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

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

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

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

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

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

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

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

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

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

 

India Morning Report: The next sharp move in the Rupee is still nigh

The Oil wars are and with US Supplies stockpile engendering a highlighted war equation, the situation could turn grim. This Friday closing is thus not like the other weekly closes in terms of markets losing short positions and trades, and it may instead see profit booking in larger dollops. One assumes therefore the sharp increase in Open interest would remain with the likes of HDIL and Sun TV and the banks open interest would continue to rise much more slowly and the 5400 cap could in those trading terms alone, define the entire September series hitting the wall at 5300 in favor of short interest to pick up once the market dips from 5400 to those levels, which has started off on a clean plate, only longs rolling over.

The advantages to shorts rolling over are the market pricing more finely in those conditions with the added liquidity(depth) to trades with the premium esp in the Indian market removing rational investor interest rather soon in the Futures and Options derivatives markets. Witness, even in the currency the only trades that made it were structured Double or Quits and higher multiples.. excluding even a lucrative CDS market in India Bonds and Sovereign. Oil swaps come with the caveat that payment problems exist to the same extent with International payment systems complying with bans es for Iran and one can assume Syria

Airtel Digital TV Review [Updated]
Airtel Digital TV Review [Updated] (Photo credit: code_martial)
One can assume also that after a 14% cut in FMCG in August, ITC’s ‘comeback’ would also bring back interest in brands like Bharti ‘Airtel’. Though GDP Q2 data would not be a trigger and long interest remain with such undervaluation

The 75 target for the currency is here from BofA ML and as I said below 68 the box is from 70 to 77-78 levels before the market interest outlasts any post analysis of the fll. Those thus aking this 68 level an occassion for post analysis would likely be lost even without any sizable crossfire in the battleground! Lets face it we actually need exports to grow a sizable bit in response to any depreciation for more than IT profits of the next quarter for India Inc

Watchmen: The End Is Nigh
Watchmen: The End Is Nigh (Photo credit: Wikipedia)

Fixed Income Report(Feb 20, 2012): Bond yields scarily poised or just rangebound (India bond Impact)

Inflation data from the CPI index considered more carefully in global monetary policy is ready  with the CSO declaring data from tomorrow ( see last paragraph)

However as we pointed out in a post minutes ago, the Fixed income yields are almost tentatively poised at 8.2% with the markets a primary reason for the tentativeness as the urge to speculate comes to town on Indianomics. India’s OMOs last week of INR 120 bln and the CRR chop to be worth INR 360 bln has not materialised, the inflation at a comfortable below 7% figure may rear its head again soon as manufactured goods indices are not dipping that well, staying nearly 8%

The 10 year at 8.2 % ansd the 12 and 15  year at 8.52% and 8.55% show the yield curve having steepened bu twith no CDS and swaps market with spread unnecessarily compensating to junk levels without liquidity for the market makers to fine tune the action, FIIs are unlikely to come bareback into a new Asian market. Even new bond issue bankers are getting a quarter of the fee last year.

According to Arjun P in the DNA analysis

Liquidity tightened by `56,000 crore last week with the system borrowing `167,000 crore from RBI on a daily average basis. The rising liquidity pressure led to the RBI buying government bonds in OMOs.

That’s INR 560 bln out of the window even as banks move rates down and RBI borrowing now all corrected to 9.5% the designated MSF by RBI getting higher than India’s high trade deficit and nearer 5 times banks could have released from their Central Bank acocunt after the CRR cut, almost all of it could easily be explained as amounts banks have in excess deposits with the RBI. Banks are moving to cut loan rates, having made affirmative stateements and SBI having seen as reducing Edu loan rates in the press.

The point is that the rates are precipitously poised on yield as rate cuts are months away and moves down could hit growth badly while yields moving up back to 8.5% ont he 10 year bond will necessitate the overtly stretched government finances to arrannge for another OMO

Last but not the least Oil has moved up to $120 levels one spike to $150 likely and 12% of our supply in Iranian oil in as mucha  threat as also half our rice exports and many in tea and fruita and vegetables to Iran. The Afghanistani Oil we have planned for also travels thru Iranian ports huh! wow.

Inflation data on the CPI series is in for the first time as a yearly series becomes available from Tomorrow, and likely coming in near 8% ( watch the lovely rural vs urban vs composite chart at livemint.com) , instead of the feared 10% unless there is another spike in January data. As of December the rural indices have moved to 115 and the composite 113.9 data available from January 2011 when rural was 107 and composite 106. The urban sub index started from 104 in Jan 2011 and ended last year at 112.4

Up ↑

%d bloggers like this: