India Morning Report: Markets listless orphaned by a Superbowl

Superbowl sold tickets for cheap in the snow

Asian Markets are closed today and lack of Foreign investor interest on Monday Morning leaves an India open totally listless at 6100 levels and falling again, struggling after a brief respite at 6050 last week. IDFC results were inconsequential along expected lines with no fresh disbursements in this financial year but the stock has only upside left at 93 levels where it closed last week post results as it remains the only empowered player not dependent on infra approvals and a fresh book of loans in the pipe likely. Loans continued to make a better ratio of all NII at the Bank as spreads showed up resilient despite a bad interest rate environment in the nine month period reported.  Retail interest aside, the stock will remain on Institutional buy lists for time to come. It’s large provisions also make it a great equity investment with the Provisions unlikely to be called and can always be reduced prudently. Non interest income remains slave to PE principal and proprietary trading business

The Rupee starts the weak on such rumors where the deciding NDF market actually feeding on the panic mindset in low trading volumes and the onshore markets trade down but only for the morning after as the Superbowl even that draws a 200 mln audience in the US and around the world has ended minutes ago and investors will be back to a market fairly under priced by the recent pitai (hustle-bustle/buffeting not to be confused with the sage of Omaha’s investing interest)  Bank Rate will remain higher for the majority of 2014 , the prospect of rate cuts being pushed back and there being no prospects of improved transmission of monetary policy with yields pushing for higher dollar depreciation despite the RBI efforts to clamp liquidity which has time and again proved more amenable to intuitive policy than a counter intuitive rate hike move to tackle measures outside Central Bank policy. However corporates borrowing in ECB might actually be able to break the ice in terms of getting older level low rates and break the impasse eventually with increased investments (starting to flow in consumption sectors) and RBI , maintaining a new inflation hawk stance would likely have to hike rats further after the 200 Marginal channel cation and announce a veritable change in stance on rates first.

REC had started up Friday and Powergrid should join in after mi d-day if the sentiment indeed looks up. The Equity rally in the Global Markets hit a big snag in January and that is holding markets back awaiting  a confirmation of investor interest with FDI having exited Emerging markets like Turkey, Mexico, Argentina and Indonesia in a hurry with Turkey coming in midweek last to raise rates by 4% to near 12%. Goldman Sachs is in trouble again having started their own EM investments in losses having chosen MINT’s obfuscated markets and a deep and dead in the water China over India’s liquidity given the cross winds. The Rand(South Africa)  also closed above 11 to the Dollar for the first time in January.

However Emerging markets sentiment is likely to get into it in a couple of quarters from here and India will remain one of the best performing destinations having been unaffected in the post taper trade in January if it maintains 6100 levels or at least stays above 6000 levels

PNB scored great results having come in counter cyclically on raising provisions in a known strategy and NPAs under control in a rapidly deteriorating market sentiment for Banks shoring up investors to its ferry/rafters and trades 10% higher at 550 levels still a strong buy. Banknifty starts the week near a low at 10150 and is good for the trade up but one should be watchful with ugly quotes (in both the 10000 and 10500 series) in the bid auction market still holding an initiating trader to ransom with option writers playing ultra safe.

IT stocks are still overbought and Infy should retrace 3600 levels and even TCS should come down to realistic levels (but already at 2200 levels) as the IT/Outsourcing axis is not coming out as the GDP’s saviour this time either. Volatility levels are hardly material at 16 in the current rally agains 14 in the previous segment in December ’13

Energy stocks should start the climb back as and when markets stabilise, GAIL having  started the year smartly. Glenmark and Cipla/Lupin lead the Pharma rally that continues despite an ugly breakdown in Ranbaxy and Sun Pharma. We still do not believe in a robust Arvind Ltd comeback on USPA and other new limited franchises inroduced by the team since 2011. Tata Global Beverages remains a hold but the magic is still in 100% go it alone investments in India ( which are still a far cry from the carte blanche leading to exchange rate breakdowns in LatAm and SE Asia in recent EM history) Aurobindo Pharma on results and Lupin on announcements today provide good portolio picks along with Glenmark which has only $500 mln in overseas debt and among companies tapping a continuing generic opportunity in 2014 with a new pipeline

Interest in the IPL in the meantime continues strong esp evincing interest from global players in the playing XI and a fresh re-auction for all the 8 franchises picking up steam soon after the spectrum auction closes. ING and OBC related good Q3 tales as were also employing covering strategies but have not started lending/stopped losing on NPAs. Yes Bank may not fall back to 280 levels and accumulation is advised at current 300 levels. The BOI /BOB story broke down in January itself as we foretold with both banks still addding NPAs in droves. ICICI Bank’s INR 45 Bln ( including INR 30 Bln pie in restructuring) included the bank can survive the pressures with relative ease having also been proactive on definitions than the PSU penchant for playing it by the ear and losing continuously losing investor confidence and investor money as far as its favorite proprietary traders are concerned who lose another constituency in an unplanned bull attack with construction stocks Dlf and unitech still in a free fall after the ill advised run

Energy Markets react positively Midday

Gas stocks reacted positively as Petronet LNG produce became free to sell to industrial users and IGL and other domestic distributors esp IGL getting commitments to cheaper Domestic LNG in the new pricing regime. This also means domestic CNG in all markets including Mumbai where already 100% domestic gas was supplied prices of CNG and PNG were reduced by 30% and 20% while increasing IGL margins. Petronet imports LNG and will no longer be getting custom from IGL which Delhi used upto 33% imported gas

The move was a n expected one with a new Minister coming back (Moily ) in a sensitive election year . Moily is also expected to facilitate large project clearances with changes at th e Ministry of Environment (EPA Act bottlenecks)

GAIL shares the good news as renewed pressures on its subsidy costs will likely subside as it supplies to city gas companies and others at new revised rates and the policy is deemed stable after LPG quotas to residences have increased to 12 cylinders per year and gas TX likely to increase volumes with good results reported Thursday

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

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

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

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

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

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

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

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

 

India Morning Report: Another “Happy Thursday!” for the markets

Bajaj Auto was the biggest story as it expanded margins more than 1.5% to above 21%, putting behind shallow stories of losing share that have mostly affected Hero Motocorp and changed the Automobiles trade as four-wheelers dulled down in Q2 and Q3 to kill the recovery India Inc was to prescribe for the Economy.(we promised to shutout the debt deal bingo and we did, the compromise anemic as ever and the Taper posted now for post Q2 2014)

Mindtree also screeched up the noise with better margins but the coming Holiday Season quarter is likely to ascribe a sea change between Bajaj Auto and Mindtree in sales and bottomline performance

HCL Tech however completely the IT revival story with a big bang jump in top and bottomline and keeps the defensives on the speculative list for the rest of Earnings season, l likely to jump further from the 60% rise on the bourses year to date(Udate: HCLT really milked the Rupee for a EBIT nearing 24%)

Banks will remain dull and Indusind may indeed be proscribed, but with not many stuck on to bank scrips any short in banking stocks is likely to be not more than pennies

In case investors are kept away from the facts yet, most of the good companies have performed in duble digit increases in topline and profits have been strong, likely to not just outperform but fuel the rally. Bajaj Auto broke the $1 Bln quarter mark nearly and will do so comprehensively in the next two quarters itself with a INR 51 Bln topline and gross proifts at 21% plus margins

Mindtree’s $124 mln and toughening of pipelines to nearly $150 mln is good as they hibernate for the winter, Infy having started off with 5 large deal wins and TCS getting back into New Jersey’s Big Pharma offices plus another Bank/FI even as Data Centers popped up on everyone’s radars especially in Europe and HCL’s growth in the segment will be good to follow for other IT satraps If HCL does not grow the IMS business (Data Centers and Helpdesk) it is likely another stumble ahead for Indian substitution services

DCB and Heidelberg both matched up to a INR  3 Bln topline and have already been traded for coming out of a hole, in terms of performance

The Banknifty in fact is due for a buy in at 10200 levels with great bank results leading the way for India having proved itself in the quarter and the Rupee gets blamed for the expanding margins, taking the currency down again to 63 levels before it comes back and yields stabilise lower after the policy turn. MSF rates will continue lower to 8.5% mark eventually if Rajan does stick to the recommended 7.50% repo rates level and does not increase it again for the 6.5% bears in wPI

Hindi on whimsy: Akasmat(Sudden, equally apt in both up and down moves); utavala na hona(to not look too eager)

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

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

 

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

 

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

 

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

 

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

 

 

 

 

 

India Morning Report: Infosys still chooses to report into the weekend

One of the Software Development Blocks of Info...
One of the Software Development Blocks of Infosys Technologies Ltd., Pune, India (Photo credit: Wikipedia)

 

After a big jump in pre-morning and post pre-open trading in Infosys, the scrip is registering ‘voters’ for the big positive result tomorrow. That it happens is the hope the rally prospects are living on as investors settle for the stable India an Asian investors nod into the markets after the heady May-September trades finally settled the issue of India being unique with a 25% depreciation of currency that has thence lost almost half its value in depreciation.

 

The Rupee will thus finally head to pre-60 levels and the Janet Yellen trade may push the markets further into rosy cheer, before a forced taper does tick in as Janet Yellen may still prove in a surprise for the markets. Yet, the news of the taper is fading away and US could remain overlevered to shelter its overlevered households and keep the consumption ticker running as inflation remains intuitively positive to growth. That could serve as example to India down the road though the comparison is still too wide off the mark except for specificities India shares with everyone (as usual)

 

Even as the Rupee moves back into stride, expected tomorrow an EBIT improvement at Infy and an expansion in guidance/rater as guidance has already been updated multiple times, a discouragement to those positing further muted guidance may still be required

 

The Bennett Coleman machine TOI mentions IIMs (and IITs, probably)  are facing employment pressures again , sneakily close to reports of net employment increases back at the IT offspring of India including Wipro, HCL and the MNC offices seeded here after a long success rate of the earlier growth phase. Accenture did break trend to show jump in consulting more than outsourcing revenue this time but outsourcing trends have been showing up everyone else again, seemingly the only strategy outside server management that has a direct proven impact on global profits

 

Yields jumped down still refusing to, but picking up real demand (hopefully) as the Rupee criss-crosses between 61.5 and 62.5 at an unnoticed fury of changing positional trades. The trades, still in ITC, Bharti, HDFC Bank, ICICI Bank, IDFC and probably YES as YES slides into 340-350 levels again for the results season starting tomorrow.

 

As noted, EMs like India, without the IT story per se are ready to take the year to a positive close esp. as the worst India could do is 4% growth

 

 

 

India Morning Report: Here comes 6000? and what the banks will do in 8.6% yield scenarios

Yes Bank
Yes Bank (Photo credit: magnusvk)

Apart from the unremediated concerns in the Fixed Income market, yesterday’s rally created an awareness of the potential inflow obvious to insiders earlier this year. i.e. Around the Globe, India remains the most attractive investment destination after being clamped on with the rest of the globe in recovery awaiting elections to be over here in policy action and growth parameters and local consumption and investment makes this story unique.

Infosys is also likely to deliver significant outperformance at the Q2 announcements a week later and interestinly, the markets are correcting Infy’s recent run up already to 3000 levels and that could mean one rally is due in October and even September saw 6148 based on the return of inflows.

Banks of course in the meanwhile are looking askance and a standoff with the Central Bank is in the works while Markets continue to worry about Banks other than PNB, BOI and the private Sector banks. Banks probably still look for opportunities with the currency not stabilised and may have to worry about increase in Deposit rates. The Bank Nifty churn would have been isolated easier if they had concentrated on shorting SBI which despite its distribution continues to spring a growing NPA basket every quarter instead of delivering on the retail growth and profitability they continue to tom-tom to any analyst who would spare time for management commentary

Considering that this 8.6% yield on the 10  year comes after banks got a whole Trillion and Half from non penal overnights at the Central Bank and NIMs are protected and increasing, it is quite likely a matter of concern es in the light of the Rupee strength that yields are wary of coming down

Penal rates and those new effective rates on the MSF may however still be withdrawn another inch or more on the October policy to bring the channel back to 100 bp. ( For details flip thru previous issues or ask us) PSU banks received another large Capital infusion yesterday to keep lending rates in check(SBI is funded separately)

Bajaj Auto and ITC probably continue their northward rally till the mid results change of weights while those looking for a correction in Tata Steel are likely to have given up now, while Tata Global investments may take off only after the company itself stakes out a minimum of 200 Starbucks stores ven as wholesale auctions improved pricing for India exports but output and hence export takeoff was lower

Pending infra projects are not going to take off in a hurry but 5900 levels should see both DIIs and FIIs buying and F&O interest has definitely moved up the range from 5900 to 100 &6300 than yesterday’s 5900 Call OI that signified markets ranged to 5900 levels on the upside. Gold and Silver are still negative. India and US in the meantime, the two strongest markets and recoveries continues to once again falter in Services PMI and thence composite PMI because of spending cuts

 

India Morning Report: A backward state card for Nomura, A Gross Margin push for Tata Steel

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

 

In what is probably the best cause of us investment bankers in this lackluster market for a lackluster Economy, Nomura Securities, took the sitting bull by the horns in an almost sleepy downgrade of Indianomics come Wednesday as markets opened to 57000 levels, positive inner rumblings in the Bank nifty and a new move in a new OTM opportunity in Infosys.

