 (Photo credit: OJN2)

 

The proof of the pudding is in the eating. in the weakest correlation ever to its presence n the Global markets, as shared by global investors and markets that largely ignore Indian events already, with mirrors available in east Asia/turkey and even other developed economies, India itself typically stands alone and the imperceptible nod to trend shifts remains the only hint to international investors. again though the banking system has been asked to step up to tighter overnight liquidity yesterday with a 4% CRR now enforced daily instead of twice monthly(fortnightly not bi monthly) where earlier it was required to e 70% now it is 995 That would affect the base SLR stock too but with most in excess on SLR, banks would have additional motive to hawk those securities for others CRR requirements and a domestic mini bond sell off may yet be avoided if there is a real overnight liquidity crunch. Which there is not.

 

So the entire shortfall of INr 900 Bln pointed out as likely by analysts like UBS’  Bhanu may actually be a mirage for inter bank markets though interest rates will respond likewise the first shock of two weeks ago and a catch up to the 10% mark as the LAF is now available at 7.25% only for 0.5% of each bank’s NDTL. Thus this shortfall may take a whole 6-8 weeks in unhiding itself in the business and a rate hike may yet be unlikely though the range of choices before the RBI Governor is still not large and banks wee on the verge of easing down loan rates when the dollar/oil trap worked them into a corner

 

What that means for equities is that they are largely naffected as liquidity from interbank schemes and pledges shares has already been minimised. Also foreign flows stay in and increase slowly while letting the Rupee fall. I may be well describing a limitation of this monetary outreach here but no one would play that card to corner India though unwittingly FX flows be unconcerned and pressure maintained on the currency as dollar starts its climb back I still dont think IT sector is going to capitalise on this leg of the continuing rupee depreciation stance but yes those basing their investments on continuing wage hikes factored in will bring in the kudos for the sector always singled out as the flip side of a depreciating currency while exports remain ata standstill falling 5% in June

 

Markets may not dip further from the 5990 levels Is ee in late morning trading on the screens and the Banknifty dip is probably still just a check on how things pan out and north is the way to bet from today late afternoon. Sun pharma going back into currency or more HUL will still not preclude positive investing in Bharti, ITC, Yes, IDFC and iCICI Bank

 

 

 

India Morning report: Oil signals treated as critical sell levels for the Rupee (This week in Asia on advantages.us)

English: Graph showing Indian rupee and U.S. d...
English: Graph showing Indian rupee and U.S. dollar exchange rate from January, 1990. 日本語: 1990年1月からのインド・ルピーとアメリカドルの為替レートのグラフ。 (Photo credit: Wikipedia)

An old adage for the market, it is now a repeated phenomena in the global markets for India to retain the dubious double distinction of heralding global commodity lows and be cornered by the slightest sentiment building in Oil. The day thus is a weak barometer but may soon gain ‘tumbling’ significance for global currency markets as the Rupee will be decimated to even beyond 65 levels if Oil rally does gain strength.

However as it is unlikely to happen for now, long investors may not be able to leave Indian shores before it eventually does, giving the upper hand to hot money flows as opportunities run out with the Yen at 99 and Euro also not facing new substitute demand, yields going up from global lows in various central bank auctions in Europe throughout June bringing short term rates to near above 0.5% and even closer to the 1% mark from momentum extrapolation(as will likely show)

The Indian Rupee has been closely pinned down earlier in 2009 and lack of buyers remain its “new” worry in global trade share increases as Yuan manages a smaller volatile range despite an equally suspect recovery path due to a paradigm change from South east, Coast Only development to a more homogeneous spread as legitimised by a 5 year plan.

Back to matters at hand PSUs like BOB will probably lead the bank indices down even as most new banks will make likely a good sector lending structure possible in the higher spending towns and villages of India that have kept Rural CPI apace at double digits till now. Muthoot’s Bank may indeed be a new kind of entrepreneurial venture in banking as long as they meet RBI conditions and manage not just the minimum net worth cap but raise the bar for fellow new anks to the desired but not contingent levels of INR 2500 crores of $400mln and even INR 10000 crores or $1.6 bln whnce an opportunity the size of India may be deemed fit. This size of course may not be ready on day 1 but should nonetheless be planned to those levels with capitaal lines tied as was behind the uccess of private insurance in its infancy in 2000s

100% telecom FDI for India thus might mean in an indirect way, better days for Oil consumers even as demand returns to the US market after a good 6-8 weeks in yesterday’s reported data and are critical for the market to retain 5750 levels on equity indices. ITC and Bharti remain on the up and up in block deals for FIIs or even program trading where such volume is amenable. Yes Bank might see another block of additions by FIIs as it exits a RBI ban on foreign investments and has quite some potential before reaching the allowed 75% levels currently in the sector HDFC/Bank prognostications for a 100% FDI in the sector linking its scrip fortunes to the same may see thus a longer gestation period till the new government is in place in 2014 and indeed starts picking up the courage to forget its pre electoral hang ups with FDI if any

 

Rupee impact: The Free fall continues, small snag on equities

A world map of countries by gross domestic pro...
A world map of countries by gross domestic product at purchasing power parity per capita in 2007 from the International Monetary Fund. (Photo credit: Wikipedia)

Unfortunately, with India inc again adding only probably less than 10% of its External Borrowing Capacity in debt, the Rupee and the equity markets have consequently snagged on the  Asian free fall, and now pro bably rupee has a trading target of 4-5% in this move to achieve the new 2014 equilibrium. While the stabiity is currently lacking it is primarily because for the Rupee it is not a daily volatility that is germaine to the currency markets and the trading range is much smaller than the other asian markets while it is still not picked upa s foil to the ultimate managed currency the Yuan which is a precipitating event of greed in the “Currency Wars” mechanism

Having said that, if one were to herewith propose a new rupee exchange with its limited degrees of freedom, the government cannot and should not bother about stepping in till even 65 levels and find meanwhile a longer run solution to the CAD, while the markets will take the Rupee down to 65 and fundamentally destroy the entropy required for recovery to resume in the aftermath and while it may be a jurassic/triassic notion of yore , destory the eigenvalues of Purchasing power parity much before the global market engagement is  increased   to a true equilibrium.

Mumbo jumbo apart 58.50 should hold because of the stability of governance and the defeat of inflation but if it is whirled through the week, it will tip to 60-61 levels and thence may not ever return to anywhere near Friday exchange levels because the fifth of GDP that is exports will straddle the rupee for the remaining term of FY14 for Global trade agreements for the year

Graph of the Gross Domestic Product GDP (at Pu...
Graph of the Gross Domestic Product GDP (at Purchasing Power Parity-PPP), per capita, as a function of per capita Toes. Year 2004. Data available online at http://www.iea.org (Photo credit: Wikipedia)

On the equities front, today’s event of correlation in moves actually mirrors the hidden correlation in capital moving out primarily from debt and in probably a stabilised form of market prediction from JP Morgan asking that the recovery bottom has not happened and will happen till now. While the RBi therefore is discouraged from rate action next Monday, it has put in motion a cascade of rate cuts which it must follow through and avoid running into damage control esp as Fixed income Markets will continue yielding lower on higher demand despite FIIs leaving Indian debt in the first pike exit of QE linked withdrawal from Asia as the lowest volatile investment and thus unlikely to produce ‘abnormal profits equated with Asia’. The PPP map of the world in the meantime as reproduced here from a long left to be updated web provider of images shows the fast losing relevance of this indicator and probaby needs a trading measure to it to harness its gains.

 

India Morning Report : (Friday, Pre Closing Update) All round recovery from global mini crash on Thursday

Map: Asia (location), subregions as delineated...
Map: Asia (location), subregions as delineated by United Nations geographic classification scheme, except *: Northern Asia* Russia in Eastern Europe en:Central Asia territories geographically, wholly or partially, in Eastern Europe Western Asia territories geographically, wholly or partially, in Eastern Europe, Southern Europe, and Northern Africa Southern Asia Eastern Asia Southeastern Asia territories geographically, wholly or partially, in Melanesia (Oceania) (Photo credit: Wikipedia)

Asia in general recovered smartly after Amari’s comments were seen as blown out of proportion and BOJ followed up with huge injections of bond selling. Of course, India markets reacted similarily but are sure to go their own way from next week as the common thread from continuing global liquidity is bolstered by the local growth stories, continuing FII interest in India and a heady  IPO market led by resurgent demand including cross regional deal interest out of Hongkong, Qatar and Singapore.

Still on the yen machinations, China’s plans to go global to keep manufacturing competitive and flagging imports also add to Japanese and Korean discomfort, making local QEs a last build option that will grow in size for the late starters despite protestations yesterday of a synchronisation with G3 interests and/or the disaffection shown by the BOJ governor Haruhiko Karuda , leaving BoJ in early 2014.

The Yen at 101.7 again , the rupee may slide to further lows on a trot next week as the adjustment trade to make exports competitive is out of sequence of the improving fundamentals and the weakness of the US Dollar, an event unlikely stopped by this week’s global inverse trade days of Tuesday and Thursday . Amid the differences, one could see trends in currency markets continue to elude India inc but definitely RBI plans to grow an international role for rupee and continuing interest in rupee positions from emerging market bank trading desks incl hsbc and stanchart are not just paper scapes as india grows it trade pie in global trade.

