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: Why exactly is IOC available so cheaply?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Individual stocks

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

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

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

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

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

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

”                                                                                                                                                                                                                                                              ”

”                                                                                                                                                                                                         GAIN                                   ”

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

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

<– LOSS 

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

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

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

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

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

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

Maruti Temple
Maruti Temple (Photo credit: Terry Hassan)

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

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

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

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

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

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

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

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

India Morning Report: There is the Rupee and then the equity markets…

Map of South Asia in native languages.
Map of South Asia in native languages. (Photo credit: Wikipedia)

 

Frankly, there is nothing much to hold the markets after they broke 5500 and the markets below 5000 Nifty levels are likely though still not extremely likely as values identified in the Top 20 liquid counters will probably include those already having fallen to their lowest levels of this rally’s beginnings or within 10% of the same as ITC and Bharti Airtel indicate. That also means institutional buying that has resumed in bits and pieces will characterise this market thru the breakdown. Even though Bharat Iyer of JP Morgan also put on a brave face and assumed Fixed income to be just duly following the currency mechanics, structurally markets are ready to ignore the falling Rupee between 64 and 68 once it starts that leg. I personally do not think interest rates derived from FX have any significant accurate behaviour, esp where in India both markets are relatively illiquid and dependent on key PDs for volume business

 

Though nominal growth is unlikely to be the promised 15%, shift to it sector has created an exchange that is leading scrips to oblivion and not really any structural factors as they remain exactly where we always were. Infrastructure and Metal sectors are actually at their best take off points now both for Fixed income and equity QIPs the latter a little harsh for promoters, and secondary market floats in infracos could find considerable long term investor demand soaking it up.

 

Similarly, rating agencies’ almost junk BBB-/BA2 ratings on India are in fact already indicative of this breakdown and may not need a correction giving the rating agencies to correct their now identified goodwill gap in asia esp india and South Asia, that can thence merit a suitable upward notch everytime CAD is actually brought into control. Strange, but true.

 

Fixed income markets are set to lead the way meanwhile to double digit yields on the 10 year bond already hitting 8.95% in morning trades as Rupee takes up 62.3 levels before moving on to 63.30 ( TV18/CLSA) as the next Technical target. Banks presumaly are also paying for their investment portfolio breakdown in this move and do not have fresh cash to borrow and place in the 11% short term and even the 8-9% 10 – 30 year bonds for substitution of current loss making AFS and not taking everything to HTM.

 

One year down the line, with a stable government maybe instead of hiking deposit rates we will see the yields going south again. Oil is back above $110 levels and Indian buying will comfortably take out 67 levels for the Rupee

 

 

 

India Morning Report: FDI flows bolstered in 13 sectors including Defence and Telecom

English: Manmohan Singh, current prime ministe...
English: Manmohan Singh, current prime minister of India. (Photo credit: Wikipedia)

Pending Cabinet decisions, Parliamentary Debates, Ordinance and Laws

A welcome decision was announced to increase FDI limits in state of the art Defence equipment to 49% from 24% through the approvals route and base cellular networks in Telecom to 100% from a 74% currently removing an important roadblock in the plans of Global Services companies to enter the lucrative Indian market which created unseemly compromises in corporate governance and issues of under priced auctions. These two sectors can see immediate fDi commitments  The decisions were pushed by an ebattled PM and Economist Manmohan Singh likely to be singled out if the UPA fails General elections in 2014

The reforms initiated yesterday, unlikely to be rolled back in the long term except for political opportunism by new governments were long expected and remain important for India Inc, even in sectors like power exchanges, commodities exchanges and Stock exchanges where the existing 49% limits have been brought under the automatic investment route.

Importantly, the long-standing increase in FDI limits for insurance to 49% meets private insurance companies requirements and the sector looks for IPO issuance in the next 2-3 years with heightened participation from investors adding to solvency ratios and potential new business underwritten in a market growing at a double-digit CAGR

The removal of brownfield pharma projects from 100% automatic FDi stands as Ranbaxy reports a new FDA strictures at an Indian plant

The rupee will likely continue to trade above 59 but there are unlikely to be further selling pressures on the currency at this point though the depleted FX reserves and continued demand spiral for Oil necessitates careful watching

Banknifty was under a lot of flak from RBI intervention yesterday but will likely have bottomed out at those levels and those short during the day would have to close out without recourse especially in the DEivative markets as the thinly traded contract that creates the highest tradable volatility correlated to market directions depends on large discrete moves in the options trading its direction and as and if strangles were formed late at 11200 levels they would suffer from the positive semivariance similarily as the bear cut of double digits on individual private bank sotcks was much more thant he losses to the banks from the Monday/Tuesday interest rate shock event

India Morning Report: Really, the failure of the food bill?

The Food Bill’s failure to carry the day for the shortest parliament year in history might bring out more ‘under the covers’ Welfare Economists like me and many ladies from colleges, schools and workplaces I have been. One odd part of the Food Bill argument post facto on NDTV was the reticence of known commentator Gurcharan Singh to link the idea of policy failures to grain lying waste in FCI and other storage nationally.  A seeming recurrence of other such arguments, the anchor was right in still feeling bothered by this denial ad these simple supply chain fractures cannot be allowed to be neglected for purely political fault lines that have long proven to be futile for the future of India, whether it is love for coalitions, BJP as alternative or change of form of government and Third and Fourth fronts of obscure policy which again succeeded for a welfare objective nosed in corruption

Importantly for the morning though, those who lost the pair trade were a little less inconvenienced by the banks trading higher as everyone agrees the private performers must, the sharp cuts in pre-open foretold of a failed section of the markets still looking to make a bear grip run for a few live hours to disturb the almost confirmed trade, a likely genesis of the recent spurt in flash crashes globally and rather unfortunate. 

Banknifty puts should pay out well at the end of the month and one should not get too greedy in raising put strikes too fast, so it is the right time to pick up a few short straddles / strangles for keep around 6100 skewed by the multiple for the short puts ( your leg long on the market)  and if you fund it further with short calls as hedges you should choose those beyond 6400, i would be vary of being stuck with a 6300 call short right now.