 

Almost seems like it was 2007 or 2008 once again depending on where you were and yes we are at the fag end of the India opportunity cycle where we have rid ourselves of all our lofty notions of infrastructure or credit growth and consumption is finally about to break down as job prospects are also at an all time low. capex however is not constrained as a lot of quality companies are growing their cash pile, not a shot in the dark but wrought on by the end of the downturn for many investment intensive businesses seen in this cycle and the Services sector dipping which has been the last port of call for the blues has been known to bounce back much better. For otherwise achieving Nomura’s new 5.5% target is going to be even more difficult. Bihar’s leaning to the uPA may provide stable government as well as a new cause for double digit economic improvements in the next edition of India Inc as we reach another anniversary of our independence.

 

Tata steel’s quarterly results are an even better segue way to India’s latest Morning trades. Th EBITDA has infact hit double digits and even after the corrections on the 90% profit improvement this quarter a 30% return on Domestic production of Steel in EBITDA is really creditable as the margins have indeed been saved on the year. You do see robustness returning to the sector as a whole with both Hindalco and Tata Steel not just surviving the sharp negative eigenvalues for the metals sector globally but showing that India can survive as the biggest players left in the huge resource industries which could otherwise be surmised to be left to India as the unwilling last man holding the Bowl in Steel and later in Shale, our last foreign forays.

 

Gold duties will have a desired effect as controls deliver immediate results to Indian policymakers in the amorphous International borders and that is perhaps an uncomfortable reminder to us to  even consider a return to strong controls and slip out of the “liberalised” reforms on offer from on of the two largest nation states out there.  we just have to keep Gold imports to 50 tonnes over each of the remaining 8 months to make the new Finance Ministers’ targets for the metal at 800 MT this year. Recovery in Global steel is likely to continue and Tata Steel is a very good investment with continuing margin safety in India, more capacities and better $50 EBITDA realisations in Europe as well, an unexpected Bonanza.

 

The coming move in Infosys will sign off on the creamy 10% extra in profits to it exporters after having absorbed inane inefficiencies and market volatility in the first round of depreciation of 10% in June as the rupee gets ready for another ride from 61.5 levels to 65 near the oil purchase date for India’s importers this month

 

Unfortunately after the great start at 895 for ICICi, 1150 for Axis and 313 for YES Bank, the secttoral index has again retreated to near 10k levels waiting for the inevitable jump but foregoing the move for today till another robust oportunity presents itself for a material move.

 

 

 

India Morning Report: As we said it, so did the market bid it

The Rupee found no buyers again at 57.70 and had no problem taking the bottom end of the new range at 58.75 today in the open stymieing buyers fromcoming back into equities. The run on bonds has added another $2 B odd in the week since as Bernanke’s announcement widely expected to bring in concrete plans pivots the markets worldwide, especially those already recognised as an island of value and ready for the QE withdrawals like in India.

 

As we said the lower volatility of Indian Fixed income markets especially after better liquidity in the month of may ensures that India markets are the first to be exit in debt but the investment stock for the country would only grow.

 

Equities maintain poise but idle lower after the weak Rupee triggers minor exits. The due noise on changing FDI laws however is unlikely to materialise before the General elections and any consequent optimism must also wait for tier 2 and detailed surveys bringing back the incumbent government’s chances of making it to UPA 3 though it is almost certain that Modi will get extra votes for BJP for being an able governor.

 

The stable range and the ready ‘stock’ of short positions on the indices and banks enables a stable return in this series  despite global volatility receding. Trades on Infy as mentioned on CNBC18 are pretty safe with puts of 2300 (till expiry) and maybe 2400 ( for a week) But I would say sold calls on 5800 are ready to be taken out and should recede back immediately by end of day short calls on 5900 are already the ceiling of good straddles in the series. 595 should also get more positions and risk/greed might also make a run on the 5850 calls possible instead of a complete exit from 5800 series. Afternoon turns are usually a great read with Aptart India on both CNBC18 and ETNow and Mitesh Thakkar and CK (ET Now)

 

Value of Indian rupee as per dollar & pound (1...
Value of Indian rupee as per dollar & pound (1980-2005) (Photo credit: Wikipedia)

 

Angel broking like SS (CnBC 18 )  continues to show signs of smaller capitalised players’ frustration with Bulls’ holding the markets bu t there are enough players to not make this a local vs FII bokerage war as at this rally cusp DIIs have started buying. SS in the meantime has moved on to better trades this week with bullish picks back in a majority opinion reducing rsk for small traders. IDFC had  anice breakout on rumors of its banking application and outside banks Bharti, ITC and the banks remain strong. Mitesh Thakkar’s strong rush for Bajaj Auto is something that jibes well with us as well after M&M. Late chores made this report a ittle delayed to remember the other interesting morning pre open and 8 am jabber. Also the OMC moves completely sdestepped us and we would still think they are great buys at new prices. And the

 

 

 

India Morning Report: Infy comeback not happy for markets, “Mind the Gap” and Rupee is still down

Don’t get me wrong Mr Murthy, you have been welcomed back except by your family at Catamaran, but that India is welcoming the IT story comeback of the decade to only 2 paise jump on the rupee itself goes volumes to say in a market shunning the banking sector after changes in provisioning introduced last week. Provisions aside, Credit growth to industry ( non food credit) hitherto most subdued in April, still grew more than 15% and coupled with global jump in Business investments except in Japan and Europe, it is still more likely that apart from extraneous bull fittings like “in the face of elections” ( middle pages of ET) growth jumps in the second half of the fiscal will lead India Inc to higher pegs of growth and make this snafu around 6000 a suckers bet for bears globally. markets opened in the positive but as today’s news was concentrated around Infy, failed to keep the momentum of the pre open after a month end weekend

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

Before I go back to Infosys and rupee machined external debt obligations of midcaps, Sun Pharma has indeed tipped off its highs and along with banks completes the reasons why there is no jump desite widely accepted as having bottomed at 6000 on the Nifty and in fact below 20,000 on the Sensex. Old hands hold steady but the defensives are well scattered in underperforming categories led by Metals and the ever decreasing demand hit Autos led by Maruti or for that matter the ever neglected growth bid filling in for the halcyon days of IT as defensive at Biocon

GMR Infra’s INR 25 Bln revenues for the quarter were led again by a 2 in 3 contribution from aviation (DIAL) at more than INR 17.5 Bln but with both airports and highways making profits apart from the CERC guaranteed power subsidiaries, and debt in the main standalone company ( one assumes the results pertain only to that even in consolidated data) is much lower than could have stoked a bankruptcy hazard at a very healthy 3.04 against the allowed 5:1 for infracos. Thus, though Relinfra might have a bit of an expensive portfolio, GMR has stabilised in profit terms and locked out bad players like GVK and Lanco, with a segueway for quality and volume plays like JP Associates no longer required to mirror the flailing fortunes of DLF. Rel infra of course would try to sell each project in the portfolio on individual merits and may have better news to share as well down the line.