However apart from equities and now a little bit of debt, India needs to open to more global currency products for a sustainable self reliant trade to emerge in chosen currency pairs to exclude the recurrent window ofdeep depreciation adjustments of the rupee especially as it is engendered by payment pressures alone and not borne by the strength of domestic consumption and growth as can be seen inthe people’s frepublic off that side of the Himalayas. Jet Airways and spicejet also report tonight though Jet traders are convinced of headwinds facing the airline’s deal with etihad

Results season is busy yet as a flurry of sells/hold ratings on SBI because of the continuing slide in Net NPAs ( now 2.1% from 1.8%) are still misplaced after yesterday’s 7% slide failed to take into account the bank’s growth in credit at more than 20% on a INR 10 trillion book even as the pressure to exit the restructuring habit of marginal corporates and the over dependence on SME accounts is still under process. NIMs have pegged lower on year because of pension liabilities but quarter/quarter decrease is still evident because of deposit costs

Full year consolidated profits at INR 180 Bln are not a trifle and help the bank establish itself in an important quasi policy role much like the dysfunctional governments we withstand as a non functioning opposition continues to get closer to leadership in parliament because of its non attendance of parliament, a sure sign that the upward climb of fundamentals in India is feverishly capped despite growing roots of literacy and a much more aware bueaucracy than is available to our neighbours

 

India Morning Report: At least having followers ensure you don’t get to listen to sermons on Destroyed Value from rising indices

English: Wordmark of Cipla. Trademarked by Cipla.
English: Wordmark of Cipla. Trademarked by Cipla. (Photo credit: Wikipedia)

No one would have thought that Oil short targets would again appear at only above Rs 5150. In fact copper watchers and other commodity watchers would also aver the current bullish cycle in the doctor of metals and the rest of them are also tentative with global pricies still moving up only to $3.67 a pound expectations, implying  asteady discount at higher levels in the indian market. A sell off in Gold too underlines belying of Domestic expectations and will with sucha broad thrust be able to move the Rupee up as a better balance sheet beckons in March and an equity rally is pretty much out of the question

Cadila and GMR results disappoint and the former’s doubling of losses though expected by many,  was supposed to have completed restructuring of its structures by this time to spread the debt load , Male notwithstanding and the latter is much a shocker after Sun Pharma climbed out of its stagnation pit almost on cue of ithe global business cycles improving. Sun’s loss of Taro control will continue to bite as others like Glenmark continue to come up in the domestic ranks and that anyway leaves Cadila on the back burner with no visible leadership in either international or domestic segments but would be on as many buy lists as Cipla and Biocon with bigger and better stories because of an assured growth clip while others are subject to volatility from innovation and automated trading as well in a traders’ frustrated market series in February 2013 when the pre budget rally has been scotched but the India report card is sunny as ever, when Asia FDI will start retreating as China peaks but India FII and FDI interest is safe in the pockets of stable acquiescence we engender in the world investor community.

Global High Yield and Yuan issuance seem to be good for Asia in the four quarters thru to 2014 as well and if that survives, Investment grade Debt and gilts could also come back on the strength of the currencies in the second half of the year

The morning Olympics have been a subcontinent show with only one or two comments in almost rabid monlogues making any sense, almost making one feel like a backbencher has been allowed to speak and you must just suffer through. Of particular delayed incapability and thus high Avodance quotient was the so meandering opinion of parrying institutional investors who are later than the last back bencher in grasping the importance of investing and if the same backworking backbencher theorems are applied and still make sense, these would produce more defensible evidence on employing of research teams in advance than jumping on to available decisions already in action, and thus the morning has been an almost entire waste of time and as readers can pick and choose when to survivve my opinion than comment on it as is being written, I was the only one who suffered. IIMA recruitment also back those wanting to get into a research career and I am still wondering Iif I will have to go thru an entire Ph D program to get suitable rich to be employment. Research for trading desks intermingling now with Front Office Quants, look like much more succinct and concise and thus productive except for Risk managers hoping to write a book on avoiding risk.

Hexaware has finally survived a s a reminder of the annuity business IT and BPO bring, the sector surviving the month of Rupee appreciation only because Auto consumption is still on training rails on the takeoff leg of the runway.

Seriously though, what is it about Capital Markets, Banking and any other tenet of GDP growth that gets so much negative attention. And why do they continue to hog most of the GDP growth then. Execution? Kudos to MCX SX on launching th SX 40 indices and starting trading in over 1400 scrips. Unlikely though but they would be going all out to get attention for “real” institutions, to grade up the edigree of their promoters who try to come out of the shadow of harrassment by regulators and use of free market critique of regulation as overpowering spices to mask any cooking in the rice below.

India Currency Report: Rupee catches the leg back up for Asia

Korean Won’s early lead in the currency scores in 2013 was blockaded by reports of a failed GDP revival in the Economy last week, while seemingly Asian currencies have kept the sell down of dollar more widesread than the Yen. While European banks do not have large operationsin ‘Asia anymore, many of their important clients and Global Transaction business originate in Asia.

The buoyancy in Asian currencies therefore is likely here to stay putting Asian exportes in a bind but Export volumes, already at all time lows with shutdowns in China ( for commodity exporters) and Europe ( for Consumer goods and more price sensitive exports) in 2011 and 2012 are unlikely to fall through from here and may be able to sustain on the rising currency.

Indian Rupee is likely to stick around its neww range between 53 -55 and if it does use this opportunity to break from 53 on up, it would be because Oil is tracking down in the Global markets.

After having factored America’s Oil independence in a falling through till late 2012, Oil prices have recovered, Brent as of npow keeping its “transport cost spread” from the West Texas WTI Crude rates Thai and Malay economies are already worried about rising currencies while Singapore is likely benefitted by the rising Sing Dollar and looks to reap some benefits from the post crisis Change agenda.

The main agenda item supporting a high recovery in Asian currencies is of course the reopening of trade wwith China as it helps other consumer Economies from both North and South Europe and developed Pacific nations including Australia to revive imports as they plod towards a non recession 2013 with GDP contraction decimated by the brilliant move up in Germany’ s Services PMI last week though the currency market’s deccisions to discount growth in the UK look to shoot the Asian moves in the foot as any such speculative recovery will have to support a stronger Pound also and not just the Euro which is stable at 1.345. The Pound fell to 1.5800 levels Friday but should be looking to come back to 1.62 in the course of the year and the Dollar index likely to remain above 80 with the Yen crossing into the 100 s vs the Dollar.

In local reasons, India’s rupee was helped by the global inflows caused by optimistic readings of recovery as Diesel was decontroled with a pledge to increase prices by 20% for retail in the next 15-20 months ( To reach bulk levels of 56 per liter as for bulk buyers)

India Morning Report: The Fiscal cliff unbuild, bright eyed investees and a chirruping economy without auto sales

Exporting planning cards
Exporting planning cards (Photo credit: plantoo47)

 

POSTEROUS server shennanigans and untrained hands could not factorise this autopost in time last weeek and have been packeting it into wrong dates and times. Hiya, have pity on them folks and try aand understand their motivations. let me know too

 

Post festive season Automobile sales are still not taking off though the monthly sales data for December is unavailable. Indian Auto Sales have stayed on a neww 220K cars per month plateau for well over three years and we do expect the new plateau to be 260k cars per month or even 300k per month by 2015 if not in 2013 itself that can last another 2-3 years. Meanwhile Motorcycle sales across the Top three is likely to reach 900000, 500000 and 500000 in the same period and Export markets are likely to add volumes

Global macro has improved just in time for a happy end to 2012 with good Economic grip and Corporate results also likely to report a fat crop after the dim prognostication of Q3. Europe is likely to move into positive territory into the second half of 2013 as Greece loses concerns about being left out and gets upgraded at S&P to B+

European markets in trade exports are likely to be replaced by new markets in Asia, Middle East and Latin America especially if longer term negotiations are completed instead of trial batches for the likely two wheeler and 4 wheeler exporters. Trade Exports are unlikely to rise above the current holding levels in India till Second half of 2013

Indian businesses continue to be driven into a bigger future and as was mentioned on the TV18 morning preopen as well, Healthcare is likely to be a mainstay for investors riding the indian currency.

The Fiscal cliff negotiations will hopefully be really completed before Christmas and those investing into the depreciation of the Dollar may like to spread it to only the weak yen through the Euro JPY trade in addition to USD JPY which remains headed to unthought of levels as Japan gets locked into a new export strategy and the Risk on trade in Equities keeps Dollar weakness a primary profitmaking failsafe for global investors going into the new year and Euro responds to its new hope, leaving the Indian Rupee safe from Crude manipulations

 

 

 

India Morning Report: More Fiscal uncliff, more detachment for India Inc ( Re Global Auto Sales)

Village Sasan
Village Sasan (Photo credit: Wikipedia)

Fundamental structural changes notwithstanding rating agencies globally keep getting the same standalone cues for India and India fortunately or unfortunately remains studiedly isolated out of world karma.

For instance, the new Dy governor of the RBI, Urjit Patel might have a hard time marrying the global recovery in auto sales with India’s first Chinese imports and the M&M resurgence as part of any global trend even as China runs ahead to a 19 mln Cars in 2013 projected higher than all of Europe

But then inflation is unlikely to go away as a critical agenda item soon and another is the return of Net Investment by Corporates in Infra or otherwise ( I heard the Infrastructure Commission has been redesignated as the inter ministerial committee on Investment or some such thing, equally incapable of moving the 1000 odd projects waiting for final approval(s) for financial closure and take off. )

The Rupee in the meantime responded to the great optimism in the PMI data and reform cues even as details continue to elude and the question of criminalised politics, a tell tale barometer high mark of inactivity on the horizon become the key issues of the day despite shorts trying for a quick comeback from the new 6000 mark and probably encouraged to journey up their stakes on the ennui coming into the new year.