When markets successfully consolidate, the volatility gap to any target peak leaves them considerable room for quicker faster rewards till they even reach for a asset bubble and then extend the wrong way down) equity investors’ profit taking in the first 5 months including December’s latter two weeks of global holiday has been muted despite funds portraying it as a short sign almost for managers’ hands waiting for fresh infusions and the second half of the year will build the next local inflows that gross up into the buying frenzy to be as LIC and even other insurance funds come for their share of bargain buying made possible at these levels by some really perfect design (dessicated and elongated into another 5 years since 2008).

Some of our renowned Economic authors either due to their own perverse aforethought (being an MBA makes me also feel ‘collicky’ / syrupy or about having believed in the author in question in his earlier corporate life) or a habitual coasting to prefabricated DNA of the argument or policy made me begin this simple daily report for Thursday. The show on NDTV was anchored by Sonia Singh and though the author in question is perhaps a greater practitioner than William Bissell (Fab India )

Gurcharan Das’ tomes of the last few years  have recently stopped being MBA strategy and become Economic thought stirring India visions. However, though I would not be commenting on his writings and have not implied any in the previous sentences, the show caught him on the wrong foot and despite being of the same/similar genealogy, and having held him in great esteem for his experience, I felt stunted for listening to this argument.

The not usually required introduction herein also probably underscores that I am not ready to be a raving rant in my Morning Report. Also I found it in his voice that he had failed when he let loose an uncharacteristic rant on the Congress Government. Man’s ideals are sure misplaced engines of convenience.

Also, it is naive to assume one can keep shouting about free market ideals as response to realpolitik especially given the engagement offered by media today.

India Morning Report: A late last minute judgement call but that pair trade was ill advised

6th century
6th century (Photo credit: Wikipedia)

ET finally let the cat out of the bag but a bit late as the Bank nifty short was paired to the indices in a copycat move of a trade that worked in the 4700-5300 down India jamboree of 2010 then 2011 and then 2012 as well. Anyway it is afternoon as most of my readers realise my busy ness in th emorning with struggles for food and hearth taking over the life and times of accomplished investing advice and career counseling for the world of investment banking. Ph. D seats in India are few as well and a preeminent shortage of goods could well price that education much higher than it is today, the doctors 9 though i m yet to get in) still on the periphery of business and academia preferring stolid credentials to maintain ranks and bag enough fees to supplemennt honored careers in banking and finance (most of them)

Anyway here’s wishing them better luck for the pair trade next time and here’s wishing you use the contact form below to discuss and disect India, Finance, and anything else you think makes sense

No break from trading this week as another broking NBFC tops $400 mln in quarterly revenues following IIFL efforts yesterday and with broking revenues not dipping in one of the most inactive lulls of equity trading in recent times.

Dr Reddy’s results look nippier solely on last year’s poor Q4 but revenues rose nearly 30% at INR 33.4 Bln , annual results topping 20% on Sales and still 18% on profits across at least 2 bad quarters out of 4 reported. Generics accounted for INR 82 Bln out of 111bln in Sales. GVK power results this afternoon were wierdly out of whack with some tussle forming with APTRANSCO while GMR seems to be progressing along expected lines on cutting debt.

Nothing of note from Novartis or Pfizer yesterday Given the wierd secrecy arround mnc accounts one cannot immediately comment on 90% of their profits (Novartis) being from other income and being (un)affected by transfer pricing

Anyway the wind out of shorts jumped Wednesday indices to 6150 and markets are trading a t their highest level since 2011 while the rupee from trades on Monday continues to stay around 54.80 and expiry is going to be easy for long traders in options , shorting options now key to an ever changing vocabulary for our middle tof the tail at BPOs earning seven figure salaries or hoping to make some disposable spreads through trading, hear hear..( Three fat tail events discussed in here, find them and write to me for a mid week mania contest entry, your favorite candy ata favorite coffee place for prizes)

India Morning Report: markets tinker with 6000, shorts fail again

Shardul kulkarni, despite his hanging on to the short trade on the indices since 5800 for the 5600 mark or thereabouts is a pretty chastised man as he leads the discussions of the index topping off at any time and falling south. if you subscribe to his school and few still do including DIIs, you would expect larger profits in the aftermath of a continuing move north, giving these positions extra incentive to come in given Nifty volatility is just south of 16. However, the depth of the market and i do not track the Historical volatility measure to track the ranges otherwise , the IDV measure could again give 25% upside from that.

The Ascent of Money
The Ascent of Money (Photo credit: Earthworm)

The caveat being the monthly series are still not good for the volatility trades and this move cannot be captured with May series transaction costs and premia making it more probable that options will lose the extra profit opportunities across voltility(vega) and the prices (delta) itself and thus the long trades have to be played in Cash equities or futures rollovers till LEAPs also make an entry for the large pool of wholesale trading money that rules the Indian markets going forward.

But then trading in Autos for this limited period is strictly a choice for the liquidity or requirement for trading income you might see as it does not befall the fundmentals of the sector despite India Inc’s impending bounceback and if you are already not long 2013 for these few scrips in the sector you might have to rule out 2013 for any opportunities later.

Today’s newspaprs carry the concise summary of results season, showing the outperformance on profit growth of nearly 20% with raw material costs down almost 5% and Sales continuing to grow only in retail/consumer and banks but many select stocks have broken through the 20% topline and 30% bottomline barrier thru a mix of cost and sales efficiencies even as in the FY14 periods the downfall of PSU bank sales continues unabated and a limited impact of the resulting credit slowdown might still show on private bank top lines esp in retail as banks fail to reduce credit costs having no option but to continue to raise cost of retail deposits, continuing with a unified ;term structure’ for retail and corporate / wholesale customers

Indian markets have to respond positively as rare cash chases India after a long hiatus and is sticky for lack of the promised revival opportunity in China and Europe. High yield debt meanwhile also presents a global investment opportunity at this time with yields just 6% may actually be supported by the US fixed income markets chasing higher yields and creating a move up all across the term structure  to revive the interest rates starting with the 10 year and smaller yields

 

India Morning Report: Nifty recovers despite Cobragate 2

Capital Group Companies shuttle bus, Irvine, Ca.
Capital Group Companies shuttle bus, Irvine, Ca. (Photo credit: LA Wad)

The follow up “revelations” of almost all due process (sic!) used to manage fund accretions thru mutual funds, insurance and deposit products in the Sub continent’s private Banking/Wealth Management units failed to enthuse the markets despite the expected ‘seriousness’ again to be accorded by regulators, finmin and banks’ compliance functions as known tricks of the trade admittedly still deplyed by at least 17 of the accused banks are so commonplace that cooperation among banks also part of the revelations is a defacto quantity and yet not news at least to those who try to engage the markets and develop the discipline of asset allocation between short term liquidity and longer term investment/retirement and event needs. Though some youth might be encouraged to consider this as a sign to push for transparency and progress and banks will show them the clean house they need, these practices are not even necessarily questionable and are known to all salaried taxpayers who remain most enumerated in the Indian taxpayers contributing revenues to the government.

 

One wonders the efforts for black money recovery could further gain pace but only from continuing increase in banking deposits and registered investment products though you would agree that a full fledged DTC implementation and that of an integrated GST would have had the benefits to revenue one expected. The morning has recovered since the Cobrapost expose with the Sensex up a 100 points and the bank rally is still alive if you do hold long positions on the bank nifty

 

Fixed income yields have not ticked down with an eye on CRR pushing pressure from rate cut to extra crisp liquidity in the coming policy or two and RBI also will be busy with arranging OMOs and as always look at its longer term SLR/CRR obectives in this light a s needed

The Rupee in this leg is bound to follow a complementary target to the equity moves but with lesser dissonance between the two markets the atmosphere this week is overall more conducive to building up long sides of the trade and even expecting Thus do not play for volatility trades in this series or look for too many day trades unless it is your favorite mid caps or blue chips still not out with their results and outlook for the rest of 2013  and which you are fully informed about.

 

South Indian Bank
South Indian Bank (Photo credit: Wikipedia)

 

India Morning Report: Cheerful markets for FDI inflows, Pensive memories of a growth phase of IT industry

Jet Airways IFE
Jet Airways IFE (Photo credit: Wikipedia)

 

If IT were a mere product than employment for millions, it would be seen to be in its mature post growth phase ready to be phased out by a new product or business. That is not a valid hypothesis, and perhaps not a valid criticism but yet a good attempt at slang , street smart catch up with the good times. Even as HCL Tech follows Wipro as Wipro opens the week headed to more than 10% lower at open, HCLTech will likely lead them back once they reach a sub 300 level here. As long as we are on the out tray, ( out of fashion vs being the ‘in’ of the last two decades) one might also reserve judgment on the golden M&Ms, Mannapuram Finance and Muthoot, both actually having been thru worse in the last two weeks but that we’ll underwrite as being on the up and up from here, calling not just a bottom but an active clawback, though one might rule out active recovery in these till results season stars are over and infact the same can be ruled out in most of the midcap.

 

On individual scrip recommendations apart from commending the HCL Tech short by Mitesh Thakkar and exhorting my readers to go forth and make profit on HCLT.NS corrections, to join the stream and strengthen it for bigger payouts I would just add one bit of caution against non recommendations by Ashwini Gujral on the Jet Airways story. Anyone who thinks Jet will remain in this channel and not reach 550 again is flawed or limited by their prior analysis of a different fundamental and as Technical chart Guru Ashwini G. will just exit this limited (non) trade idea of his once the scrip beats prior targets and resistances and Jet Airways per se remains one of the strongest MidCap non Blue chip picks in the Indian markets on par with pharma midcap plays which realty speculators and chart gazers run easier with because of studied volatility and proclivity to oscillate in SHM around the mean traded price almost at beck and call.

 

Similarily Mr Sukhani’s view on banks and the nifty are always a little tentative at ‘U’ turn moments and one should not discount them in a hurry nor excessively mind them while looking at even positional trade except when one expects to run in for an intra day bet or two. Bank of Baroda may not grow faster, higher and stronger in a hurry but Banks per se have been out of favor unnecessarily for long part of the 2013 trade and as they remain half the market cap and two thirds of the liquid market one would venture its the easiest pick to grow with if one chooses YES Bank at this time, headed to unknown heights on its stock price.

 

The April series has seen a 14% decline in IT till Friday and the index is safe for 5600 puts sold positions to build further as booking profits on sold puts of last two weeks is likely happening in the first session (before noon) as we speak. The Land Acquisition reform Bills are to be keenly watched before the market tires of this brief comeuppance yet to be characterised as a rally while Fixed yields weather down to 7.75% in grudging admiration of the Rupee’s performance, inflows and the fiscal accounts. If the yields had indeed been leading the trend basis the conomic forebearance of India inc and the improving data, they would have fallen to closer to 7.25% even by now and thus one sees a lot of strength available to equities if the results and statistics can keep the faith making a mid week tentativeness a good point to start a big positive institutional trade even as HMT restructuring is approved and coal supply agreements signed. Coal India’s divestment plan is still threatened and complicated by the LRB (Land Rehabilitation Bill) being on the table in parliament and the Food Security Bill precariously close to being threatened by a cornered but fragmented opposition

 

 

 

India Morning Report: How wealth now hates equities for keeps..

stock market
stock market (Photo credit: 401(K) 2013)

 

Globally emerging Markets have become a unique asset class and the first month of 2013 was as sunny as the latter part of 2012 in terms of asset flows. US enters a period of so-so uncertainity in equities a stronger currency on the anvil to stew the growth equation for the largest democracy, and not mirrorred in the Yen’s ever increasing appetite hitting a weak 94 /95 against the Dollar last week enroute to par economics.

 

However predominantly from investor behaviour on MCX’ new segment highlighted in launch yesterday with volumes of just 1.1 bln it is obvious that wealth that favors Oil speculation, Fixed income, Currency and Commodities is wary of this simple growth paradigm advocated by equities and even when it invests in growth it by passes the “stock market” dream with much more muscle than any lip services its banks pay to the segment. Though at Goldman Sachs and European houses, equities trading for clients till forms a substantive segment of business, back int he country and in real markets Equities are failing to entice banks, institutions and retail wealth equally miserably.  (Nifty bottom is capped at 5800 at its worst intraday moment and can be bought)

 

It is possible that ironing out execution flaws and goading institutions to trade the segment in due course will bring volumes to India’s newest stock exchange, but it is unlikely that equities get any more weightage in this large wealth market already lening on just that precious drop of gold more than anything else and addedly missing its calling in the global markets with shallow and reefy fixed income, currency and even commodities markets though courtesy of MCS we have volume leadership in key contracts.

 

Structured Term investing probably brought the equity paradigm to oratory finery professed by the rich and the nouveau rich, giving them cleaner mirrors into what they wanted and perhaps their disregarding risk is what made them pliable which would be a pity as that market is unlikely to be permitted to grow that size again as Derivatives would go into regulatory scrutiny in more regime than those like Singapore and China willing to publish new regulatory regimes with large chinks int he armor, but that in turn just crimps the prospects of banks rOE and those seeking employment predominantly in Finance in Banks and other fund investors (

 

The original Private Equity Council logo in us...
The original Private Equity Council logo in use from the formation of the organization through September 2010 (Photo credit: Wikipedia)

 

shadow banking). All classes of non bank investors including Private Equity though Hedge funds still trade in equity at almost negative returns, have shunned Equity markets underlining the need to perhapds reinvent the paradigm, which iss till more understandable and germaine to capital flows than even the post Bretton woods world and its currency wars

 

The Stride Arcolabs deal with Pfizzer at 8X Sales at under $2 bln highlights the efficiency of Dealmaking and Secondary equities esegments are but a highlight of the equity charaacter that allows such Capital flows to underwrite the growth in both G10, G20 and the emerging economies

 

 

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

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

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

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

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

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

skyrise
skyrise (Photo credit: Brennan Mercado)

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

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

Happy Thursdays! Billions decimated in last second discovery of skunks

 

In a thoroughly disgraceful show by the markets, the markets took apart the indices near their bottom on a selected PSU bank throw down strategy after having clearly identified all the winners having established a bull market and trying to be instead suddenly seen saying but I don’t understand this index, the index being banknifty of course and the markets seemed to comply because every such short seller no one thought his buying was needed on this day of expiry.

For me, I am disgusted with the show of skunkworks and really do not think these market players are the ones who are going to get others to feel confident about the Indian markets or story which is exactly what it is and the markets right now seem to be increasingly becoming a naxal zone..and really if that someone thinks is representaative of a society I am aghast.

 

India Closing Report – July 16, 2012 – July 20, 2012

 

Monday Monday
Monday Monday (Photo credit: soonerpa)

The market seemd to never move throughout the 5 days of trading but is very cannily poised at the bottom with banks shaken. Yet one would like to believe that this will be a new bottom for the market because the overall correction from 5350 has been completed and tied into most fundamentals with results seasons positives. Even as analysts on the netorks are set to orrily look the nifty in the eye for the banks’ not being up anymore, I would be going into the weekend long on the banknifty at 10500 mark.

It is not a leap of faith but new positions on the banknifty on Monday may miss a good 100 points on the upside.

However back to the analysis of the week in question, it alloed one to feel remiss about India Inc and hopefully tempered expectations from Policy reform as most expected a panacea from government speak to propel further gains like on a couple of nes stops on Sibal and spectrum last week shooed in.

English: Dainik Bhaskar logo
English: Dainik Bhaskar logo (Photo credit: Wikipedia)

The week began with MCX addingequities platform licenses from the regulator and Sensex futures getting into the limelight as well. ifty currency contracts have been gaining volume in the 2012 move but as of now the currency is tick at a one feels intermediate not so lo mark of 54.9 purely for trading reasons

The Power reforms were solved adequately with Mundra expectedly left alone and SEB loans lobbed to states duly.

MCX Logo
MCX Logo (Photo credit: Wikipedia)

Germany has already approved the Spanish bank bailout and finand will complete the exercise before markets open on Monday. There are still 45 minutes of trading left as I close out the week in the report. Healthcare and Utilities standout as powerful movers for the indices and Banks and Financials dominate especially after results were compared. The IT story was finally accepted as relegated to the second rung Media scrips and businesses survived another quarter ithout groing subscription or falling Advertising revenues and making good enough big money with Dainik Bhaskar’s 43 crores and Zee News’ 158 crores. Fresh investments are due.

 

Bank Nationalisation - India - Newspaper Clipping
Bank Nationalisation – India – Newspaper Clipping (Photo credit: Wikipedia)

 

 

 

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 :LATE :LATE MIDCAP REPORT: Where promoters wreak havoc, is there a reason to formalise insider networks?

Securities and Exchange Board of India
Securities and Exchange Board of India (Photo credit: Wikipedia)

Indian promoters as Anil says so often on CNBC India (On Menaka’s The Firm) promoters control so much of Capital that trading in the so called Mid Cap segments here the Daily Volume is in a few thousands is an exercise in futility as the promoters manage in a bid to secure their Rupee funded investment which does not track global investment valuesin Dollars consistently. More than that domestic investors would probably like more investment opportunities but can be stopped out any time by short interests or market makers’ floating stock on whims and fancies market participants are so eager to drive home. One wonders with such a prescient SEBI and a tough act for others in terms odf trading regulation and ground conditions, is not there a way to formalise insider information on those not unlike the Russell 1000 in the US which has a pretty accurate information bag to play to facilitate long only trades in such counters and list specific qualification for opening short trades on a counter esp if it passes muster on a score of negative buzz. Eminently doable if one decides to do it. After all, these are investments and everyone ants investments to grow. Apart from unreliable balance sheet data, fine line items on export and import regulations, and somewhat transparent FCCB/ECB obligation sets which are yet among the most opaque, promoters like Ajay Piramal for example are not balanced by yet unieldy and larger controlling powers of the retail investors in the Indian market than comparable trading only investors in the OECD world

To note: The author dissociates himself from well wishers and ill named friends who use proclivity as a

network to illegallly monitor and destroy relevant and irrelevant information and decision making equally.

To note: The author dissociates himself from well wishers and ill named friends who se proclivity as a netork is to illegallly monitor and destroy relevant and irrelevant information and decision making equally.

Promoters that try are probably equally to blame

JYOTHY LABS (SPIC)

MAX INDIA (33 B inflow inc 9 BLN from unrelated sales not unlike DLF – A split could make businesses worth 50B int o two orth 150 B) and not ready because ‘insiders’ would know but likely promoter stake diluions etc as it did not start abull move at 188 ( CMP 194)

PIRAMAL LIFE

ORBIT

TALWALKARS ( expansion plans are 3 times slower than offer document, always known so yyyet stuck..because of a standoff with operators/institutionals)

PRESTIGE ESTATE

M&M

MAHINDRA RESORTS

GUJRAT GAS

No not yet Trading Strategies – India July 05, 2012

MK_GMR4827
MK_GMR4827 (Photo credit: Presidency Maldives)

Late Morning Trading strategies (DID you buy your ITC yet?)

As the title suggests most of the activity is in the silent bond and currency markets with Indian bond rebound and unrelated yet unlikely dollar rebound sees hectic activity as accumulation continues n the suggested consolidation, the market having not seen any exits and the rally probably been too quick for the bus to fill up before it moved.

The marktes are healthy not waiting for a fall though a dollar rally cutting off air supply cannot be ruled out and hence the unwillingness to move from the enw normal – right priced in ne light after  a 5600 year to years back left investors bothered seemingly

Buyers have to stick around and probably get in today or tomorrow. A dip does not relally add more interested investors and thus is unlikely.

Buy Infra stocks, GMR, RelInfra and RPOWER and even RelCapital and of course IDFC

English: Diagram of covered interest rate pari...
English: Diagram of covered interest rate parity in the foreign exchange market. (Photo credit: Wikipedia)

Morning Trading Strategies – India June 27, 2012

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

Currency markets expiry does not usually bring much volatility as the markets inherently trade in forwards and futures. However the dollar is poised to hit 56.50 today as the Rupee’s fortunes take over petty benchmarking to a Dollar index fed by the weakening Euro. The Dollar index is itself down despite the Euro weakening as the Yen follows to higher ground on the back of its new revenue measure on a government running a 200% public debt but required for speculators who thrive on funding trades thru the Strong Yen However forward continue to retain all their premium..

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

In stocks, the benched NBFC sector could help the banks surpass earlier week’s levels on the Banknifty while the index rangebound till 5150 is probably ripe for the adventurous to sell a few June puts, but most should have been done by Monday. A couple of network mentions like Jubilant and Titan ind shorts are great starts. On the long side, REC, PFC, PTC and Powergrid should move at different parts of the day and typically ING Vysya and Indus Ind as well. Bank Nifty gets safe to 10,200. Setting up new July strategies should have been disturbed by the seesaw index moves and so one should probably wait before publishing bullish option picks in the segment esp as July options are overpriced. Futures plays in the Bullish sectors are safe including Healthcare which may get a little cashed out as interest returns to other sectors today. Buy Cipla at today’s lows, stay in Sun Pharma if you are already in and exit Dr Reddy

BAJAJ AUTO  is again a long and HEROMOTOCORP could recover a few in the couple of nifty surges in the day but both will likely start back from 1500 and 1960 again in the near future. Use discretion and exit any upmove after 3% for day trading and those staying in should be ready to stay out July. Fresh buys in MARUTI enjoy the same caveat. Banks are at a new level but may not retrace much more except Axis to 978 levels and SBI to 2110

Prime Focus (RJ), Tata Global (Starbucks, Indian promoters) and a few other Mid Cap picks are around including Mannapuram Finance. Reliance Anil Ambani stocks including Rel Infra and Rel Media will have a move each in this run to 5400 if it happens

English: Generic finasteride 1mg tablets produ...
English: Generic finasteride 1mg tablets produced by Cipla India (Photo credit: Wikipedia)

Infra sector is poised for a take off on its own technical steam as well as good announcements from the PMO / MoF. IDFC and GMR Infra remain prized large cap picks in the sector. GVK Power, IRB and LANCO seem to be marginalised by their Capital structure by now but Global infra financing sector would still have to adjust to a lot of India specific projects’ independent performance strictures and it will not be easy except for Development Finance plays from Japan ( $10 B for DMIC), IFC and even ADB to enter India and thence I atch out for others except IDFC

A very tough pre open, Infra may have bottomed out but it is not going to break out any faster

India Morning Report (June 27, 2012) : Dollar loses steam

Prime Minister of India Manmohan Singh in Arun...
Prime Minister of India Manmohan Singh in Arunachal Pradesh. (Photo credit: Wikipedia)

Another of Dollar’s correction days is upon us easing the day trend for the Nifty qithin the flat zone and making the trading day verbose and Recommendation/Tip friendly across experts in market, analysts off market and stock market investors contributing to volumes of INR 2.2 T daily the last two days of nervous boundary wall smacking diatribe from fence sitters not able to get tv slots or investable surpluses before the last bus leaves.

The market will soon be back of course and probably not below 5000 but expiry is safe near 5200 than lower as Sir Prakash Gaba also confirmed on the first day when the policy action snuffed out many fragile hopes.

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

India PM Manmohan Singh taking over the reins may not change the situation on the ground but it is a material plus, the one on Tv making the posit for him being the Citi APAC MD, Pawan Vaish in end May in “THE WORLD ACCORDING TO CITI”.

The material plus from Sardar Manny taking over is in all the non political attempts filed over the last one year by the Plan Comm, the PMEAC and perhaps even the RBI to redeem the current situation which in various forms had come earlier for India Inc and which is why still sub 6% growth rates are unchallenged by India detractors who actually watch India’s ratings (including Indian citizens)

stock market
stock market (Photo credit: 401K 2012)

FDI got a big bonus with $5 B announced by Coca Cola over the next 2-3 years. It is already involved in social empowerment programs to cling to its early mover advantage and find ways to expand India’s stale but potentially rich soft drinks/beverages sector wwhere it enjoys 25% share thanks to an early recovery by Kinley as Parle’s Bisleri still manages another 25% of the fluids

The Global 5 by 20 program targets increasing the role of Women run businesses in its 100% groth by 2020 and was started in 2010

Trading strategies follow.

India Morning Report (June 26, 2012) – Angry Investors to come back?

Irrespective of a slow moving day, bond yields have moved up to 8.1% because of thin trading / under supply of the new 10 year benchmark. RBI will be holding a Inr 150 B auction on 29th to introduce a new 5 year bond (40 B) which will ease trading in Indian FI markets. The supply of the 10 year benchmark is less than INR 10 B apparently. The benchmark released in November traded upto a stock of INR 900 B before the new benchmark was released.

India has added $5B to the Gilts limit with a lower residual maturity apart from $25 B for Infrabonds, permissions for QFIs to invest in Indian Mfs and another $10B in ECB limits which are unlikely to be taken up as only high quality companies can operate under the limits on cost spreads on such debt

Morning Trading Strategies – India June 21, 2012

Capital Market Line
Capital Market Line (Photo credit: Wikipedia)

There is still one week to expiry but those selling puts to stay long on the Nifty are safe at expiry also, a rather one way strategy in terms of flows as you do not expect to do a transaction cancelling your position. However, if you have also sold calls and you should always be careful about that, the exit of the bears is on and 5 trading days could still take out 5100 calls into losses which happens above 5160 odd at yesterdays close.

The USD INR move, very wild in the post CM closing yesterday was strong and the global developments on the Euro’s crash also mean that the Indian markets will remain bearish on the Dollar intraday but as it means a bullish Capital Market segment ( and vice versa) it will not fall much unless the equities want a breakout in this series itself.

Banks are good investments as suggested yesterday, Healthcare will remain great and there is a bear play in Two wheelers yet with construction lagging a week of byull sessions before a rally ensues. JP Associates has a play though with a deal in the pipeline hopefully. Market is rangebound and choppy unless you kno your picks

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

Happy Thursdays! Expiry Volatility continues

English: The Symbol of Indian Rupee approved b...
English: The Symbol of Indian Rupee approved by the Union Cabinet on 15 July 2010. The Design for the symbol was submitted by D. Udaya Kumar. (Photo credit: Wikipedia)

One week to go, rupee made an equally violent come back even as the Euro finally matched INR levels to its own performance in Europe rather than wait for its comeback with stronger levels against  the rupee on the back of depreciation against the Dollar. Dollar marched on relentless against currencies yesterday before Chines Flash PMI data again confirmed the worst and again a rally in base metals and precious metals has been nipped in the bud because China would not be importing any more in a hurry esp after the export crunch began in APAC last month.

For equities, it means the risk trade is definitely off but the Dollar may have stopped rising giving a temporary synaptic failure between rupee depreciation and Equity crash so equities recovery can likely continue after the rupee is back at 55 levels too, not necessairily nose diving at every pick up in the USD against our currency. Changes like China’s tick down and the crash in Newzealand exports for example could disconnect the all markets correlation and that would be fortunate for most FIIs too as the Risk on trade can continue while Europe implodes on itself Spanish and Greek yields continuing rising upwards and ECB unable to afford another LTRO.

But then a lot of you should now just be trading June futures and banks and select equities like IDFC, REC in the infra sector ( or construction if you prefer)

Fixed Income Report: Credit Policy tuesday likely unsatisfactory

It just hit me that with the fixed Income markets moving so tenuously, the yields of 8.44% ruling on 10?Y today will likely be wiped out within 2 weeks of the trading after a 25 bp rate cut, as markets also expect yields to go back to even 9% and RBI unlikely to follow up with OMOs so diligently after the rate cut.

The Rupee fortunately has a lot of head room in the new range , coming in to policy week at above 51, with March GDP likely to stay near 6% than 6.9%

Budget Impact (Fixed Income Report) – Hold your horses on the report Card

The instinct is to laud the report card but the chink in financing is obvious and yields are already moving up in a bid to force a rate cut this tim ebyu april. . yield now at 8.41 % Bonds could be a great investment if youy were sure of a peak but I am sure investors have started buying again in small quantities.

Tax revenue increases are fair, the subsidy bill seems to be an adhoc set of assumptions currently with no reform in sight and diesel pricing or any other real decisions not taken and not likely to be taken in which case yields could continue rising for some more time before important investments are made in the bond market.

Got a thumbs down from Moody’s but indian banks back thenew deficit target ewwww1

New India IPO rules (SEBI Action)

SEBI Action

To contain IPO manipulations

Auction process to put merchant bankers on high alert at boutique banks

The Action

First Trading session to start with 45 min pre open for price discovery. The closing price from this session would be the opening price for regular trading in the morning session

Smaller IPOs i.e. all <250 Crs (or INR 2.5 bln), will on listing, trade in the Trade to Trade segment

Large IPOs with size > 250 Crs ( INR 2.5 bln) will trade within upper and lower limits of +/- 20% thru the circuit breaker deployed for 100 scrips 

baidu_logo_nasdaq
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Smaller IPOs i.e. <250 Crs (INR 2.5 bln) will trade within upper and lower limits of +/- 5% thru the circuit breaker for 10 days

According to new rules this week, SEBI has limited listed IPOs to the Trade to Trade segment which will allow orders against delivery only, not allowing trading of scrips and limiting the IPO market , FIs probably in agreement with SEBI ina  fee less market dominated bby vanishing fly by night operators in its last stages throughout H2 2010 and all of 2011

Thence the pre open session for price discovery(further..we speculate..) has lesser meaning but yet it encourages more effective price discovery in the new market which can later consider IPOs hopefully for regular trading instead of T2T segment to be reserved for indiscriminate promoters with a bland due diligence from vanishing trading houses

All seven promoters’ issues hotlisted with merchant bankers last month had issue sizes of <250 Crs and were prenalised variously for the act of price manipulation.

In other discussions, SEBI is still considering Merchant Bankers’ certifying end use of IPO  funds on a regular basis ( monitoring)

Fitch Banking Report on Asset quality

Cyclical downturns in Textiles, Steel and Real Estate continue adding to asset quality concerns . Power and Infrastructure company concerns could continue and balance sheet rported asstes as per new PSE systemisation to 3.5% and Total NPAs coul d be as high as 10% as per Fitch.

Going forward Fitch reports on better days in light of the growth returning to the economy and seets position would not worsen for the larger banks esp not in agricultural sector but others where stressed assets have already fructified.

 

 

India Bond Impact(Fixed Income report): No Please don’t cut rates, RBI

Bond yields have cut to less than 8.2% on the 2021 and 2022 10 year bonds and less than 8.5% on the 2032 20 year bond while markets are in a tizzy running commentary on RBI cutting rates ahead of the policy announcement tomorrow. However the bond markets per se have a lot of mature buyers who are pretty confident of no cut in rates and an early start will take yields down much faster from here tomorrow in pure volatility speak if the Guv’nor does change gears on his stated policy early. However our outlook with rating agencies being stable we have definitely grown into a bigger more liquid bond market esp with good returns for gilt investors in the last quarter.

Yields should firm up at slightly higher after the policy announcement tomorrow either immediately or int he next one month before the March announcements of rate cuts hit the wires.

RBI has also repeatedly clarified that no CRR cuts are likely and it has allowed the use of the MSF with SLR collateral , the same may be reitereated tomorrow

India Earnings season: (Bank Results Season) : Axis grows NPA beyond expectations

As usual the NPAs of 687 cr or 6.87 bln would be marked to high growth in some long term analysis with NIMs still 3.75% and gross NPAs still 1.10%

CAR also seems ok-ish and not too great at 11.78% Can’t match the growth in NPAs to a PCR of 87.7%, harddly management attempt at efficiency, likely an anachronism. Write offs as expected never went near

Images_IRRIDB0210_DSC_3980
Image by IRRI Images via Flickr

even 2-3% of net worth with a NPAT of 11.5 bln above expectations. NII is 21.4 bln and growth in sales is 23% (incl other income) Asset book must have grown largely in retail

I am ready to short every fin stock at 5050, probably results season is good but the marks have been reached

RELIANCE AMC gets follow on investment from Nippon Life

Even as Rel Com suffers from a $ 6.5 bln debt overhang , even witht he rupee holding, the condition of the group is precarious esp on Reliance Capital as a NBFC funding the group also. Rel Capital got a reprieve yet with Nippon Life agreeing to another high valuation, this time the mutual fund at 6.4%AUM and investing INR13.5 bln for a share of the business

At a valuation of slightly over $1 bln, the investment pays premium for Reliance’s dominant 12.5% share of Indian AUMs at the said 6.4%

India Bond Impact (Fixed Income Report) : Not RBI, but bonds try to get a depression prognosis

Fixed Income yields keep falling off a cliff while liquidity is managed with the year long rally in yields chopped

BOMBAY MINT Post Card
Image by BOMBMAN via Flickr

below 9% even as emergency liquidity’s few dollars keep bonds from staying east of the channel corridor mandated by RBI with the marginal lending facility  currently at 9% for banks.

The drop in yields could not however encourage RBI to force rate cuts sooner as these yields remain in a thinly traded market and neither borrowing costs nor lending rates for retail or wholesale tranches are nearly being effected apart from Treaasury gains ahead of March 31

RBI has been allowing the use of excess SLR for the MLF (MSF) emergency window since the last 3-4 weeks leading to the unwitting capital appreciation in bonds since November.

India Fund Impact: Balanced Funds an ideal choice

While some public data has definitely gone out of circulation after the brakes on fund growth, availability of direct investment in mutual funds without mandatory commissions, such game changing regulation also coincided with the brave AMFI India’s monthly data not being available ( maybe my browser don’t work)

A year since we printed the monthly fund report, the new QFI regulation is also miles away from making a discrening impact on fund flows even as Cash market volumes pick up after a lean 18 months with current disparaging index valuations calling out value equations for many. ( that has an interesting take too, in last week’s post marathon)

Fixed Income offers a great ramp in returns too for those not on board yet, as markets correct yield in anticipation and RBI holds out, taking the rate cut cycle to all FY13 and then some as it is unlikely to be in a hurry to cut rate this time.

Gilts and Corp bonds up front offer good returns, then the unsuccessful floats asds duration management was never put on charter by our Fixed income managers and India’s unique opportunities from the inverted curve lost to many.

Yet the most opportune because of the inattention from investors is the Balanced Fund family. While Fixed income returns will likely be pruned in adjustments to the small amount of investors, some balanced fund regimes have the experience and the intelligence to deliver According to an ET report today, the amount of funds in this family with 40-60% equity allocation is a minor 4.5% of the overall india fund management industry. You could see a couple of fund launches in this sector but I suspect the first rush there is in general equity regimes. You could ccjust choose the Prudence Fund franchise for your cuppa choice in breakfast mornings~!

HDFC Securities brings Trading to ‘ordinary’ smartphones

For the upwardly mobile customer, India’s first trading app is ready. though one is not sure of the execution guarantee that comes from the trading community that launched Indiaa’s second but last trading platform in 1999, HDFC Sec’s mobile app looks good enough to increase trading volumes by a good 5% more than the 20% uptick already in evidence since November when Indian markets hit 4700 on the Nifty and below 16 k on the sensex.

In terms of execution capability there are others out there who offer really best rates to retail investors on a trade whence ICICI Direct / HDFC Securities could bu tcarve niches for themselves and none of the awards and goodwill that went to Kotak securities or geojit and investsmart india, during the franchise building phase in online broking. This could be a new opportunity to “GROW” the mobile/web trading market among Indian investors and could see new laearnings being put into practice by players. This time, Kotak securities stays away from modernisinG???

Predilections: Read the Global tea leaves

The Fall of the Berlin Wall, 1989. The photo s...
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3b. All said and done, shorting India stocks is easier and easier every day and those derivatives volumes are not going to fade away, Write a call today. If you want to buy commodities instead, buy the dollar instead, the others can’t last as China is still holding on to purchase orders it was suspected it would sign in metals, grains etc

3c. Did you know Europe has a trading surplus from all the import orders that have been canceled. Having decided inflation is not the way forward, most of the EA-17 will be tightening their belts like never before as Germany becomes the villain  that cannot buy them the luxury of food and drink for their next 20 years

10. India is in a vicious cycle of low reserves, targeted currency and high oil / energy and higher food / vegetables prices. and our supply side imbalances are being a targeted to tipple over and experience the “recession” that everywhere else gets talked about. China can just put it down with its surplus and state control on supply inflation is so “prejudiced” but ultimately closer to the truth than saying China does not matter ( like its military aggressiveness that is so glaringly obvious

EA 17: Those who have adopted the Euro

Predilections – Casing the results season for fly by night investors

Securities and Exchange Board of India
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The latest in FII troubles for India Inc is that the $1-2 bln odd that has come in has been found to be patterned on coming results season for a play starting 30-40 days before results announcement and exiting 3-5 days before results. ICICI Bank is a case in point today for example. But then the SEBI investigation will yield more pertinent data.