English: by Neville_S Uploaded to wiki by user...
English: by Neville_S Uploaded to wiki by user:nikkul http://flickr.com/photos/nsukhia/303927860/sizes/o/ (Photo credit: Wikipedia)

On Infy again, Rohan may not shine as EA to NRNM, Infy may no longr define Indian market’s fortunes but the nudge up to 2500+ on Monday morning has definitely rerated the stock back into some portfolios.

Infosys slide not Kamath “idli-chai” vs. Murthy’s “flash drive IT”

I agree too despite his own protestations that it would be wrong to put the finger on KV Kamath which might make the coffee tables at the Infy campus not in “My-eye-sore” or other satellite cities but the one at Hosur (part of my-eye-sore ;0) One thing of note highlighted much later in hindsight could be that KVK had a globalisation experience of a very Indian company in management values and markets while NRNM has the outward-in outlook of an outsourced engineer/ almost NRI like that ie entirely different. India must realise from its last two decades of exposure to both sides that global mores of management and indian ones despite a shared management education spine and an equal distaste for ‘ajurveda’ or failed homegrown remedies, differ in values and attitudes except some of that ‘jugaad’ in ‘not so big’ money situations.

It was this gap that probably KVKamath found too abstract to jump if indeed he tried to take an active role in the situation at Infosys. Also, though much of the morning’s contributions from TV and media have been rather objective segueways into the first quarter of reporting by a reconstructed Infosys savoury dish in Q1 of the fiscal, not much is expected immediately and this upside is limited.  Annuity business of $21 Bln is however intact from global businesses like Big  four banks or leading global brands that continue to find Indian management equity compelling for “outsourcing” repetitive tasks that do not require expensive compensation strategy key. Cognizant thus will be difficult to displace in the high volumes game infy has struggled to avoid.

On the more important topic of Cricket and the general elections in that order, Srinivasan must be joined by Dhoni in resigning from a few of the intertwined job responsibiities sooner than later and yesterday’s farce is likely not the end of the story of IPL gone wrong if indeed the Special GBM of the non profit is called. Similarily the sub 5% fiscal deficit performance may not bringing the flagging fortunes of INC(Indian National Congressas is registered with the EC) any required relief but we can probably look to a left included coalition at Delhi in the 3rd edition of the UPA if we indeed are able to fend off the extreme politics of Gujarat from the national scene. The more cosmopolitan under 40 population normally wronged for not participating in elections may infact shun the ideology ‘ridden’ politics of the far right in time if goaded properly and yet save the next 5 years of the India Inc canvas

Mid Caps like Opto and Orchid seem to be targeted by those that could not recover the infra vector gains from their speculative tips in HDIL, Orbit and even DLF consruction flats and despite the big jump in equity and convertibles from European investors last year or two Indian banks, infracos and pharma companies will have a much easier time this time around in managing ECB receivables during this continuing hammer down trade correction on the rupee likely stage managed to change into 2014 order of magnitude of purchases and export realisations and likely to last all of june as CPI still has not trended down and no seen imovement in supply chain efficiencies despite AAdhaar and the Food security Bill

India Morning Report: Breakdown trades in progress, don’t get fooled again

An HDFC Bank Branch in Hyderabad
An HDFC Bank Branch in Hyderabad (Photo credit: Wikipedia)

5500 is not holding. It may be FIIs affected by Infosys, it may be that those who rerated Infosys already have looked not so hot on India inc despite replacements like ITC and Bharti that signify winning consumer propositions on a near global scale while brokerages still chasing the tech dream led by Morgan Stanley with an EPS target of 185 for Infosys in FY14 are bound to be bad examples for traders and investors not stopping the exit of the weak. JPMorgan and Credit Suisse have rerated Infy at long last to 2700 and 2450 and the stock may well provide buying opportunities at 1950 again thus ensuring a good index momentum to the downside

The other reasons for worrying about India Inc showed us that only a rerating of positive expectations will continue to happen in the post crisis world and India market returns and economic performance remain exemplars in the new investing heirarchy while China’s struggles continue to define Asia/India. Nominal GDP and GDP at Factor Cost have grown 6.0% (12.5% excluding inflation) and 5% respectively according to the Advance GDP report. The fiscal gap will bring discussion on cyclic impact of exits which should not be significant and as Gold falls on thru in India as well, to below 28k, likely pressure on imports will be found to be reduced but both the arguments are inane and fueled by the ir relation to the fiscal gap in basic math but unordained by any data linking them thru the years when fiscal balance and non exits have again become primary reasons for India to continue recovery. Today’s trades seem to signify a 25k level for gold and 42-43k for Silver for 10grams / 1 kg respectively

Historically this should also be the last negative growth in indian non food bank credit growth at 12% as Deposit growth remains strong enough but that is a challenge that banks have to perform to and while HDFC Bank and ICICI Bank deliver , PSU banks will struggle with higher NPAs till they reach a mean 10% of the PSU bank assets apart from SBI and PNB which are expected to have been done with systemised NPA growth

One is probably looking at more dealmaking in FY14 as well though bigger M&A is not as likely, with PE likely to find a string of deals to match the fresh deal flow in March from Kotak Bank (Temasek/GIC subsidiary) to others in aviation and likely in NBFC and other services businesses.

However back on market levels there is no stop after 5500 till 5350 and waiting in the markets again is unlikely to be worth it, especially with results season likely to be good for only large market caps and selected banks already on buying lists including Indusind, YES and Axis Bank where fresh foreign investment is still likely

India Morning Report: Infosys shows a lack of forebearance in a sack sack play

English: By Nikhil Kulkarni
English: By Nikhil Kulkarni (Photo credit: Wikipedia)

 

As expected, Infosys rerated the recovery rally with a 15% cut on open pushing thru a 1% increase in US and overall Dollar revenues and beat in Net profit based on other income offered as bait to speculators while the stock possibly returns to its #6 position in Nifty stocks based on Market Cap.