Lupin and Glenmark remain good picks in Healthcare and Ranga committee’s answers for future Energy projects and thus Gas pricing get closer to being implemented. Reliance Power has already crossed the hurdle where it can now repurpose coal allotted to Sasan to working projects including units at Sasan. The Diesel subsidy degrowth thru steep increases may see light of day only in the second half of the year while the 30% + deceleration in Gold imports by nearly 50 Tonnes per month is apparently not enough for the Indian currency to come back meaning Gold smuggling may have further skewed the data.

Stride Arcolabs also celebrates another good day on the bourses, we also remain optimistic for banks even at a 12800 Nifty to keep getting rewarded for being private sector performance and get questioned for being PSU unless you are PNB or BOB and we hear BOI. The last two could not hold on to any semblance of performance in the last quarterly results either and PNB itself is struggling with increasing NPLs while others seem to be dead in the water including Canara, Syndicate and UBI & UBI.

Credit card spending (ttm November 2012) has recovered but is still 20% below 2007-08 levels and more encouragingly Debit Cards seem here to stay. MNC banks have restarted consumer credit operations as ell but their market share remains below 5% including their strong Corporate Credit business and strctured risk sold to corporate treasuries

Education and Healthcare spending are unlikely to cross the 1.5% mark of GDP for annual spends till the end of the current plan period in 2015. The more things change, the more they remian the same.

India Morning Report: A dozen successful OFS to close the year

The old logo of Maruti Suzuki India Limited. L...
The old logo of Maruti Suzuki India Limited. Later the logo of Suzuki Motor Corp. was also added to it (Photo credit: Wikipedia)

Last week’s beginnings after NMDC with Reliance Power’s 15 mln shares on offer, were followed by successful closings by Adani Ent(28 mln shares for INR 6 Bln), Eros, Bluedart, Honeywell and even institutional equity sales by Godrej and a PSE sale by Hindustan Copper. 2012 FII purchases have likely exceeded $25 Bln , near the high watermark of $30 Bln in 2010 and wiping out bad news 2011 though India’s Economic recovery is far from incomplete and some indicators even say unlikely to reach 8% again, as for China in the new post crisis developed world economics of a large base and limitations of progress (market expansion) show up. India’s model of the Hindu rate however has shown the fallacy of these being limiting factors and excuses since we took up reforms in 1991 but that was then.

Fixed income yields have not crawled back as fast as they could have after the upbeat

English: Honeywell logo.
English: Honeywell logo. (Photo credit: Wikipedia)

Credit Policy Tuesday but persistently high retail inflation is no longer the limiting cause of India’s problems and neither is a run on Oil prices likely

The Rupee meanwhile is right back up its repair drive crossing back into 55.1 on another start of flat equities to close the year while Maruti and Bajaj Auto climb relentlessly and let ITC and Bharti Airtel scrips slide on lack of interest without hurting the index prospects. Pharma continues to outperform while banks are likely to push for early clearing of margin debt and infraco debt resulting in portfolio sales proposals closing after those holding out for price start staring at

English: Logo of Bharti
English: Logo of Bharti (Photo credit: Wikipedia)

a bleak winter holdout, including those at GMR Infra and LANCO Infra. Why exactly is Lanco scrip moving up today at 10 am?

 

 

India Morning Report: And here we are 5850 and nary a huff puff break!

The early morning run for the Nifty has panned out really well, with the 5850 mark looking as enticing aas the hitherto 3800 mark(5600 from August) and no employment for traders yet again on the upswing or as now most would like to say in the week of consolidation after it ends the day after expiry without new brilliant moves of mathematical elasticity of direction brought about by Expected returns of each stock. algorithmic/Program trading however is different yet and with new regulation pon HFT preceding other countries’ attempt at controlling the HFT beast, Goldman Sachs trading rooms and that o f JP Morgan will continue to resemble SOHO offices trading the solitary Gilt in action.

The OMO scheduled as promised after a big break that definitely helps the cause at many ratings analysts’ desks is still required though for what would have been $3 B but is considerably depleted in Dollar terms . Similar problems with credit growth data also top up your and my morning cuppa as the absolute growth of INR 300-500 B every fortnight is now going to be a below par performance especially for one of Asia’s Top 5 equity markets of 2012 and probably the Top 3 in 2013 as Phils and Thailand are probably over the hill from all the buying un abated since china’;s slow poke began in an atmosphere of  European banks’ left with Asia as the only profitable franchise in 2010 and continuing through their liquidity squeeze on Asia and post the ne liquidity moves of 2012.

The Euro is king right now among currencies and that means the Gold and Silver tunder will be missing for some more time though buying has begun. China’s industrial demand for silver had thoughtfully started increasing this quarter but accordding to somenon conventional indicators china is still a long way away from a beneficial breeze starting to blowin new custom even as impports continue to rise optimistically keeping retail sales steady on month.

Back home in Mumbai, Bharti infratel IPO is finally up and running and seeming there is more clarity in the CDS market for insurance cmpanies as well which could be the leather for the leather hunt required in fixed /income markets to keep the comeback int he currency markets esp for those longer term rupee investors which have stuck around after banks withdrew fromtheir Bullish rupee positions just last quarter albeit a bit too soon. Despite market movers, I am not very fine with the move in Canara Bank or other PSU banks that are keeping the Banknifty abreast. Its pure sacrilege of the same variety that brought the house down last time. NMDC should be a good issue and good pricing will bring good treasury gains to banks supporting Divestment OFS issues like the one priced at 155 last fortnight

India Trade Report (Flash October 2012) : Deficit Climbs

Trade and Monthly IIP. international Trade is currently 1/5 of India GDP

The October monthly deficit climbed to a $20.96B in India even as larger trade behemoths with monthly export volumes of $160-180 B in China and US returned higher surpluses ($32.5B) and lower deficits ($41.9B) spurred by jumps in Exports.

Indian data is ofcourse skewed by both the rush for Oil purchases and a downtick in imports not just in Europe but in US and most other India customers. While the European contraction is worrisome on an aggregate basis most global trade volume has been replaced by other categories for other customers. However Capital Goods trade remains one of the most severely affected led by downtick in such Exports from Europe (Germany) and Japan

Indian Imports rose $7.5 B for the month and the Rupee as expected inched towards the 55 levels. Indian IIP has been trending at lower levesl since the Global trade contraction picked up force in mid 2011

India Morning Report: Markets reassess the strength at 5650? (Also, India Closing Report for the week of October 15-19, 2012)

Indian rupee collection
Indian rupee collection (Photo credit: Wikipedia)

 

 

Markets seem to be eager to test 5650 again in what can be said to be an observable phenomenon of the the last 6-8 months whence the second half of the FnO series is geared to a cascading short thrift on expiry, banking the gains from shorting the market consistently as writing calls becomes safe enough to support a weak trend in the fourth week. There is no real logical basis to it that makes this strategy stronger except that the bulls as usual will be in a likely wait and watch hold and most investors running in this series will not be tempted to cash out or take profits around 5700-5750 so the correction still has a less than even yet finite chance of happening making the risk reward skew to building such speculative shorts.

Some good results are yet to come but Oil buying as expected, has pressured the Rupee suddenly into trying to end the week closer to 54 if there is further weakness from the day open around 53.90 in the October series and 53.70 spot

However international Oil prices are likely a dud and so the Rupee and the equities might ell gain back a big chunk of today’s moe as at 5700 they will still end the week higher from last week’s 5676 close on Friday

The underlying bull trend remains so this hit on Nifty after every positive move of 50 points could only lead to the corrections getting an upper hand temporarily but breaching the Nifty’s 5650 support to hopes of a 5500 bottom before the Banking regulation changes and fast tracking hopes bring back the policy steam which brought forth this big run upward.

Some good results are yet to come but Oil buying as expected, has pressured the Rupee suddenly into trying to end the week closer to 54 if there is further weakness from the day open around 53.90 in the October series and 53.70 spot

However international Oil prices are likely a dud and so the Rupee and the equities might well gain back a big chunk of today’s move as at 5700 they will still end the week higher from last week’s 5676 close on Friday

The underlying bull trend remains so this hit on Nifty after every positive move of 50 points could only lead to the corrections getting an upper hand temporarily but breaching the Nifty’s 5650 support to hopes of a 5500 bottom before the Banking regulation changes and fast tracking hopes bring back the policy steam which brought forth this big run upward.

 

 

India Morning Report: Markets to follow up another uptick from 5650

The Rupee started the week well and set the tone but the ‘missed’ opportunities to churn the portfolio finally got to traders as the index is definitely not more than range bound though biased to the Northerlies taking it up. The resulting afternoon correction should not have worried you unless you were the few who entered this week in the last INR20,000 Crs or 200 B entering the cash market, which is going to be in a little trouble as the downward trend for Hero and the continuing travails of Infy emerge again with IT scrips getting hammered for prices booked in September in their quarterly results.

The Rupee hopefully will get to stronger ground nearer 52 than 53 before Oil prices rear their ugly head again, precariously poised at $92/$116 for WTI/Brent per barrel and India staring at just concluded well priced contracts askance if they could still bite on the WAC cost of our rising Oil bill. The September deficit climbed out of the hidden trenches on mass buying of Oil atleast as it seems from the monthly deficit and the growth in China’s exports can only do so much for our exports to Big brother.