FII clubbing is a deletirious feature they have not even tried to curb, and we face it when live in the trading room everyday. In fact some good practices ground in the same gentlemen’s club kind of action may be resisted more by market “operators a” and set up many an unequal battle in the ring but WITH RETAIL UNWILLING TO SPONSOR ANY KIND OF INVESTING RIGHT NOW, the markets are a transparent cornucopia of malfeasance from hawkish clubs where in trading it becomes dfficult to discern any line between a good trade and bad trade except when you can take cash to the bank.

Thus when FIIs get together for an idea arbitrage opp, it sticks out like a sore thumb

Predilections: A culture to run down the “good guys” without publicly writing them off..

The Bombay Stock Exchange, in Mumbai, is Asia'...
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A public/private bank name comes to mind, as also many personal investors but India loves is shock therapy and now is the right time as any for the :::Common Man:: to open the TV and just shout down the goddamn stock prices. It won’t yield him anything either and his neighbours would be so happy..given that momentum basis, it is unlikely that anyone will miss buying the “good guys”

Infact not just good stocks, the Options and Futures series should get more interest whenever recovery starts wth a basis in the markets for having understood Futures and Options till here. Fixed Income markets could never provide that opportunity so are not well traded and I or any one else have not been able to provide a public trading platform for trading the other public opportunities like movie stars, public figures and sports men, IPL teams..the list goes on

Also there is the subsidiary cultural meme that instead of right guessing the good ones and he bad ones, seems to thrive on being reckless fools who just wildly keep guessing in the middle of someone’s work..IO am finally getting crazy from all the writing.

Predilections: If you still mind shorting the market..

Huddle

Though that is not from Fibonacci or for the Fib series, some tormentors on virtual soot could very well push the case forit. However while immature shorting has scored a few gray areas out from the market maps n the last few weeks when it began, now traders who get scared by shorting could very well be losing a packet as intra-day movements are long range and compete a week’s trend in half a session for all practical purposes pushed by paper thin volumes. There is a lot of downstream wind for the markets to rest lower and yesterday’s move though decisive and covering a lot of the range down, do leave a lot of room for fresh Put purchases which also has o spread out from an overt concentration on Nifty. .Anywaya lot of us would still be praying for the secular up move to start away, while worried about purchasing that long long position we want. Buying should still be concentrated in smaller lot son the bigger scrips and I really do not see any value mid caps out there with banks and tv networks driving growth and not being really there on the exchanges. (Disclaimer: This author suffered from air shock when NDTV was listed and its over leveraged financials disclosed much later and still continues to consider himself a savvy investor, market maker and trader fit for any Global bank position in Trading, Marketing or Sales)

Predilections: Is it the individual than the Company?

Potrait of Dhirubhai Ambani
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ADA group s a whole with its umbrella of companies move together as one company, while Reliance, having burnt its hands in oil flares tries to become a diversified conglomerate to represent India of the future . Both Groups ADA Reliance and Reliance continue to be expected to roll the markets and no individual earnings performances and valuations may matter to strategy and Capital raising teams at both companies.

They continue to look for the personal licence to muddy over their Sports, Financial Services investment for the Hydrocarbon major and the incessant hunger for Capital for Infra projects under Power and Telecom retail for the other group. Reliance Capital itself remains pressured as a subsidiary to such ambitions before new bank licences try to enforce an independence on the same .

A little more Capitalist as anyone would want a promoter to be but still, serious analysis would probably show up the deficiency of this mass correlation for internal investors and outside in hangers on to theIndia story who look to the return of Relaince as the proxy investment for India

Sunil Godhwani, Chairman and Managing Director...
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  • Predilections: PSUs represent the mass of the resource economy (awardz.wordpress.com)
  • Predilections: If you still mind shorting the market.. (awardz.wordpress.com)
  • Predilections – Our Faulty towers series ( Factoring the Indian Markets by beast ) (awardz.wordpress.com)
  • Predilections: How about senseless shorting? (awardz.wordpress.com)
  • Indian stocks slump 1.7%, led by Reliance shares (marketwatch.com)

Happy Thursdays! The rate hiked, will we go back to business? (Late Report)

fruit market in Obaköy, part of Alanya, Turkey
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Here you go, the beer will go down in happier times on Friday, as markets take an opportunity to reflect on slowness of growth in the worst performing Asian / Emerging market and the expected 25 bps hike a marker for keeping low interest and maybe even testing a new bottom as India failed in its 2009 bid to go over 10% and now avers 8% is enough/ FDI flows for April will be out next week as low interest and slow growth replace low interest rates and high growth. From a cursory browse through of ET(economictimes.com) it seems Cash volumes are now INR 90 bln a day in Cash turnover, last seen in mid 2003 and a third of that seen in 2009 in the same month

Some shorts are now paying full cent for the dollar in th Indian markets as keeping the markets up for monthly pronouncements stays in fashion and gives bulls the time to use filler time on the networks for the same 30-90 stocks championing consumer spending. At least Titan and Jubilant are more than extended and make easy pickings

The infrastructure / construction development sector still does not allow LLPs , but allows 100% FDI for performance, each new PE signing Infracos has signed a new road project ( $500mln each for a not too large project bid). The third sector still keeping me on a fine perch is aviation as loss making KFA and Spice jet also pick up 15-10% more traffic. Autos should become more expensive, Coal companies passed over in the next quarter even as RBI’s Financial Stability reort to the MoF still shows 18% credit growth in the banking system, a near equal deposit growth and a tenuous and uncertain link to the global financial system persists and noted players withdraw from the Indian market in terms of their cash on the prowl and planned to be in stake.

In a way, we still have the perfect insulation to stay alive in the global winter and the global winter runs prolonged but in the long run, i looks like we and the world are talking two different things and maintaining a sotto voce constance in the two paradigms a task akin to your English school teacher trying to teach you all the nances of letter writing and presentation, leading to another fractured new generation with their own lingua franca

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