 

The market rally is intact though with a PCR at 0.93 hardly near enough after a smart move from 0.80 in less than a week. Axis Bank though is unlikely to be used by speculators to fill the coffers of the empty Nifty and a Bank Nifty run highly probably for a 1000 points after Indusind Bank reports on Monday.

 

Those looking for a 5650 cap for the Nifty may have been superceded in Nifty targets but for these results but with the PCR provisioning the momentum for earnings outperformers, once you factor out the movement of infosys alone fromthe index values it would still proceed to 5750 levels (ex infy, mail me if you are willing to do the exercise?) The Power NBFCs and the outstanding picks like ITC and IDFC are expected to outperform in business as well not unlike YES Bank and thus are likely to be chosen with ICICI Bank and HDFC Bank as bedrocks of India and Asia portfolios.

 

Critically though, India’s successes with damage control on key attributes of low low information sharing gets a boost with Infosys almost deciding to scupper guidance and India’s data engines will have to work on broader strokes for a long long time to come. Banking, Credit, Economic guidance or otherwise the India forebearance model is equally predicated on old Colonial forms of information blackouts in the public domain and the bedroom entrepreneurs of the country like it that way more than the failure of Bombay Club would have you believe. Granular data is in fact available on more counts in India than attention is given in the press but policy mechanisms and successes of ‘no crisis no new score’ strategies globally in any sphere ensure that the India dream lives along higher interest rates and a hindu rate of growth.

 

The US budget exercise on the other hand , in larger control of global Economic vicissitudes is underway despite the gridlock and with a barely $500 bln for Defence in the Budget proposal and $47.8 billion for State Department ( earlier read as the War Budget) while being part of the larger 2.5 to 1 cuts to revenue based $4 Tln spending cuts managed to increase focus to Asia. That unfortunately means large increase in Iraq, Afghanistan and Pakistan in turn showing the large gap in US understanding of Asia bigger than the wholesome ozone hole created by European Capital flows. The rest is too technical to imagine and should probably be appearing in bit and pieces in future India reports or economic discussion at advantages.us

 

JP Morgan reports when the sun comes up in the US later today probably cementing the big rally banks had in the quarter despite the changes in the mortgages refinance volumes. Derivatives clearing impact starts appearing in global banks in 2014 only as the war for granular bank regulation enters a predetermined longish rollback phase.

 

Contraction in Singapore this quarter (based on Advance GDP), followed by negative IIPs in Malaysia and Mexico are likely to cascade into 2014 after the rosy start post Christmas was wiped out in the vast Asian predilection for property growth as the be all and end all of the ‘organised economy’

 

Infosys destroys brand equity with 8 pawn gambit? Or Infosys lives dangerously?

 

Guidance is actually available in dollar terms rather transparently and infosys has again made a play for Brand infosys by pushing a too muted a guidance in a bid to allow it wiggle space in the client boardrooms and ask for high value business and try and keep its uniqueness intact.

 

Infosys has chosen margin impact in the current quarter in onsite wage increases folloing on increasing White male employment in the US and Europe geographies earlier.

 

Others in Indian IT have long given up, NASSCOM being under new management with MindTree CEO KK Natarajan taking over at its helm , and CTS and HCL looking for volume on negative margins. TCS is unlikely to follow transparency in similar terms when it mixes it up for the fourth estate and the investors next week and try to capitalise on what looks like a sub 20% margin for everyone else except TCS as infy is already down to an op profit of N 26Bln or 23% EBIT and HCL and probably Wipro are sure they don’t really want to push it beyond 15%, settling t a vastly improved 17% in the first case.

 

 

 

India Morning Report: And the market survives a cut to 5900

Tried and tested , yet new mechanisms of 2013

Of course, the markets could still decide to browbea

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

t the equities segment further from here despite the mild recovery at the end of the session. As of now my plans for going to Ahmedabad are on course and the indian Ph D programs are getting better lookie loos again with Ahmedabad “Management” ranked in the Top 100. More importantly for the markets, delivery based buying cannot be expected to ramp up in this rally as retail investors are not just stung by 2008 as journalists perceive or want to name the shroud, but are infinitely better placed by investing in inflationary spending than in equities for the future canvas.

Mutual Funds, Insurance and Bank savings still come next and pretty importantly yesterday’s negative IIP score and a near 11% CPI inflation clip ( more than 11% decidedly in urban areas, but thats just the trend) are unlikely to matter to this question of volumes. A slowdown in bank deposits could be an interesting quasi middle management at 100s of growing India corporates and IT investors could take to watching as it mirrors the real response to the production slowdown even as investment makes a faltering return to the Indian Economy and the Savings Investment gap recedes.

sinbadRevival of fortunes in steel seem to have hit an “early call” WALL a new block and tackle strategy likely to hit traders nah speculators in the F&O segment and though I normally desist but the morning call on JP Associates straddle buy invites my derisory attention by the spades. The JP Associates stock is unlikely to tank from 71-75 levels and if one expects action in the scrip in this series further it would be a clear positive, likely kicking off the pre budget mini rally instead of the rally we were going to have at the start of the series. Of course those promoting this market hiccup were the ones betting on fundamentals instead and thus calling off the big pre budget move.

Are Sun Pharma and TCS yet Defensives?

Much as Consumer goods led by HUL had been lumped in Defensives with Pharma, so also today while Pharma while awaiting the Domestic breakout remains defensive as a sector, stocks like Glenmark and Stride Arcolabs aren’t and Sun Pharma is probably unlikely  to last in the Defensives list too long (it ould not be shifted on account of Taro, however)

Similarily IT as a sector and TCS as a defensive remain sectoral strategies or more Big Pig strategies at the start of the macro uptrend where Trendlines can be drawn and in such moves as are in 2013, the stock probably would move out as a mainstream investment much like Infosys earlier. Either way those watching for a bottomed out markets are right in prognosing the comfort moves in stocks like TCS and Sun as a likely vote for no Bull run than the other way around and thus the to get cast in the same leagues as HUL, Sterlite and SESA which would be the Defensives the markets could ascribe. While Axis Bank may not get rebranded as the ‘defensive’ for 2013’s mini moves, Airtel still likely will be as the corporate gets shafted out of bull only and 130-30 portfolios for lack of a volatility linked move in the stock

Tata Steel

Meanwhile the Tata Steel calls are good to sell off probably as JSPL and SAIL indicated a slowness in the sector which is to be shed in 2013 and 2014 so it is also the time for buying this defensive as well for Domestic fund houses avoiding buying for so long since August as they get another Start of Rally point to invest surpluses.