Obama is back in the reckoning and though that does not mean good things for outsourcing followers, most IT companies have been hiring locally and settling down in the US as local color than exporters of manpower with a more than 10% bench at Infyand hiring for special skills in larger accounts now more than remotely likely. Banks and global financial services majors have much more bandwidth going into 22013 to expand footprint in Asia again outside of Goldman Sachs which is already fully invested in growth portfolios and the Deal markets should help further FDI/FII interest too.

India has managed to get extra flows without affecting prospects for Mexico or Turkey showing Emerging market inflows are more collaborative than competitive and US equity inflows should not impact the flows adversely either but worries come from the coming increase in share of the Commodities complex and the Japanese commitment to keep buying US Treasuries. Japan’s currency’s new turn is alsoa great story as the over valued currency seems to be in line for a big correction in value as China gets left behind in the list of US Treasury holders and the regional argument between China an djapan is balanced by the weakness in the Yen for Japanese and probably Korean exports as well.

 

Flash Crash on NSE: And the 59 trade “flash off” was the Pre Open session

 

Update: My attributions to pre-open were based on the similarities to this all frequent event every day when the pre open routines works to a variation of +/- 30% over the last closing price. Also as ET Now reports, the cancelation of these trades is again in question because of the uniquely wedded Day trading system in India whence those who closed the trades at 3 pm are  the main issue of why the flashed market trades cannot be closed and Emkay can be hung out to dry with these INR 650 Crores in trades. (INR 6.5 B) as it is adequately capitalised.

Image representing Infosys Technologies as dep...
Image via CrunchBase

The much publicised “flash crash” on the NSE in India was actually part of a daily phenomenon where proprietary desks of brokers with risk give exploratory trades without any circuit breakers and other exchange controls in play during the first 15 minutes and no trades are consummated.

The Flash crash literally happened half an hour after the normal session began and the canceled trades saved the markets $60 B before another Preopen session was imposed at 10.02 AM and session began at 10.05 The Nifty ended down barely 50 points with Bank Nifty resuming under pressure and HCL Technologies and Infy getting ready for Results season and the new rupee vs Q2 performance at the Rupee’s lowest

The broker Emkay involved in passing such “erroneous” 59 trades on behalf of institutions is likely just using the template to look for wa swaying trend to a correction in a more “macro” pr “global” use of technological failures than the high Frequency trading algorithms used for institutional advantage legally in the US. Hopefully, the broker will be investigated throughly and thence the pre open session per se which gives the Rupee a 15 minute headstart on the Equities in trading as it opens without a Pre Open session at 9 AM IST

 

 

 

Currency Report – Rupee to sizzle to 48

 

Ofcourse a coupl eof bank trading desks have been waiting for this moment and have pushed a 48 target for Fiscal 2013, but the long term trust and focus built on a tirade of FII participation in the World’s “only” market growing at above 5% and showing having likely bottowmed out is serving Rupee traders sell as they bore the weight of  a big down move thru the first half, hitting 57 as late as August.

The Rupee todyay officialy channeled into below 52 trades at the start of the October series, the spot rate likely near 51.70 and lower despite weak equities egging on a blind man’s channel up for the Dollar on the Rupee. The Commodities situation has also reached a peaked state and Oil lost to the bottoms in the traditional india month for Gold buying stabilising international lows on the currency

Copper is likely headed for the correction down and probably Natural Gas and Copper will both run down quickly and stiffly as Oil rifles up the cleaning bore and into more demand charts

The Rupee thus has again landed the 2009 international vortex from which inflation risks stay abated and CAD has already come down to $16.7 B for the period April – August.

 

Pre Closing Trading Strategies September 24-28, 2012 – Wednesday 3 Pm

 

Markets have decided to inch upwards is a clear prognosis and as of now even the new resurgent Dollar’s trade on the rupee to 53.52 seems barely able to survive new shorts and likely fresh shorts in Rupee are warranted now or after 1 more 1.5 more upticks before 54 levels depending on the resurgence of the post expiry buying that ensures the trade remains up than a month long correction to enable fresh institutional buying at local MFs and LICs

However banks seem to be quite decisive having dived 60 points to 11350 on the Banknifty and fresh buying in HDFCBANK and IcICIBANK is out by a week so more uptick will be in Axisbank led revivl stories of Canara Syndicate and the ilk like Union Bank and CBI which unfortunately is not really looking likely even now leaving Axis Bank a lone horse again to repair the points damage and ride in the first week to come Ye s at 375 and ICICI bank at 1065 may not see fresh buying now but like ITC corrections are unlikely to be deep even if you accumulate in the same levels before the upswing resumes.

 

As mentioned earlier however the rest of 2012 is unlikely to see hard data backing a recovery and is only more policy speak peppered with off market and on market deals with Etihad, USL, Ikea and Walmart among others.

 

Pre Closing Trading Strategies – And We Said The Rally Maybe Could Not Hold Off Friday

 

As suspected/expected depending on your lingua franca and the youth in your team, Markets survived 5500 so well that they could not keep their hands off a big rally into the weekend, ending Friday with a likely 150 point  gain on the Nifty and a 400 point gain on the BankNifty. AxisBank is finally1120 and so Monday opening will unlikely see a straight line improvement from 5700 levels exp the Bank nifty ripe for a few points of bargaining.

As commentators hae mentioned and has been obvious in the last few days, buying has in fact become more frenzied as institutions realise India will be the last minute pronounced outperformer int he region despite the bad news economics continuing not even till the bottom in April but as recently asa week back when the IIP dat came out at 0.1% aand prompted another string of Growth GDP forecast downgrades to 5.5%

Most of these commentators have a bad eye or shall we say long lost cousins that seem to find their favor in the amrket rally as the obvious ones defy commentary. However the Banks and Infracos remain the sectors to invest in and again a Hobson’s choice for institutions still waiting for the elusive dip. Also healthcare could indeed come back as the second leg of the rally given that Infracos were almost simultaneous in their move with banks. I am an investor in RELINFRA so that is one stock I can eagerly mention as a bull weather friend.  JETAIRWAYS IS ripe for those not locked in and roving eyes might still catch these and heath scrips like SUN at new levels for a big run. ITC would be a dream pick but more accumulation is likely as the market tries to find time for mid cap consumer companies probably even VIPIND

 

Morning Trading Strategies – India September 17-21, 2012

Trust us. it’s not time to sell into the rally yet.

Banks are again the biggest victors of the Reform story. While Telcos will be apparently in with 2G licences without missing a beat including Uninor and Sistema buying Aircel, Bharti would be benefitting more from investments in retail and its IPO getting investors out of the 5 year old Bharti Infratel restructuring

Stay long in Banks and the uptick will be tempered as we go along. Indeed some may again try a Bank of Baroda trade. ICICIBANK and SBI are the best picks going up while HDFCBANK is the one likely to lose the least value

The Rupee is below 54 even in the September series and that is saying a lot apparently as Udayan puts it from INR 28 B in one session. The gain in the Rupee is not capped yet either till December

The infra stocks ill be part of the second coming and will be from among frontline stocks only from IDFC to JPASSOCIAT and maybe GMR and RELINRA

The 11AM Update – PMI at 53 for July 2012, Rupee cracks up big gains, Retail Mall wannabes power on

 

English: 1 French Indian Rupee, 1938
English: 1 French Indian Rupee, 1938 (Photo credit: Wikipedia)

The Rupee finally rid itself of its obstinacy as the market thru out some of the smaller shorts like me out before pulling down to 55.71 and the equities pulled up apparently on the news of 52.9 soemhow a surprise to this market though very obvious from the trends including the downbeat 6 months of 2012 till date. Backlogs contracted while employment was positive in the latest Manufacturing PMI readings. Still the index should enegender more positivity and continuing flows into the Indian market

Shoppers Stop reported a good turnover as did Westside and StarBazaar owners Trent Ltd. Shoppers stop reported INR5B inquarterly retail POS sales of its INR7.64 B turover while Trent reported INR  2B in Sales > Sales at both grew just below 20% Profits ere muted at Shoppers stop for its lower margin retail pos sales but sales grew on new store openings as same store sales were up just 1% including the new chains Hypercity (food and groceries) and Mothercare, MAC(fashion) and Crossword.

Nifty is ruling at 5230

 

 

 

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

 

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

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

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

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

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

 

Bank Policy Tuesday: Nothing can be done for now, Markets react

 

As we mentioned, the markets had decided for the bank last week itself and while it was clear the rate cut was not recommended the market is in position to react unfavorably letting commentary focus on  “hawkishness” of the policy (just listen  to LV on TV18 carrying on live from the dog and pony show) which is unlikely its tone.

Banknifty is down 100, supports for the Rupee sunk in the melee and Nifty don 20 points. SLR has been cut 1% finally after 3 years of dilly dallying. that means with 23% SLR and 4% CRR banks now need only 27.8% in Liquid government deposits and with borrowing from the government already reducing the liquidity will improve albeit slowly as these are sticky deposits. India’s GDP  growth is likely to come below 6.5% and inflation is high according to the policy review.

I am wondering if my short Dollar position will stay in the green in these conditions against the Rupee with markets using every such excuse for running it down and are virtually uncontested in that. The RBI reference rate to the Dollar will move up today. Inflation target is now 7% and credit growth targets are above 18% wiht most of the big four affirming a 20% year

 

Morning Trading Strategies – India July 30, 2012

 

ICICI BANK And IDFC start trending down when the exodus becomes clear in the coming weeks esp after the GDP data.  TILL THEN ICICI BANK may actually reach never before highs with ITC ITC results up 20% were an eye opener after they showed up plateauing on consumer brand sales in Q4 data Consumer brands do show continuing losses (minor) but traction shows capability to tap the 10X higher unorganised market in Atta, Oil and readymade foods.