Banks say meeooww

Banks are the move I am waiting for as PSU banks finally acquiesce to getting re-rated instead of trying trading jumps to catch up with the gap created by the NPL imbroglio in the last six months at Banknifty 13500. Thus the move from 12,400 on the Banknifty and it is not made today, will be a decisive one as Public Policy recedes and Finance takes over as the bete noir of the India Comeback strategy for 2020 and beyond.

 

India Economic Upgrade destroyed in time for a questionable “manufacturing revolution”!!

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

The Indian Services GDP is probably in threat as India loses its leadership of the incipient global Services sector growth, where it now enjoys a barely positive PMI at 52 after a big slide from 54 in October and instead the remaining almost vestigial 18% of Indian GDP that is manufacturing has taken pride of place with a more than 54 clip in the PMI sub indices in November, leading KV Kamath, an industry doyen one would not belittle or argue to claim apparently that India’s manufacturing sector is resurgent. Which again, reminds of some other key mistakes from organisations like India Inc’s ICICI Bank and Infosys which have made other such weak claims earlier in the nineties and the noughts while using other selling strategies to actually gain power of mind and mindspace over the budding markets they have indubitably created.

Not that market development has gained any recognition in the meantime but there are many other areas not forgetting major discrepant growth inputs missing from India Inc like our FMCG sector and Retail where both branded output is still stuck at 15% of market after two decades of reforms and is not growing share of voice or market even at a resurgent and well nigh bharat consuming and growing at twice the pace of Urban India albeit with unbridled inflation in urban India than any other reason to blame.

icici bank
icici bank (Photo credit: Wikipedia)

Is the real consumption franchise anywhere near increasing and is any growth in manufacturing paradigms really possible. One should be careful in using carrots for a generally more educated and access powere urban and rural market in India before making such superfluous conclusions the mainstay or athe retort you have as a personage of voice int he Indyustry and in the nation that is busy pinning down its real core advantages and probably needs more focus on items of Services, Welfare and Infrastructure than Construction and whatever manufacturing we need here to survive.

English: K.V. Kamath, Managing Director and Ch...
English: K.V. Kamath, Managing Director and Chief Executive Officer, ICCI Bank; President, Confederation of Indian Industry, speaks at a plenary session titled Risks to India’s Economy in a Post-Crisis World held at the World Economic Forum’s India Economic Summit 2008 in New Delhi, 16-18 November 2008. (Photo credit: Wikipedia)

 

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.

 

 

A reality check that augurs well for those willing to stop and take a breather | Earnings Insight

Earnings Mid Terms crash on All nighters..in India and US

Mid Cap IT and Infy looking for avenging the transfromation space with Indian business providers were again usurped by larger BPO deals and a good showing from unhedged HCL Technologies and one hopes also TCS leaving one critical movement in currency which is good for the larger economy as the ones hanging for dear life.

Similarly consumer plays like Coke paid 11% in Currency headwinds against a  strengthening dollar in the first two months of the quarter as global corporations report the halting recovery in the US. Intel is down and the world as we know it unchanged thrashing ahead for those not playing in such currency movements , not necessarily wanting to be shackled with Nationalist interest. However even as IBM looks at an inevitable yet steeper falling hardware sales and the ones that missed the housing recovery at Citi look at a continuing salvage operation, the world has moved on whether it desired to or not. The gap between the peers that have performed in this quarter and the rest is likely to keep growing and one must recognise those that have failed in this perfectly competitive quarter as having strategically misaligned themselves and needing a relook at their global and domestic business strategy. Globally this will soon include BofA by today evening when they report before US markets open but the winners may not necessarily include McDonalds’ , Starbucks and the resurgent Wells Fargo. What has probably happened is that those running with a perfectly operational strategy and anticipated free fall in this quarter have been singled out by us and we stand by our observation as we see the various forces of human endeavour trying to come out of the ever elongating crisis and note that no one has caught the envisioning of this new normal whether those still prognosticating a recession or those just hoping to ride on more growth allowances to make a comeback.

The changes at macroeconomic level mean that older ties between economies in critical businesses including banking and auto have probably been running on the saame tenets as the nineties yet and that they have changed only no as have been expected since 2008/9. Investors thus would have more hiccups ahead and would likely need to pull back from equities and reassess the situation and a second round of deleveraging will now likely hit global economies only later as European banks re-enter the arena.

However, this article does not have the answers we need to ‘move on” productively, except that even without regulators’ forcing it banks and global companies would do well to be more careful and are likely to be weaker to future economic crises or as observers noted, black swans could be a more often occurring event in the coming days. The growth of consumption as variously noted by Intel, Fedex, Starbucks, McDonalds’, Coke ( incl New York’s ban on supersized drinks) GM, Facebook, Dominos and Pizza Hut is not the same as it was a decade ago into which you added a health fad and a mobile. The Euro will survive but European corporates are still not ready to come out with performances worthy of a standing ovation including growing Healthcare plays like Roche, Novo Nordisk and US based Sanofi and JNJ

The going is going to be tough and the tough better get going!

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.

 

India Morning Report October 12, 2012: The Correction Continues Into The Weekend Close!

Also, India Closing Report (October 08-12, 2012)

The 5650 mark holding, markets see saw with two up days on Tuesdaya nd Thursday and rejuvenating interest in South East Asia and China with Chinese banks agains ppushed into increasing credit outlays at lower rates.

Portfolio investments in Inida have shown interest at current index levels between 5650 and 5675 and as expected rerating has seen knowledge of internals coming tot he fore with the JP group scrips making a late rally since midweek leading with JP Power and JP Infra but more pertinently, superior stock selection showing in Dr Reddys Sun Pharma, Bajaj Auto vs Hero Motocorp and even Maruit Suzuki. Healthcare uptrend continues with market expansion and 30% plus growth in Healthcare sector moving more investments to the sector while lowering hopes in Consumer Discretionary and Non Discretionary (FMCG)  leading to more movement towards ITC and Baja Auto and the returning bulls in Jubilant Foods as Yum foods plans for India and that of P&G find few listed companies for the bidding consumption wars.

The Power NBFCs incl REC and Powergrid (plus PFC and PTC) are on cue for the SEB Bad debt while SBI’s derating on 25 stock of restructured debt staying to cause heartburn even as sector scrips from NBFCs, M&M Financial, Bajaj and LIC Housing taking up the slack and ICICI Banka nd HSFC Bank moving into position for bumper results. Infosys seems to have avoided the Friday morning rush to prove its results on the investorate and the weekend will get busy rerating India’s old numero uno in GDP contribution, the IT Services and offshoring sector.

Infy reported lower Rupee revenue growth with less than INR 100B in Q2 Revenues and the USD revenue or the Net Profit weakness did not help them. The bargain price of Infy questionably could be below 2000 and not the current 2300 as management takes over the dias with network broadcasters. EBIT’s actually fallen sequentially despite the good Rupee Dollar Conversion in the quarter A rerating of the annual Dollar growth in revenues ( constant currency down to 5.7%) acould not be balanced by increase in wages. 98.58 B INR revenues up only 2% sequentially or $1.797 B in USD terms down from conservative estimates.

 

India Morning Report October 10, 2012: Bill these to the neighbours?

Marico
Marico (Photo credit: Wikipedia)

The markets continue to allow a much pushed out correction but stand on 5650. While yesterday’s Bank Nifty risers were targeted in the afternoon itself Axis Bank, inexplicably ticks down further strongly to an almost binary state of 5650 = below 1000 target though once in four months mean  most traders have crossed the rubicon and are shortening the trade cycle this week to a daytrading drill even as Emkay pays up instead of cancelling the 509 trades that caused them grief.

Bear Calls on the IT sector are in surprisingly good time as the Rupee weakens this week and thus IT continues to enjoy support wiht Infy maintaining its hiwgh wter mark above 2550 right now. Verdict, irrespective of sectors rerating downwards, traders will play safe IT trades in results season, and will evoke retail interest as well. Consumption sector’s rerating may prove to be tempestuously short of the mark during results season as well

250
250 (Photo credit: Wikipedia)

as there are no real hopes for good results in Q3 December and the “bottoming out” may have only Q4 of this Fiscal. The prices of Crude, Palm Oil and the Dollar offer injunctive relief and market will probably pick and drop stocks as volatilely it does esp among tier 2 plays like Dabur, Marico and Britannia, instead ITC and YES BANK may continue their breakout in this uneven quarterly evaluuation in the coming fortnight, esp as 5650 is likely to hold.

JET and JUBILANT rallies may again provide the sparkle to the debate and the KFA story promises more twists and turns with its show cause notice likely expiring without KFA losing its licence. The already pledged USL and UB Holdings’ personal holdings of Mallya are likely to still carry some optimistic tones though you are welcome in anything except ITC, YES, JUBILANT and JETAIRWAYS wtill you can keelp a singular focus on these. BIOCON and SPICEJET probably stand out for special attention and may be surprise picks in the return of the bull tot he likely 6000 targets still open with the bull. That would not be in a hurry this week either.

LATE MORNING TRADING STRATEGIES INDIA SEPTEMBER 06, 2012

 

Due to  POSTEROUS AND WORDPRESS ISSUES WE ARE UNABLE to POST around the morning report and trading strategies for Friday. Nofty has maintained 5330 levels and bnks are good to go, with the Euro bond buying program promising to be the long term friend global markets needed for liquidity ahead of spanish bailouts to come. Yet, China’s bemused failures should support India more if indeed there was any real policy action to follow on the interest generated and a deal was closed in retail or banking or others. Healthcare is still the sector with the most potential after banking

Flailing Auto sales in July and August have been estopped by the advent of the Holiday season and Ganesha and Dusshera will not let optimism go down in banking, auto or consumption sectors in durables and Non-Discretionary. However while many have beenlooking askance no one has called for the correction in Healthcare, Ashwini Gujral / ET Now biting the bullet again as Energy replaces any gap and older commentators hoe for a quickfir IT buzzer round to rate up scores , Infy and Bharti evenly priced. I would stay with longs in ITC< ICICIBANKand IDFC and not go short on SUNPHARMA though DRREDDY may stil have a few spinning out moves to the downside. Similarily, LUPIN, STRIDE ARCO (STAR) and the newly resurgent ORCHID and OPTO are unlikely to be part of the correction opening Ranbaxy and Sri Aurobind to more nervous action in the very few moves we will see this fortnight till expiry targets become clearly polarised.

 

Happy Thursdays! Infosys alone cannot change the trend

Tata Consultancy Services - Ferrari ad at Hyde...
Tata Consultancy Services – Ferrari ad at Hyderabad airport (Photo credit: teemus)

Bears had fun in the markets today poised to take the markets below 17000/5200 tomorrow or day after, but the results from TCS could change all that. The IIP was a nice positive surprise too and it seems not just consumption but some production and some growth in basic and intermediate goods was underwritten too. the Fiscal and Current deficit should also have crawled out of the hole of worry and banks set to take the lead in an Economy which they have nurtured. The growth in Credit for the week is lower only because the ebnd march ramp has to die out anf is still a globally leading indicator of the goods Asia can bring home with 14% growth and a M2 also close to 14%

However, that Infy results were cathartic for the markets cannot be denied, and I am aching to buy some good infra and banking stocks onthe pick up again, esp if I can be a keeper for 6 or more months, this not proving to be but still looking like the bottom we had in the second half of 2009

TCS reports a volume growth of 3% in USD terms and ofcourse double digits in Rupee terms even as the wage increasesaffect the EBITDA. Also MindTree may be back to a buy level at 632, so print the upgrades and lets get going . Of course consolidations, almost discouragingly last at least 4 more sessions and a quicker run up may only trade so llok for a weekend close towards 5200 or at least an intraday dip after we have celebrated TCS and Infy starts back above 2300 tomorrow open if TCS results do fine,

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)

Late Late Morning Trading Strategies – India July 11, 2012 (Results season preview)

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

Infy strikes first on Thursday morning followed by TCS results after hours and then the limelight quickly shifts to banking as HDFCBANK reports on Friday itself, MindTree having skipped signal bars to run the results on Sunday and one feels HDFCBANK might run things late too as

Bombay High, South Field. Undersea pipelines c...
Bombay High, South Field. Undersea pipelines carry oil and gas to Uran, near Mumbai, some 120 NM away. (Photo credit: Wikipedia)

growth in credit will be stronger and also catch up on rural growth while NIMs might not keep up before increasing realisations on loans again inthe April – June quarter.. HDFC Bank is unlikely to be compared on Fee income growth with Indusind but may continue back on a handsome growth after an average Q4 while 30 growth in Profits and 20 growth in Sales is a given, again handsomely beating INR!0B expectations on NPAT and . Axis Bank will have reported by Wednesday and may have mixed tidings with a sharper cut in NIMs for a SELL on news flavvor by Wednesday

The street is as alawys positively expectant on Infosys after de-rating the stock but being the eternal optimist, my followers may be a little shocked to realise that I don’ t think bad news in i/nfosys has been factored well enough. But this time around, weak global demand will be welcomed with less derision and more participants ready for a short play on the ‘bellwether’ as Dollar guidance of 8% growth may be struck down further because of the same reason they are postponing hiring – no clients, less additions.