Regardless of HDFC’s 20% higher profits the Consolidated income of INR12.75B, the markets remain topped off and likely candidates while the rupee wants to correct to the Dollar to 54 levels before trying a jump, leaving markets pushing for an upside.

However, my earnings capacity and the trade in the Rupee Dollar have been hit adversely as I get targeted in the ring to sort out their confusion on the irection of how to get out of a dollar positive trade because of the weak markets.

Marti’s scores in Q2 were bad but more than results actions in Manesar and its swift rebirth in Gujarata this time are going to have positive ticks on the price sooner than later. BIOCON and healthcare upside has definitely been ;lost excep t for one shadow snook with the telco stocks. The IT jump is illusory but if you hold them, it is good for you

Someone did say PSU bank shorts, but if you try CBI or even UBI they may be climbing back today.

Snatch and Jerk (Intraday) therefore offers few available opportunities left on the shelf. 

No need to add positions now when you can get them cheap later BOB and PNB should infact come back into the green and rise sooner than later. Indusind is not a good pick. Yes Bank holds.

 

Morning Trading Strategies – India July 20, 2012

 

Bharat Heavy Electricals Limited
Bharat Heavy Electricals Limited (Photo credit: Wikipedia)

 

Shock and Awe, what can one say. Markets opened deceptively lower and start from bottom of range on Friday. I think you can pick up a few Calls on the nifty and maybe not the banknifty but then banknifty is the stongest player in the series and next

MARUTI has picked up , may again be available at below 1100 Power stocks are an avoid. There is no definitive course for order backlog ridden and recession driven BHEL for new buys to 250 immediately, but after whipaws of the day it will be available at those same levels again

Today’s alrternate relief sections are sharply corrected even otherwise and TCS and BHARTIAIRTEL make good picks. Buy SBI when you see a nice rounded bottom,. i think 2150 is a good start to accumulate for a positional trade

ICICIBANK may not correct further from 945

A big thumbs down for HERO and DR REDDYs and a big thumbs up for COAL INDIA

 

Tata Research Development and Design Centre
Tata Research Development and Design Centre (Photo credit: Wikipedia)

 

 

 

The 11AM Update – Well I can’t tell you I am buying, hushh! Bajaj Auto reports good growth

A dull day nonetheless and without any buying data from market internals , it might well be the cliff OECD nations are facing for the next  20 years. The Power saga is especially threatening stability in Lucknow, Jaipur and even Bangalore, the new richest city in india measured in per capita income

Mining ban is due to be lifted soon but with state coffers empty and the Centre showing its hand by decisively asking ( MSA at head of PlanCom) for states to share the Debt restructuring burden in such a situation with SEBs is a trifle daunting for those waiting for reforms to be actioned before the markets move up

Indian states with younger CMs might be evaluating official bankruptcies already though India’s long federal history gives the traditional politician enough ammunition to get out of such triflings as another INR 3 Tr in unaccounted spending.

If I were in retail and could pass on prices to consumers as I proved i could, definitely I do not need to suffer much more pain on the exchanges.

Bin that bullish note on the Indian market, someone else got this FII investor / QFI (though he is still headed for India) 😀

A dull day nonetheless and without any buying data from market internals , it might well be the cliff OECD nations are facing for the next  20 years. The Power saga is especially threatening stability in Lucknow, Jaipur and even Bangalore, the new richest city in india measured in per capita income

Indian Rupee Symbol
Indian Rupee Symbol (Photo credit: vishuhospet)

Mining ban is due to be lifted soon but with state coffers empty and the Centre showing its hand by decisively asking ( MSA at head of PlanCom) for states to share the Debt restructuring burden in such a situation with SEBs is a trifle daunting for those waiting for reforms to be actioned before the markets move up

Indian states with younger CMs might be evaluating official bankruptcies already though India’s long federal history gives the traditional politician enough ammunition to get out of such triflings as another INR 3 Tr in unaccounted spending.

If I were in retail and could pass on prices to consumers as I proved i could, definitely I do not need to suffer much more pain on the exchanges.

Bin that bullish note on the Indian market, someone else got this FII investor / QFI (though he is still headed for India) 😀

BAJAJ AUTO profits of INR 7.2 B is good enough in the current situation esp the added challenges in Sri Lanka exports which are expected to fare better from here. Cons profit at INR 7.18 B infact beat expectation and buying has begun ( after some confetti on the wires, buzzed traders) Net Sales of 47 B or $1 B within a Quarter and Other Income is actually up using only month end forecx translations at INR182 Crs ( INR1.82B) up Rs 5 since i printed that buy intraday , now 10

Late Morning Trading Strategies: July 12, 2012

IIP for May outperformed expectations at 2.4% up 24 times over last month, mfg up 2.5%, Electricity up 5.5% mining down just -0.9% Durables are up 9.3% again Cap goods are down as per global trends at -8%

Though a lower target from Infosys is INR 1671 and funds could be closing out large positions in the stock, the orst is done and the Rupee also recovered, choosing to react even t o corporate results for the Infy boardroom morning. Infosys CFO does a creditable job of defending lower EBITDA, most autobots would have started accumulating infy on the backbreaking fall. $7.35 B in USD revenues would be a good enough score for Infosys followers ho had priced in industry conditions.

The trouble is the home of the outsourcing industry, India has many temple going followers of the scripts either TCS or Infosys, who cannot understand technical things like clients deferring projects or even as the ET broadcast is blaring in its new Cannes retro campaign “Pyar kiya to Darna kiya”

COALINDIA is a great buy. I would suspect apart from individual buys on IndusInd and YESBANK, the whole BANKNIFTY Index will be a buy at 10650 to at least 10800.

MARUTI , BAJAJAUTO and STRIDE ARCOLABS (STAR) could survive, SBIN could be a great pick. 5250 should be a new bottom, esp if TCS and HDFC BANK follow on expected lines

Morning Trading Strategies – India July 12, 2012

Sell INFY in the morning even if you get high 2380 levels as the cut would go deep

Buy BIOCON and buy the banks esp stay in your holdings in HDFCBANK. Auto shorts are unlikely to give too much in returns, Healthcare and Consumer stocks should be buy on dips. CIPLA my stay up and SUNPHARMA shorts work for the street though keep a tight stop loss on the same.

Buy a few Nifty Puts at open regardless of any strength you see, do not buy Banknifty puts and if you are tempted to sell a few puts to lock in the banknifty levels it could actually work but then it is temptation

Hopefully by 10 AM you have started biting Nifty Calls

India Morning Report (July 12, 2012) : Tech results eye-opener, rupee rearing to lose it

NINE NEW RUPEES IN A ROW
NINE NEW RUPEES IN A ROW (Photo credit: Michael Francis McCarthy)

Infy PAT is down sequentially to INR22B and revenue INR 96B despite the firm holding out on appointment letters ( which again surprises one assuming infosys is a proactive firm than a reactive one)

Though the Won and to some extent the SGD have come back from a month ago levels, the indian Rupee is all too willing to not return to 54 levels and run back on every day we extend the bearish correction in the indices. Infy margins will expand and in a couple of minutes it will be on the wires as a INR 96 B revenue tag finally becomes a small enough number for most to ignore. The management is likely to further reduce their Dollar growth targets and despite rupee depreciation of nearly 10% in the quarter TCS will report margin degrades from wage hikes (33bp) and cross currency movement(?) as the Euro plunged in the same period.

Biocon seems to have consolidated at german levels again in the mid break period of the rally at 240 and is likely to become a good pick going into its results within the week. autos seem to have corrected enough bu tthen there may be very few candidates losing their shirt in this mini week so everyone is a cynosure for the bears’ eyes.

Indian markets are however definitely beyond the IT outsourcing era so to expect a deeper correction except in IT for the new General Manager at GM to cut outsourcing at GM after doing the same at HP

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

Weakness in Commodities does not a Rupee trade make.

The One Rupee Banknote.
The One Rupee Banknote. (Photo credit: Wikipedia)

I am willing to admit I am rather a big Macro kind of person even during trading and as most are, the Rupee’s upside is indeed limited by the size of the market it plays. While the Aussie does not want to and yet makes stronger against the Dollar, the dollar itself wantonly strengthens contrary to tis economy’s weakness because of the “Flow to safety” trade and because of the large foreign holdings of Treasuries not unlike the yen ( that story in the later paragraphs, do read thru for it will also play out) thus a weak Friday Jobs report for the first week of July meant that the weakness of data actually was expected to and did make the Dollar stronger and later bring it to the brink of a deflationary scenario.

It does not need to be the Dollar to affect such an inverse transaction as Yen has suffered for years on end and the Euro and the Pound Sterling carry a similar risk. On the Indian side however, the comparatively lower Dollar value of trades in the currency similarly preclude the rupee from having any upside advantage and as it gets stuck on the Euro’s downside its inverse transaction riding the Dollar Index is much more than other currencies.

Other trading economies of Asia including the pass thru trading economy of Singapre, similarily suffered but the Won and the SGD benefit from the larger share of Dollar transactions and build out a better case for strength in the currency and thus domestic inflation and interest rate management with slightly weaker equities as witnessed in Korea when Samsung results took the equities down but the Won managed.

Speculative flows make the Rupee’s comeback from 56 levels tougher as witnessed in sharp comebacks pegged to the Dollar Index (DXY) on Friday. However if there is strength and institutions are willing to trade it to 54 and lower on the “upside” nothing can stop it from happening as flow traders would ride that move equally.

Similarily a global weakness in commodities would help other Asian currencies including Indonesia as the Sell Indonesia buy India trade probably winds down if the Rupee remains weak in the face of weaker commodity demand from lower global trade demand for commodities Oil and Gold controls will therefore only help the Rupee gain back ground rather than fixatiing on government support from $289B in Forex reserves.

At certain points in the climb though Rupee does acknowledge the weakness of the Euro and that could be material in bringing the rupee to competitive levels and win back benefits from the falling commodities price cycle that begins with the Dollar Index poised to hit 90.

India Morning Report (July 05, 2012) : Risk on trade continues, yet a stalemate

Image representing Goldman Sachs as depicted i...
Image via CrunchBase

Of course no one’s fighting to take the Nifty down now but some are waiting if they can buyin again at lower levels an oft repeated strain since August 2011

However the correction though not perfectly correlated will depend on the weakening in the rupee as it becomes another export dependent economy without consumption growth as in Brazil, Australia China and Russia. Not to confuse the bulls, wea re still doing well, PMI at 55 and Services Indices at 54.3 athe best showing globally currently and a 5% growth guarantee at this bottom means India’s premium is justified and riskakers would be growin gIndi’s share . As BRICS follower Jim O Neill and now Goldman Sachs aver, the BRIC markets are at a 33% discount to their share of world GDP of 25% in their share of investment trades in Equities at 16% so the immediate opportunity in those which have steadied the tide in an environment of uncertainity, will get  alarger benefit of the global liquidity injections.

Ofcourse, India participation by FIIs remains capped and Policy decisions continue to teak within India’s share literally capped at 5% in the Global Indices

Acorrection is unlikely as Consolidation has held, and the investors must be patient. The Rupee may let the Dollar recover durin gthe day today as emerging currencies broke their 4 day run yesterday

India closing report : Rupee Rally to continue, Stocks to jump to another gap opening

English: Signatures of Manmohan Singh. Top in ...
English: Signatures of Manmohan Singh. Top in english, lower in Hindi. (Photo credit: Wikipedia)

As Friday wound down in equities, the morning’s gap opening held up and Wall Street was celebrating the summit as well leaving little doubt to Monday open marks on the Nifty. My personal trading strategy has been to hold on to my good investments and recommendations and buy into the bank nifty by selling a few puts and buying the ATM/OTM calls at 5300/5400. Selling the Put keeps the money off your mind with margin paid and you get instant credit. Of course selling Puts in a rally like this is because there is no chance left to take and thus you will have to buy it back later at you chosen peak ( I would not suggest a number at this juncture as this is a fresh rally for all intents and purposes )

Rupee’s rise will aid the rally sentiment though a perfect correlation is unlikely. There is no shortcovering in this rally the market having stayed up above 5110. Of course a couple of corrections along the way are only too possible and thus Monday afternoon will be a key test of whether the index retraces to 5180 or stays at 5250 levels for some sessions and there are no recent marks in that range. Whence the Infrastructure and Healthcare sector sentiments would be critical as they have been holding back for the big jump and Sun would need to take a breather in Pharma stocks

Bank Nifty is likely unstoppable, banks having shed all their bad data in the last few quarters and results are due in another two-three weeks after Infosys kicks it off here in India and JP Morgan follows after the Alcoa earnings on the calendar

Rupee fell to below 56 levels and NSE Currency segment stayed above 56 but mostly for salutory purposes or hoping for enough exits for another satta on the dollar but come Monday they will largely follow the reform news flow, again a reason for equities to rally if we can just keep up with Manmohan Singh’s dream team for India.

No QE, no dollar depreciation

The Euro ready to give way from 1.27 levels to 1.26 levels, it is unlikely that the Dollar would get brow beaten and the Dollar Index rising would mean the Rupee continues to settle to new final lows as no fresh probability to assuage the larger revenue deficits in India is seen. However, in a few days our imports will actually start getting cheaper and impacting a lower core inflation. When that will translate into CPI inflation improvements or actual action on the Diesel and Fertiliser subsidy programs is anyone’s guess. The currency is unlikely to benefit from small fills / corrections on the Fertiliser policy. Yields in the fixed income market run north to 8.22% levels too meaning more room for the Dollar to take up

Aviation stocks were back for a fleeting moment when the up trend was in acton Monday, but a Dollar depreciation seems to have put out prospects on them in these uncertain policy times. India specific political reasons like NDA have largely become dried up wallflowers but a hope of Manmohan Singh getting FM portfolio being dashed might still mean more pain for the Rupee. Of course with a majority of the GDP benefitted by the Rupee the stock market might start seeing the Depreciation ride as more fun than pain.

Dollar remains a safe haven and Treasuries continue to surge south on yields.

Rupee Impact: Why the Euro can’t fall enough for the Rupee

The Euro of course is at 1.26 and the Rupee, happy kept its level to the Euro as benchmark for Dollar’s movements against the Rupee has gladly tempered this rise of the Euro to 70.40 in morning trades ( Interbank rates at 70.4, nse can run at a retail premium to 20 basis points – not just points)

The Dollar’s weakness in the week of more QE ahead of Greek elections has been shortlived hopefully because the QE rumor is a shortlived one, however, the Fed would extend its support thru Central Bank swaps ( see advantages.us – It’s for sure another LTRO, but QE? ) Anyway it means the system would be awash with liquidity and Gold, Silver and Oil are back on the (upward) run. That is another week of respite for the Dollar index hardly corrected from its peak in the first 3 days to 82.5 and no falling rapidly, with the Euro 1.26 levels likely to be a strong support in a liquidly able banking system funded from Europe, other G20 or the US

The Rupee is likely to breach 55 on the long side if the trend lasts long enough and the fall for the dollar may not be a one way street in the Indian FX markets as the USD is defacto the only currency traded including cross rates to Euro and JPY good reference for currency moves and the Revenue account

Indian Rupee Symbol
Indian Rupee Symbol (Photo credit: vishuhospet)

having limited avenues for Dollar speculation, Hot money flows still find a way to keep the Rupee excessively week

MidCap IT is ebullient at the improvement in Margins but unfortunately for the lean prospects of IT the Rupee is unlikely to help more than the 26% depreciation at its ‘peak’ of 56.50  to the US Dollar

India Currency Report: An early break for the Rupee

The Dollar index (DXY:US) turned down precipitously as the fight in the Euro remained about the semantics and the sufficiency of the EUR 100 B, France stepping in to say why it should be an ESM stability pay out than a bank rescue. That meant the Euro is trading close to 1.26 and the Dollar Index already 82 a full point down from 83 levels when the rupee hit 56. That means Rupee’s going to be very strong in intra day trade tomorrow.

Go Long in the July and August Futures at a good price if you want to bet with the Dollar and i should think short the June positions to 55

Better Than Expected Economic Data
Better Than Expected Economic Data (Photo credit: Thomas Hawk)

India’s monetary supply data trended with growth in Deposits to a safe 13.7%. I would say numbers below 16% are even anemic for growth but definitely that means the inflation report tomorrow will be a brilliant 7% or even lower unless the Economic data is not in sync. The base effect on the IIP hopefully is the only thing that is keeping it low now as Infrastructure looks at new investment and other sectors of the Economy also report higher investments this quarter, reigniting confidence in the Economy

India Morning Report (June 13, 2012 – Pre market Open) Already discounting the rate cut (Incl. Fixed Income Report)

indian equities started off a rally yesterday to upturn its nose to ratings agency S&P for daring to suggest India was closer to a downgreade two days before IIP announcements and a week before  RBI policy is expected to be announced.

Surprisingly, even naysayers, including us in this cycle who thought RBI need not cut rates now have been silenced by the intervention from S&P. While fortunately there have been India Bulls that have defended India saying this is the bottom of the barrel for India’s raft of bad economic data in the last six months there has been a precocious turning down of yields in the fixed income markets pointing to a massacre on Monday if rates are not cut by the RBI.

India 10 Y yields are trading at 8.06% having started the week at a low 8.14% from before the S&P announcement, thumbing the nose at Cassandras of doom. Again though not unsinged even in fully hedged trades, I recommend staying away for this entire rally in terms of ne positional trades and let your existing holdings and positions enjoy the sunlght till the RBI policy hour as expectations become clear.

Though it has not been opportune to say that Indian Capital Markets are thumbing a nose at short-term flows from India oriented FII investors at these high levels (FII also took positions in January to INR 450 B) it is foolhardy to stop the market to its 5400 levels as the underlying fundamnetals have not changed for India despite the statistics.

Yields are likely to stay below 8% and the standoff ith the RBI trying to absorb more on the existing 10 Y bonds turned out to be till only an absorption of INR 900 B on the 10 Y bond released in November, now having gone for the new 10 Y paper with a coupon of 8.15% Traded vbolumes in the G-Sec market doubled according to a DNA report

Also seemingly RBI is still conducting OMOs to enhance liquidity and the new Government borrowing programme is as much a challenge as ever despite the liquidity conditions being better. That hoever means the Rupee will start trending up firmly after Monday again keeping the impending correction in equities away but this week may trade weaker esp today’s continuation from yesterday’s Dollar rally as the Euro gets extinguished again overnight.

The India PM Report – S&P forces the blues on to India

English: Prime Minister Manmohan Singh in the ...
English: Prime Minister Manmohan Singh in the Opening Plenary – Resillient india: 25 years of Economic and Social Progress. Participants captured during the World Economic Forum’s India Economic Summit 2009 held in New Delhi, 8-10 November 2009. (Photo credit: Wikipedia)

India’s first risk on rally in a long time has probably been nipped in the bud effectively by the S&P announcements ahead of the IIP data for what is likely the worst quarter for the Indian Economy Credit Suisse joins us in suggesting June’s numbers would not be good but that the next few months are unlikely to be as bad as Pranab steps out to Raisina Hill from the Congress stable and Manmohan Singh itches to take control and bring in a 1 Tln worth of projects back in the reckoning

The Rupee will suffer all week and thus equities will have to stay away from tracking the upside they had started on in the morning earlier as S&P gets ready to probably convert the negative outlook into a lasting downgrade that takes India below BBB- It won’ t be the first time S&P has pre- empted a downgrade based on the last of a string of bad results for the Indian Economy as it also holds a unregulated negative bias and wants to play catch up with other global downgrades more than review the reasons set in the outlook for a downgrade/upgrade. Brazil and Russia are both at BBB after frequent downgrade. Brazil has cut interest rates 6- times since August 2011 and GDP is still contracting as of June 2012. If the downgrade does not happen it would be because indian liquidity problem long solved has taken interest rates to a low of 8.1% and after a rate cut this weekend the interest rates would trend down below 8% before growth also responds. The problems of the CAD and the Fisc have hardly been solved but are unlikely to see any deterioration and political inaction is unlikely to take our costs or the fiscal and current deficit to any worse levels. For Fiscal 2013 we would repair the deficits to at least 5.5% and 3.5% despite the political inaction.  The correction of the currency to 56+ levels factors in the current deficit led correction and from here fiscal measures like a n increase of more than 10% in Petrol/Gasoline prices at the pump that take care of some of the Oil import led creeps on to fiscal discipline

Fixed income Report: O India! Is that how it will beeee…!

Indian yields settled down to 8.5% comfortably after a run on the Indian bonds brought them back above 8.5%

Does it have an hackney licence? Parked outsid...
Does it have an hackney licence? Parked outside Rolts Garden Centre, Clacton Road, Elmstead Market, this is a Bajaj RE three wheeled passenger carrier. Back in its native India, they are used as taxis. (Photo credit: Wikipedia)

when the Dollar ran up a big 1% wall and kept the Euro from crashing in Indian trades. The recovery in rate sensitives may now have a stronger reason to yield to Export heavy businesses like Bajaj Auto and Infosys but whatever be your sectoral poison, the Indian markets will accept all inflows and the inflows will keep getting stronnger from these levels in the equities market.

And though no one would bet on the Rupee’s recovery, the RBI would come in only once and thus that currency equation remains weak for us under

Bajaj auto rickshaws in Adama, Ethiopia.
Bajaj auto rickshaws in Adama, Ethiopia. (Photo credit: Wikipedia)

pressure from hot money as always. Asia leads global recovery and in the Asian recovery, India leads from the front followed by China and its ASEAN friends with Chinese investment

The Euro unfortunately complicates india’s still effectively Dollar pegged currency as it wants to protect the interest of Exporters dependent on Price for European demand for indian goods for reasons best known to India’s specific non Capex led dependence on Exports.

The import basket continues to offer super deals to aid the india inflation story and that has definitely eased the pressure on policy planners. But trading whipsaws keep India inc busy rather than new business paradigms. Facebook’s $104 bln IPO or Piramal’s INR 35 bln purchase of Decision Resources Grp become easier to appreciate for predominantly consumption Economies in the USA than for the Indian palate. 

Godrej gets a Temasek vote of confidence

Baytree’s investment into Godrej consumer underlines the long pending second line of investments to be made by the Asian SWF in India and other growing economies of the region.

Godrej is issuing 10% equity or 16.7 mln shares in a preferential allotment to the Baytree arm of Temasek at a good $8.2 price or less than $6.30 if you consider Indian rupeee’s expected levels of INR 65 to the Dollar $$) The equity makes Temasek a 4.9% investor in GCPL, Godrej Consumer. The new Rupee 1.00 par value shares will help the company fund and stablise their acquisitions in hair dye maker Cosmetica in Chile and last year’s acquisition of African hair care firm Darling.

Cosmetica for example cost GCPL a hefty INR 10.8 bln for its $36 mln turnover but will add INR 2 bln in profits

Temasek Holdings
Image via Wikipedia

every year after the acquisition is completed. African Darling is thru one phase of marger integration as per Adi Godrej and likely to complete integration by 2013. GCPL grew revenues at 36% from December 2010 profit growing faster to INR 1.67 bln for the entire company growin g12% volumes in the Indian business

Adi Godrej’s interview in today’s DNA is available here

The company has acquired domestic brands like Genteel and Swastik, haiir color Rapidol and accesories Kiny in South Africa as well as Tura in Nigeria and an insecticide company, Megasari in Indonesia

English: Adi Godrej at WIEF
Image via Wikipedia

The company has made a comeback with its pure soaps in India, growing volumes in soaps at 18% in the latest quarter and Magasari’s innovation will likely be introduced to compete with Good Knight in India. Godrej also likes to talk about its 1-2% R&SD spend and may want to grow the advertising on its brands in line its new mores , probably for its proefessional hair brands in which it has increased spends and M&A purchases.

While Malaysian Khazanah has just changed its charter from a Energy rich SWF to a diversified fund and may be more interested in smaller/monopoly plays in smaller Indo China economies, Temasek continues to farm the big money in China, Singapore and India.

Korea will probably make its own surplus SWF investments but still needs some inward interest from other SWF funds while india’s Top 20 in the Private Sector have been a matter of considerable Interest for Temasek since 1999.

The use of so many subsidiary vehicles for Temasek however incl Cedar , Baytree and directly as well as the bigger sibling in GIC is likely to make governance complex however for the coming generations of investment from Temasek as well.

Playing on India’s FX rate? RBI is monitoring your treasury again!

English: Diagram of triangular arbitrage in th...
Image via Wikipedia

In a ‘blow’ to liberalisation as old as old wives tales from Delhi ki bhatti, RBI let out a warning from its bag as old hands from Foreign bank desks set out to build treasury positions in Rupee with out Import / Export obligations on behalf of compoany treasuries throughout the country. Right now it may be simpler derivatives, even forwards and cash to play on the weakness in the rupee as the finite returns have quite an attraction for corporate treasuries wilfully blocked from Money maret lending to banks or excessive ticketing in money market mutual funds.

the citi scam of 2010 used such monies thru personal accounts of the bankers concerned in the Equity Capital Markets segment


Business Standard
 via moneycontrol.com

The rupee has depreciated nearly 16 percent in 2011 against the U.S. dollar.

“RBI was aware that many foreign banks were encouraging speculation in the market. But it could not take any action as most of these trades were done offshore outside its regulatory purview. There was a meeting last month where RBI issued oral warning to some of these banks,” a source privy to the discussions with the regulator, told the paper.

Most of these trades were done taking advantage of the difference between the forward premium rate in India and the offshore non-deliverable forward market rates, the report said.

The RBI, on December 15, reduced the net overnight open position limit (NOOPL) of authorised dealers in the foreign exchange market with immediate effect, potentially reducing capacity of market participants for taking trading positions.

Food and Fertiliser Subsidies, No FDI, Oil bill and state elections

Indian Rupee Symbol

Banking and Infra dominated Nifty and Sensex was shocked into its monthly / quarterly ‘uprising’ from food and fertiliser stocks as fertiliser subsidies are intact in run up to the late yet dull and desperate Budget Report for March 15, 2012

RBI is under pressure again as MOFCOM forces all loss of FDI on PE rules regarding options to selll back to promoters. Such rin built options are attributed to 9 out of 10 FDI deals and are strongly objected to by the regulator and banned since September 2011. RBI insists such exposure with sell back options be treated as loans

Meanwhile the Aviation auditor’s report singled out the cash strapped airlibnes for “glaring deficiencies” in the safety standards was not a CSI style water borne success in destroying the sector. Thence the watchdog has changed chameleonic colors to put profitable indigo in the dock for “dancing around” with the rules

The UIDAI meanwhile has no hope for resurgence being out of funding and at danger of being chopped off in the middle of implementation again as budget parleys bring back other ministry’s demands for a parallel similar scheme out of various single data registers like the central pension organisations and the tax men The Oil bill has become hard to pay even otherwise with reserves accounted by Corp India’s money markets splurge abroad.

Kissan cards could get alignment as financial inclusion vehicles also counted as debit cards represeing a deposit account giving banking access to the 100 mln card holders. SUUTI will continue to leverage its assets “to keep liquidity for redemptions” and no other leveraging is planned says Finance Secy ont he tube ahead of budget. Also though unrelated to the budget only 7 out of 10 billionaires survived 2011 according to market cap recomputations by the “ETIG”

While the Rs 1 Tln extra borrowing ( announced 992 bln ) may not fill more than ordinary expenses,

200 px
Image via Wikipedia

without buy backs swallowed by State PSUs, the spending of Rs 1.5 Tln on food subsidies already made this year and the new 1.6 Tln on energy with INR 475 bln planned for ONGC and a INR 100 bln for the rest of the producers  leaves another 1 Tln hole in governance even as Mamta stays centerstage ahead of elections in NaMo and BSP ridden UK/UP twith Punjab Manipur and Goa. UP elections will go on thru February.

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

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

Infrastructure improvements
Image by Scottish Government via Flickr

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

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

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

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

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

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

Is Orchid underestimating the loss? No..could be a good pick

Markets have beaten Orchid Chem to a pulp down 12% as investors and traders think that the new $100 mln raised though prudent, paying off FCCB and lesser than the original loan plus interest is going to be a big loss for Orchid. The Rupee is in a downtrend from 54 now to likely a number above 60 which will reflect in MTM losses and increasing rupee payments on the balance sheet. However, with consistent dollar revenues, Orchid could well balance any MTM losses and Gains on a quarter to quarter basis as both sides of the Balance sheet are fully covered in exposure with $100mln of exports each quarter at avery conservative basis (in a stressed scenario)

A State sponsored SWF

Bharat Heavy Electricals Limited
Image via Wikipedia

While the planning commission has apparently detailed all sector expenditure till now, the forex crisis is likely to continue for the state as the Indian rupee looks for levels like 65 and 72 while hanging on to 50 rupee levels.

India’s 117 bln deficit ( for the first eight months) structural disconnects from the global scenario and the inability of monetisation as a tstrategy to fill shortfalls in even a single head of expenditure means that the government is trying everything in the book to avoid the fisc crossing 5.4-5.5% against a target of 4.6% Excess expenditure on food and fertiliser subsidies amount to $10 bln by itself, and the bill goes on to include many other subsidies incl the one on energy (fuels) Stae Electricity Boards and infrastructure providers like BHEL have long employed barter in economic trade domestically and internationally as well as sale and lease back. States are running higher interest bearing $1.5 bln and more of bonds to pay for their deficit this year

The impact on our forex reserves of $310 bln ( Currency reserves are more than 90% of the reserves) can easily be imagined and thuis automatically there is more pressure on the rupee to go down rather as warranterd by the transactions required much like any of the midcaps trading in our own market with hardly 1% volume in traded shares

Bombay High, South Field. Undersea pipelines c...
Image via Wikipedia

All the above reasons cannot preclude one from using some of those reserves for the state sponsored infrastructure debt fund and thus the SWF india still does not own. Those investments will fill critical gaps in Indi’s social and physical infrastructure and are a required head for planners to cement and excute in the period till 2017. The fiscal deficit in the mean time will be funded by such interesting propositions as cross ownership of equity of PSE already employed extensively in traditionally developed economies of Europe and unlikely to cause much more discomfort than having state enterprise managements on their toes. even if ONGC, SAIL and BHEL are taken first and buybacks in COal India also considered we will more than cross the over spend on food and fertiliser subsidies and reduce the burden on OMCs However PSEs might want to wait to find like minded PSEs for cross holdings like the OMCs int he same sector with ONGC and if such patchwork can be arranged in the next 4-6 weeks, I daresay people would be willing to wait. NMDC already employs cross holdings ina  lot of erstwhile mining companies and the plan for buybacks and cross ownership is as old as the concept of BRIC economies

Happy Thursdays! East is East?

NINE NEW RUPEES IN A ROW
Image by Michael Francis McCarthy via Flickr

RBI is unlikely to post extra liquidity except thru 9% auctions to buy bonds at their window weekly. There will be no CRR cut, non food inflation expected to trudge down to negate everything else and the rupee expected to walk out of the hole it dug itself. Funny thing is, all of this is going to happen in the rest o f December and then the next Rupee level ( ML drives a 58 minimum) sets into view at the far end of the scope.

ECB/FCCB failures if any unsung ones yet, could in the meantime drive rupee deeper into its first hole, On this golf course hole Index ( indicating depth/difficulty of hole) increases steeply with each putt. Thus, no putt, no hole! That means no FDI, no retail, no aviation, no more ethan two strategic investors for Kingfisher, AND NO BUYING TILL THE INDICES BOTTOM OUT! stay away and eat healthy in the holidays! FCCB items have been added in a new post timestamped concurrently

The reforms have hit a wall. And no Wall street journal cameo can undo that. Livemint.com, ET and advantages.us do not matter in the larger scheme of the writing having been writ on the wall, the pen moves on to spoil more walls for others. FT’s caught on to its weaknesses in understanding India, it pushes Indonesia for Indian government to realise blah blah blah!  Indonesia’s got another crash coming of its own making as the Coal situation worldwide is causing serious powerburn. Indian rice is replacing Thai contracts in Philippines and Indonesia as the floods in Thai shut down the economy. Japan has not recovered yet. Korea and Taiwan doing well right now are watching out for the big wall once Chinese slowdown ripples up to the coast.

Inflation figues would be updated here as they appear. Fuel is still 15.5% Food inflation a sharp ciliff from 8% last week to 6.6% and Primary articles ( non food + basic + food) at 6.92% Good show! SIAM has updated November sales to 171,000 units from 159k last month

 

India Bond Impact (Fixed Income report): RBI purchases ‘ominous’ to another 9% bout

stewart, mena, SCOTT?!Though a late market rally on Friday has taken away the gleam of an easy short for Monday, short covering in the last hour may also add to those planning to cap the trading range with a few swats with the bat.

In bonds however, the easing of yields to 8.75% is not so certain either as RBI’s bond buying program was an even closer 8.69% in yield in the buying of nearly $1.5 bln yesterday. RBI rates are 1% lower by channel defined even though RBI charges a 50 bp spread on its MSP sales in the middle of the channel. the yields are closer to last weeks sales Auction by RBI which were at 8.94% and so the yields may move back to that near 9% mark again before the Rupee tops out.

Smart rally in the rupee though, again speedingup the trend to a big spike, leaving you with less doubt that it will return to lower marks sooner than later. consolidation above 51.50 levels near 51 would help people believing the rupee lost mire than it deserved. Remittancees likely to be heavier through 2012 were heavier only in geographies like MENA from our labor exports and not the managerial variety yet ( if it can be distinguished)

Inflation cannot get better, however China actually got it improved to 4.5% before it eased rates and put the brakes off, risk on stride into the Economy, lasting till December after throttling started in June itself.

Rupee Impact: Rupee Turnaround

While we have already discussed and the story of Forex losses for Indian corporates is ongoing given the 15% correction in Rupee to its lowest levels in November alone, the rupee has already started its climb back, not as a intra day reaction but as a secular move as governments realise the fragility of the Euro albeitly slowly, and the Europeans battle with an extended low period for manufacturing

The resulting Euro weakness eases the pressure on

One rupee — Obverse
Image via Wikipedia

the rupee which should anyway never have been an issue to dollar’s supremacy in the last 3 months whence despite low trade flows it corrected under sharp shorting by traders as the unlikeliness of fiscal deficit coming near targets or trade and revenue deficits being under control was made clear here.

The Dollar may continue strongly however but election years may limit the trend for America as well despite the easing of US oil supply as WTI instead of slimming prices is on a b inge to catch up with Brent more than halfway as prices converge

Indian IT is an immediate loser in the resulting investment interests in India as gfrowth in retail and infrastructure takes center stage Consumer Discretionary businesses may be excluded bu tthe Indian consumption story is doing great esp as more urban influencers dedicate a higher 20%-50% of their disposable spend to entertainment and “going out”, eating out at an all time high despite the high food inflation figures Of course supermarket outings continue to masquerade as non TV entertainment for most couples

IMG_0979 - 2011-06-27 at 20-24-06
Image by KiltBear via Flickr

Predilections: The exploding turkey

one rupee
Image by balusss via Flickr

The market sentiment today after the Euro’s integration was exposed to the public as nothing but  a rear guard defense throughout the coming decade, was a perilous wait and watch for any buyers with the indices giving in to another one-sided move after 8 days of unguarded hostility, broken for a brief lull yesterday.  The market also sees everyone else as unwelcome intrusion, just that there are sellers in both equities and currency markets , not to forget bond markets who still like to see the government’s face on the other side before stopping the spree.

Whether in currency markets stemming the Yuan rise or the Rupee breakdown, most would look at the woeful example in Europe and stay away from intervention as nothing good comes out of it eventually. However, the sellers are very clear in their actions and verbal speak that their selling is not based on fundamentals and they do not think that matters. Hence, given our unlimited patience and the propensity of going bankrupt by going shopping for Rupee or Dollar at the wrong time, we would stay away till things settle down. and now, the nifty after breaking 4700 down, may just swing back tomorrow for 5 minutes before staying down till Europe realises how much it is left with after the margin calls and how much it has to print. Unless China gets a new breeds of FIIs. Though, none of the money that enters India typically leaves ( After profit booking, more is inside than it is outside in this entire 2011 spectacle)

Not to say that the markets can’t rise vertically after they do end the fall, but as the exploding turkey in the oven, it is hardly going to be championship fare when this selling gets over. The prognosis therefore is that the markets will stay dull enough and you can wait even more before you do start buying. And, right now shorting any of these would be committing hara-kiri, in equities or in currency As even newly converted India bull JP Morgan mentions, we are still overweight on cash.

Sector wise, no one who is overweight on Comms can be without skeletons to hide and I would not suggest going overweight on Comms or tech. Except that Airtel scrip, which has a lot more going for it too and a sthe only player with muscle,  in its main markets, it will turn out well. I hope my readers have been buying on fundamentals, as there are a few stars out there . Also, apart from the intermittent interest in consumer staples and healthcare, sectorally, the market does not get into a secular upswing till the best sector there is i.e. infrastructure and banking, get up and get going again

Just getting the morning coffee to work..

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