TCS is expected to gorw profits 35% over Q1 last year and Infosys itself will improve EBITDA by 100 points on the Rupee average rate moving out of bounds but that is unlikely to keep Infy at 2488 and thus see an intra day correction in TCS tomorrow before it is ready for its own results announcement. Ideally , be very sure of the sentiment before you move in these scrips.

Buy JUBILANT FOODS and TITAN INDUSTRIES

An HDFC Bank Branch in Hyderabad
An HDFC Bank Branch in Hyderabad (Photo credit: Wikipedia)

The Rupee has trended down and MCX and FT finally up only 2% to 1180 and 800 as they make the happy announcement for MCX SX which has been trading just currencies

TATAGLOBAL and PRIME FOCUS seem to be the best picks int he sideays move the market is hoping to stick to and REC and PFC have been creeping up. ONGC is likely to outscore 280 on a diesel price hike and BPCL already up at 782. If there is another Vertical move HPCL and BPCL will move further

q

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.

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. 

India IIP Report (January 2012)

Growth on Consumer staples (nin durable ) shot to an aberrant 42% fuelled by growth in some categories of groceries like Vanaspati while the most dangerous degrowth was led by electricity at 3.5% and Capital Goods at -1.5% from 10.7% and 6% respectively. However it is doubtful if this can be treated a s a wash out as NSSO and PMEAC expected a rebound in the quarter and this statistical compariosson may improve by next month. 

A time for infosys, past

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

A time for Infosys, past The cut of growth estimates to 16% and a last clarion call from Infosys( before going down) for high quality revenues led by consulting as CTS shines up on the horizon wihtth low cost high volumes and TCS maintains the domestic lead Esp suspect would be macro strategy pronouncmements in the wait and watch mode , having plateaued or lost relevance in managing high relevance for clients and or creating and non linear growth in products and platforms. Europe’s outsourcing experience is patchy at best and they are busy at home this year, growth in Asia not spilling over to spread of outsourcing for another decade? Infy wants growth from Europe (touche) and 5 large deals were signed in thwe quarter for $500 mln value, one in Europe. Margins are good for Infy and hedging for less than half the revenues at $877 mln. Sales were $1.8 bln , forecast for Q4 flat at the same

Image representing Cognizant Technology Soluti...
Image via CrunchBase

$1.80 bln and expecting yoy growth to end at $7.05 bln revenues in March 2013 Also funnily, the management team just about managed to not sppeak about growth in banking and financial services but then the sector remains key, we believe also nearshoring is more key than you would believe in such a key Outsourcing insdustry thus Accenture outscoring Infy by 5:1 in coming bids and wins despite the “potential” for this industry,. Between CTS and Accenture’s growth (outside India) Indian IT is up for recalibration or individually for Infy and HCL Tech

Q3 Sales INR 9298 Crs ( INR 92.98 bln) up 12% QOQ from 8090 CRs (INR 80.98 bln)

Q3 Op Margins 4.4 % currency advantage 3% from rupee

Q3 OP Margin 31.4%, pricing up 5% yoy

Added 49 clients, 5 large deals, 2 above $500 bln, increasing share of outsourcing of clients with higher quality business key target ( biggst weakness in strategy)

Europe and life Sciences and healthcare grew over double digits in size from last quarter

Future Outlook

Pricing stable

FY2012growth down from 17-19% to 16.4%

Moneycontrol Interview – Boardroom

Accenture
Image via Wikipedia

Services growth pushes composite Growth

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

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

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

India Earnings Season: A good jump start by Keki Mistry’s HDFC

The HDFC India Homes Fair
Image by Kaustav Bhattacharya via Flickr

An almost vertical 33% rise in Sales to a $800 mln ( at a temporary $1=Rs 50 average) from $600 mln last year in September, and its exemplary 4.3% NIM at the Industry defining low LTV of 70% brought home HDFC a bonanza of chips in a game of consistent upending of Industry challenges with a captive home loan customer base and assets of Rs 1.27 tln from 1 tln reached last year at the same time

September RBI data according to BS showed a growth of 6% in deposits and only 3.4% in credit while even in the US credit grew at 6.1% in the same period. Thus its borrowing rates remained a cool 228 bp lower than its higher lending rates as well. Results season for Indian banks and financial services comanies kicks in completely by tomorrow morning when IndusInd reports growth in credit and retail banking profits, expected to be another 20% as for the previous quarter. Average rerating of banking prospects in the subcontinent is looking at sales growth in credit remaining just below 20%

Infosys kicked off a new bullish trend with good results last Wednesday and TCS may pitch in with margin expansion as well even as recessionary trends in US and Europe are muted by a vertical 9% fall in the value of the rupee in September

Will we lose the infrastructure push in the High interest rate world order?

Unlikely..the winning core team of the India Infrastructure story is resilient and used to challenges

Though Indian operators do not have the habituated brand of global infrastructure giants and are getting preference from the government in financing as they have to use the $3 trillion infrastructure cheque to build India’s ports, power plants and many more, we seem to be enjoying their discomfort taking the entire brigade as equal to constructionc ompanies and worse treating them like defaulters from mid cap space even when they include institutions like REC, PFC, PTC and above all IDFC

While one can understand General Kamath’s discomfort with the high interest rate regime he stewarded in the 90s , a t that time apart from not having a retail mortgage book we also did not have a tiered strcutre of investors playing cash trades and funding the india story so willingly. Corporate Finance at sub 20% rates may not be repeated in this generation by high interest rates let alone create a sad layer of former infrastructure projects in a BIFR like bundle for happy punting and 89 meter maximums for the sporting traders in the global carry trade economy.

Why it will not happen is also because institutional portfolios like that of IDFC are of much better underwriting strengths than Kamath’s ICICI which stil has all the processes in place. However in roads we do have operators without much history and thus much less of a future. those who doubted GMR and GVK are already licking their chops and there remaining leveraged units has not created extra default situations.

In the absence of a larger superset of Billion dollar networth Infra businesses it is probably been more of a handicap for which IDFC and REC have been needed yet Also Delhi metro and others have proven we have the quality of project management required to build the processes within this consistent superstructure for Infrastructure Finance which will continue to stretch banks that want a piece of the lucre fronm the sector and keeps gravitating to construction plays in its corp credit book.

The planned network of the Delhi metro upto ph...
Image via Wikipedia

Delhi metro, operated by the Delhi Metro Rail ...
Image via Wikipedia

Up ↑

%d bloggers like this: