India Morning Report: At the top, VIX = 18, NSE Nifty = 6535

DIIs are again trying to correct the market levels hoping for a bigger correction sooner than expected as markets having scripted a recovery trade from all time highs of 6500 level look to executing the same fueled by FII investments. Hopes of a mild correction in Banknifty continue as trades from 12000 levels in Banknifty are also stymied by the lack of positive PSU trades, SBI and BOB still counting as fundamentally short picks. PSU Bank Capital plans are likely to strain Government finances as Insurance companies also reach their sector exposure limit of 25%. It remains inadvisable to increase sector exposure levels from 25% as well and the problem is likely to get complicated as many PSU banks are unlikely to stop NPA accumulation at the 100 bln mark they magically topped up to in December 2013.

Meanwhile the Powercos (Distcos) supplying to Delhi have a long expected bonanza in regulatory assets allowed to be claimed by the State Regulator (DERC) (–see BS lead of date )but apparently the price rise and yield is already been priced into Rel Infra and Tata Power ( Tulsiani)

The VIX trade in the meantime flies off the handle at a tepid 18, the move from 14 to 18 completed in all of two trading sessions on Friday and Monday as Option writers finally got busier and naked calls and shorts covered out at Monday highs and markets continue upward. The PCR also is likely to be stretched at best to 1.30 and till then considerably larger highs could be established for the markets to return toa as indeed foreign buying of INR 16 Bln on Monday is likely to be followed by more such thrugh this week with many shortlisted stocks showing new stamina including Bajaj Auto which is likely to go up to 2050 levels if not 2150, Bharti which is still at  305 levels and can trade up to 335-345

Buying opportunities in ICICI Bank and HDFC bank would be grabbed by the markets though shorts re likely to succeed in Axis Bank as well, with its NPA and management problems unresolved. IDFC is one of the rare scrips that offers liquid trades witha 20% range from current levels on the long side to under 130 levels and YES Bank is also still a big gap from its earleir high valuations of 6000 valued  on the same economic scenarios back in 2011 as India repeats its unique performance twice within th single minded slow plodding recovery after the banks broke in 2008

Reliance however seems saturated at 855 levels and GAIL seems to have been ignored unnecessarily at 355 levels as Pharma is likely to be ignored till the end of the week Cipla headed to below 350 levels, Sun to 580 and probable 1950 marks for DRL while domestic producers with an export portfolio like Glenmark, Cadila and Aurobindo Pharma are likely to get a fresh batch o f long term investors from current levels itself

The Rupee’s trades at below 61 levels , opening at 60.70 in the morning are likely to be followed by better and lower yields in the Bond markets as investors follow the currency buying with some debt investments in India and hopes for an investment cycle upside to India increase with easier availability of “ECB” debt

One should choose pedigree and portfolio when choosing infra stocks and not follow for leveraged small promoters as deal wins in the space almost threaten the existence of such corporates instead of improving their chances given the debt raising limitations

Infy and TCS are already topped up in investor portfolios and current falls are fundamental revaluations and not much institutional trading is likely happening in the two stocks right now

The 2010 consumer flotation offers including Talwalkars, Prestige , Page and LL remain premium stocks with Thomas Cook for FIIS looking at sectoral picks

 

 

 

 

India Morning Report: Markets start the day at all-time highs from 6400

Though, it could have been better for the fundamentals, markets have not caught up to earnings increases over the last decade and will probably keep the gains in this weeks rally as the Rupee finally responds to buying and moves back to 61 levels without showing signs of tiring. As it moves further along to the top of its range to the 60 mark, consolidating yesterdays gains over another week, the currency does have a limited headroom as the Dollar Index is trading below 80.

Banknifty and IDFC are keeping their gains and moving north even as the indices savor a moment at the top and a lot of the individual stock memes switch , with Energy and Pharma both offering unique ignored opportunities that may well be taken up, without ruling out the better consumer scrips consolidating to new price levels or for ICICI Bank and HDFC Bank ( including a final decision on its cross holding by HDFC , still pending for renewal of its Foreing investor limit)

In Consumer we continue to back Bharti , ITC and Bajaj Auto. Yes Bank seems to be popping the champagne again, while the real estate pack will lead the way back for a quicker correction if interest in the sector runs up a bigger tab

ITC may again start up from 320 levels , if you are a trader and need to offload the stock currently. Bharti seems to have a new partner in sight for its retail JV( which I will tell you later why is not the ideal reason for backing the stock, like its financial foray earlier) but there are more fundamental reasons for owning the stock

Exiting DRL is a good idea at these levels

A lot of cash stocks have steam trading much below their lifetime highs despite good fundamentals like GAIL while the PCR is also a bland less than 0.9 with PUt OI still being extinguished , probably a precursor to Puts being written as confidence in new levels increases in the Indian markets , as they lead a global equity rally with the Dow a little behind as it is already at record highs. Markets have a long week ahead next week before 6400 Put writing becomes economic and the markets rewrite 2014 forecasts.

India Morning Report: Markets continues the ra-ra-rally to 6350; Business as usual strikes

The Rupee has finally moved into 61.50 marks, investor interest in the tech quartet unruffled by a climbing currency as Dollar indices moved to their lowest levels. The Banknifty is squarely above 11,150 marks on Thursday in an eventful week for bulls, enjoying a cash and positive calls led market supremacy over the cagey watchful investors with BJP backers having decided 200 seats in the National Parliament was worth a celebration too in the face of defating th eBears, an opportunity that does not come by regularly in every market segment and cannot be passed over.

PNB is back near 600 levels and the short trades are gone from even Maruti and others for the moment, likely to come back any time now below 6400 levels itself once the Put Call ration reaches 0.75-0.80. One hopes the shorts come in Index Options and not entirely in Index Futures or worse continuing in individual stock series.

To my mind PSUs like BOB are already looking overpriced again with their asset quality woes not done and BOB likely to be among the PSU strikes leading the way down, with a news driven exit in Adani remaining a probability after a quick rally in the same as this rally segment will unlikely see the one sided euphoria in Jubilant and Titan in 2010. The markets apparentlt kick into gear for welcoming the change in aviation rules allowing International flight without fleet and footprint restriction

Bajaj Auto still has a rally left for brave longs at 2020 levels, using Maruti to torque the trade ( Buy Bajaj Auto Sell Maruti) and starting a similar trade in Hero at 1850 levels ( unlikely to get lower levels int he same) The Trade will likely last thru any index led direction for the market. Index moves are matched tick for tick by the new LIX 15 showing the hold of rare liquid stocks on the market. Markets will correct once pre elections or immediately after results so broader interest can rride on the secular move to 7000 warranted by FY14 earnings and FY15 forecasts even in absence of a recovery

The Cement stock rally indeed seems a little too precocious even this late, as expat commentators would dig their heels in to say in three months time when the GDP recovery led trades start a final swing at old 6400 levels Construction and RE stocks should be avoided.

Your pharma portfolio picks may see a sneaked in ride as markets consolidate, as IDFC finally crosses back into the Century plus marks, both Glenmark and Cadila coming back stronger ona Green only map day for the markets , twice in this week

Time is probably ripe for selling in IT now esp with Infy at 3900 levels. Media scrips have again seen older bullish levels in an almost hidden move on an all green day hiding poor Sun TV(no longer media)  in plain sight with more secular picks like ENIL (Mirchi) and Zee

Bharti is back at 280 levels and the big trade in the stock could take it quickly back to 335 levels , GAIL and ITC is also a long only pick at current levels

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: IT’s missing pizzazz, Auro Pharma strikes Cymbalta gold

Courtesy: BioSpectrum Asia

While the markets renew interest on Friday to get ready for the battle of wits at 6100-6150 levels, Banknifty has moved into gear with good boy PNB ceding its additional upside from 550 levels and SBI continuing down near cracking below 1500. Private Banks see Kotak going down too with Marico and Godrej losing the barely viable Western(Maha/Goa) branding attempts , consumers rejecting being shortchanged as a way of life. That leaves both ICICI Bank andHDFC Bank with YES and probably Axis but for its NPA woes. Aurobindo Pharma’s wins were mostly likely for the gains in Cymbalta and that’s a big molecule to crack.

The Foreign investors however bite into its market pie despite a 10% indicated gain at the open. Jubilant Life is also returning 3% at the open. In Banks, as desired by the broader markets BOB and BOI have also been shucked out, though the turn of events has apparently got Ashwini and proprietary traders’ older generations into a tizzy in the markets proactively readying themselves for a blood bath monday

Bullish picks in YES Bank, ITC  and Bharti continue to plough open interest as short interest is extinguished in droves before a new bite. Shorts were down 10% in REC even as PFC stole the limelight with great scores , unfortunately pushing the Powergrid story to the back. The Power and other infrastructure stories thus remain orphaned by the impracticality of raising larger equity or single entity debt for the mega project financing requirements of India Inc and specialist Finance like IDFC instead gets more important not less.

PNB remains a buy, Axis will probably continue down with BOI, BOB and grandpa SBI. The correction in Power Finance is probably understandable after the big gains overnight. Ambit Capital again agrees with us on the rate cuts remaining in RGR’s coat pockets to conjure due braking for the inflation express.

Bajaj Auto is back again but pairs would require new designs probably mixing Tata Motors into the trade as Hero exits a long term bear view on the stock. The Bajaj Auto story as pioneer however, much awaited by shortchanged Western region industry, is definitely back with a bang along with banks, with performers in banks waiting to be rewarding after marginalising of the Foreign banks in the Business and Consumer sectors

MNC Pharma will probably get into this rally for more than spectator gallery participation. The Infotech trade is unlikely to be back though opportunity for shorts in the sector or on the flip side for cadgy immature ET reporting in print is probably extinguished (opportunity)

Spectrum auctions, unlike reported yesterday have indeed turned out to be an exercise in budget restraint , bidding well for the Indian Telecom sector as Vodafone returns as a 100% owned business. Total Bids have still brought in the desired INR 500 Bln per budget targets and it was a big ask to have completed successfully with the prudence now reflecting in Telco strategies necessitating the delays in the process where Government was on the verge of bankrupting telcos with its greed.

The Gas companies will be on the good side whatever happens on Monday and some bad boys like Jet Airways have probably bottomed out while midcaps like Talwalkars, Prestige, LL and Page continue without breaking even as Pizzas break speed with Pizza Hut taking back 30% growth on completion of capex spends in new restaurants.

Thomas Cook and Sterling remain a bad story post merger with lots of work to do including printing restated financials, probably still required once the combined operations on board. The IT clawback is a temporary mirage and the sector should be avoirobably hiring plans will be postponed again as the Visa sanctions come back owith immigration reforms on tap in the US

If indeed Bear on Monday , one should retreat into Auto and stay invested in quality stocks identified here over the last year

In other unlisted business, Twitter results serve as warning to those assuming bigger volume pies from the SMAC crowd, the social space inherently low value except for big advertisers and Corporate Business with Facebook and Linkedin

Look ahead to a grand theater attraction as Disney’s Frozen takes the world by storm and ESPN after global success proceeds with better redefinition in India as well. Time for someone to get another update from Aubon pain and the QSR ilk?

The rupee is trading consecutively improved levels at 62.30 and yields are still hoping to cross 9% apparently though if we start angling for ECB debt we could score tighter spreads and renewed growth could indeed be aan easy story again for India Inc

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

India Morning Report: A post festival dawn, markets churning sector and memes

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

The Goldman spiel actually are quite a Venus flytrap “MODI-fying” India targets to 6900 on the Nifty as it wanted. However, markets haven’t really closed around any specifics except the “Investment dozen” which could include ICICI Bank and YES with IDFC and ITC among others. however the morning rush of re open advertorials on the networks today, especially saw me frowning a lot at ASK’s shallow commentary on ETNow, and even Sukhani got caught in the vortex of sellling Tata Steel and /Buying Tata Motors ( ineffectual, near total failure in India) as SS tried to look for a deeper correction.

** The investment dozen is our(mine) selection and does not match the broker , Goldman Sachs as reported in TOI/ET/other Bennet coleman properties

On the other side, Cognizant results , till now shackled in their being listed in the US only, were being feted by the market’s unholy trinity in bull spats on the HCL Tech and even “Wipro” counters, showing the day had not only been bought in by the Bulls, the correction strategy was completed midway thru closing trades yesterday before 3 pm and the day is trending in the positive again. Apart from that trading hint, I also have to let you in on the secret that market volumes are still going to be building up till after the Superbowl in the US when all yearly earnings will be over and EM flows will be in focus again. However Q4 inflows will be dominated by Emerging Markets and China is in play again so India will get its due but nary else, romantic fund managers like PIMCO, the Fink or even George Soros being in short supply and having already decided on India a while ago in 2009. One ears Madison Square Garden is a little silent today but its a long way from being a new advertising strategy for Indiaphiles or Global market conversations involving authors. AMBIT is hardly a help , ET Now perhaps looks at shining at this plateau and ceding a little back to moneycontrol/CNBC18 again.

Metals are indeed in the bull ring and contrary to those still waiting for outperformance in results before the stock selection, the metal rush is on. India PMI and Services PMI crawled back to 47 levels this October and china again reported an expansion in the Economy. Singapore is doing well despite curb on overseas investments by Chinese dominating that flow.

New Banks will be a new story in this new year though most will be reusing attempted model plans from 1995, including rural distribution and Home finance or FX and structured Finance with increasing/exclusive attention on derivatives to spin risk into profit and out the door again for more business.

Sells on Bajaj Auto(Ashwini G)  or Tata Steel(SS Investments/Trading) are contraindicated and those on failed PSU banks still accepting deposits and making credit a funny way to establish anyfaith in India stories. There are very few Bank of India stories out there

To reiterate this market was quite done with the correction at 6250, and seeing that it is flow led, it is likely to push forward faster and probably YES and IDFC are better single cash trading picks or Bajaj Auto and ICICI Bank or HDFC Bank pair trades. Bharti and ITC should be investment portfolio stories throughout the remaining December quarter and till June 2014

Petronet LNG(SS) and Tata Global(Trader20) seem to be good mid market picks though overall I maintain idcas will be ignored in this stock selection spree which will still see some victims . 300% Onion inflation is of course an election gimmick and stays one as monsoons create a win win for India Inc

India Morning Report: HUL divines the uptrend, shift in stock weights

NEW DELHI/INDIA, 16NOV08 - Klaus Schwab, Execu...
NEW DELHI/INDIA, 16NOV08 – Klaus Schwab, Executive Chairman, World Economic Forum, Narendra Modi, Chief Minister of Gujarat, K.V. Kamath, Managing Director and Chief Executive Officer, ICICI Bank; and President, Confederation of Indian Industry at the welcome lunch for the World Economic Forum’s India Economic Summit 2008 in New Delhi, 16-18 November 2008. Copyright World Economic Forum ( http://www.weforum.org )/Photo by Norbert Schiller (Photo credit: Wikipedia)

 

One part of the funding trade is of course another substitution from IT into post result scrips including private banks. Another reinforcing trend for the market is the return of interest to Mid Caps like Tata Global Beverages for the Coffee Auction expansion in their Global Supply chain effort and the Starbucks JV. More importantly however, HUL’s mid trend reinforcing of Ad spends by 24% has signaled more than return of its brands in that despite its lack of growth in soaps and detergents as in Personal Care by 16% nd in Food (9%) and Beverages (16%) , it seems to have forced the hat off ITC which has gone into a tailspin with investors likely to exit as the funding trade returns to HUL instead. Bharti is still strong however, and likely after HUL is not taken by a majority of brokers (from old times more than anything else)

 

ITC wll return to favor as an in trend consumer staples scrip as its Consumer Brands fared pretty well and they have already taken big ad spend jumps in a 2012 quarter instead. Also P&G despite its continuing domination of US markets has not ventured that strngly upon India as China walked away with most of the “Middle Class” Consumer equations leaving India’s non encouraging performance a fundamental back bone of most Global Consumer staples

 

Nifty is strong at 6150 as Monday morning sees uick exits from IT trades for another day with the bulls before the end of next week. Banknifty is finally catching on strong results and has crossed into 11000 so there is speculative interest there to take it to 12000 in a rush.

 

In Autos, CV Sales continue to scare investors and bankers, and it may hit NBFCs and Banks with Auto portfolios as well and Maruti’s recovery is pretty much incomplete with a return to barely 100,000 cars a month rate in the last two months. Justdial success was an eyeopener for sceptics but is likely a Jubilant/Talwalkars repeat in the trade being years’ ahead of the performance volumes not unlike the 2001 dotcom boom (and bust)

 

Interest returning to Metals and Energy would be a good sign for the market to retain higher volumes and move past 6400 levels for the longer term if a recovery oes come to substantiate higher EM flows that will definitely prop up Indian equities. Bonds are still twirling as yields still hope for no repo rate hikes by mid week . If there is a repo rate hike therefore yields will move further north and the Rupee in the offshore NDF market and in bank trading will lose some sheen even as other EMs catch up on the No Taper news, now becoming the new market basis for further Economic clairvoyance

 

Signing off, Essar Oil’s squeeze on GRMs to $6.98 could be in fact a positive sign for the Energy scrips as it means international prices of crude are weak and that other efficient producers(refiners) may still be able to score on their GRMs . India is not currently on Import Parity pricing but on Trade Parity ricing with 20% weightage on Exports and the Government may well ski the Ketan Parikh committee recommendations for this term.

 

ICICI Bank performance is instructively better, and Bank nifty would do well to exit all pessimistic trades shackling it for the last 2 odd months, also PSU Banks at the bottom like Union Bank esp are unlikely to return. Some among them have since jettisoned Bulk DEposits to break the negative attern in the product’s impact on the bottomline but unless REpo rates stop moving a higher cost of funds will be the norm for those in bulk deposits and LCR inspired wholesale funding only model shifts.

 

 

 

India Morning Report: No, yesterday’s mid-day rush was not enough!!

Welcome to ICICI bank Page
Welcome to ICICI bank Page (Photo credit: denharsh)

Of course, ITC and ICICI Bank will be reporting during the afternoon as well and the market closing is unlikely to be weak enough to discourage a big move possibility next week and overnight positions are unlikely except the refreshed long straddles (short put 5700 –  short call 6300-6500) and exits from 6100 shorts built up mid-week again. J Associates may see flash floods in light of the F1 race weekend but Bharti, ITC and Bajaj Auto will lead the way through to close.

Banks may be in pressure again but only because of the legacy of NPAs in BOB which built up an entire portfolio of NPAs / instead of trade receivable in a bid to export Indian Banking Capital and lending in the last two decades and PNB lone cannot stem the tide. Also the unfortunate positive attention on SBI though under a new chairperson is unlikely to escape keen valuation specific traders for more than a few trades.

The ICICI results may thus see a complex short-term trade unfolding which will beat down PSU earning expectations and correct the recent run up in undesireds except perhaps in the big-ticket PSU Banks like BOI and Canara. Taking the examples of the bottom rung from good old ET(yesterday’s op-ed pages), Corporation Bank, Indian Bank, Union Bank and that other are unlikely to get picked up soon either even as they trade down to less thna half their book values as they tot up more of the impressive 2 Tln NPA in the PSU Banks

SBI’s steady stream of recoveries at INR 4 Bln this quarter is no small feat too and is no small measure contributing to the revival of the stock after Chaudhuri’s exit.

Blackrock and JP Morgan ( with a new Middle East Fixed Income Index) are leading fund managers as Europeans garner more cash from Emerging Markets in their Wealth Management saves and EEM continues to bring good tidings with a big rush in midday trades, again signalling a big push to break down the 6220 limits faced by the traders. Tech M has in the meantime done it again, extending more bad blood to investors as it loses a big renewal from BT to little known Virtusa

Powergrid results enthused the markets and would be a big draw for Foreign investors with more than 80% of its top line Net Interest income translating to profits consistently and the NII now crossing INR 40 Bln close to a quarterly $1 Bln target. Also the Power NBFCs have been fairly active in QIP debt and are a known international entity.

US Banks in the meantime walked out of one frying pan into another as the closure on some mortgage settlements was followed by an “unfavorable award” by the Fed demanding higher thn expected liquidity reserves. The ensuing collateral shortfall and rush for short-term liquidity ( of more than $200 Bln) may hopefully not impact Emerging Market portfolios as BankAm has completed most of its domestic restructuring and government intervention preventing international expansion ( with frequent non US asset sales) ebbing down

Kotak’s results yesterday were less than spectacular with deposits still less thn INR 100 Bln and NII of INR 10.24 Bln on Loan assets of INR 512 Bln ood yields ( NIMs of 4.8%) but hardly any expansion commensurate to its size, and YES Bank already more than caught up except for perhaps a few more wealth clients with Kotak (UHNI)

Fixed income yields are back to 8.6% at the close of the week ahead of the Bank Policy announcement on Wednesday. We do not think a rate hike is on the cards and are long on YES Bank as the MSF will anyway further come down by 50 bp. If instead the repo rate is indeed 7.75% and MSF thus stuck at 8.75%, then the Rupee’s refusal to complete any upward movement would have been vindicated and it may further move back to 63 levels . As of now a move to 60 still looks like on the cards for the Rupee to be vindicated as the stronger Asian currencies as the CAD shows into the good books again and PSU banks complete a two step Capital bonanza with more Capital post the retail fest from the government at the end of the quarter

The markets should close above 6150 in anticipation of the next week’s move or unwinding should hit quickly to more than a uarter of the outstanding in F&O markets. More likely it will as 6200 positions in shrt calls again go to cheaper OTM  6300s in the straddles

Also, I did forget, Will India welcome another to the Kingdom of Fries as “Burger King” heads to twon with the North India franchise of McDonalds already down to underestimating market demand for the McDonalds’ menu

India Morning Report: Markets consolidate to new 6350 range/top

Beijing subway
Beijing subway (Photo credit: doubleaf)

 

The IT correction of last week already got used into the 6200 mark as positive results keep positive momentum on global news for the Dollar backing off. As BGI (Blackrock) and Vanguard welcome back funds into Emerging markets US yields and Bond Funds may not get that much investor interest returning and markets like Korea and India should thus be beneficiaries in the ensuing inflows to ‘EMs’

 

Thus ‘uncomplexed’ the flow however is likely to still not be emboldened by the fears of an asset bubble in China as  further improvement of House prices by more than 15 and 16% in Beijing and Shanghai keeps China the easiest target for Hot money flows probably now getting more focus on to its fixed rate currency. Thus an unforeseen window for pressures n the currency though the currency-markets hedge is no longer holding and correlation between equities and currencies will be kept by the broader money flows of whatever magnitude

 

Metals are a good pick for Macquarie which is among the few doubling down on IT post results with the rupee at 61-62

 

YES Bank will likely bring back bigger and better position trades to the Banknifty which is right now sprawled between ‘PSU having been whacked too hard’ strategy and ‘Private banks being the only worth’ bidders who for some reason are getting shorted on ICICI Bank, the bank’s own dealers likely not to blame. ITC and ING Vysya will follow the lead of the banks as most select scrips in portfolios are not adding further positions otherwise except for further small window trades in the delta to the Top from here. Is more discussion on RWA arrangements in India possible because though instruments are merely traditional ones predominantly, Basel III treatment could possibly be more rigorous and Indian Banks are mostly getting a free ride except for the large move to NPAs which is limited to bad quality portfolios.  A Bank promoter for instance recently suggested he has only 3% Tier II Capital and 13-14% Tier I Capital which is true for this particular bank and showcases the thinking on Capital /Leverage in India and the potential for the banks to grow having come thus far in an untapped market and running at 3X the GDP in growth in lending if a little focus is maintained on bank governance

 

HDFC posted a perfect quarter except for the Bank dividend having already been distributed in the First quarter dipping the expected NII to a posted INR 18.14 Bln. The year on year growth is safe and sold loans constitute less than 10% of their outstanding book while still earning the bank 129 basis points. NIMs increase for the institution through the year and the first quarter’s 3.9% increased to 4.1% yesterday(as of September 2013)

 

The news of a fund crunch in Jet Airways or the CBI action thus far proceeding against KM Birla and other industrialists is likely to become the focus of the “Bad India, Dull India” news flow and may merit immediate policy action but overall market participants are well aware of the limitations of policy action from an outgoing government. FIPB was also postponed for day after tomorrow having approved INR 33 Bln worth almost a month ago.

 

 

 

 

 

 

 

 

 

 

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

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

 

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

 

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

 

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

 

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

 

 

 

 

 

India Morning Report: Markets out of short opportunities at 5350, Rupee actively down to 68.63 at open

ITC starts the day at 305 levels, a good buying levels as the FMCG opportunity tanks.. Markets will be unaffected by shorts like Voltas and Tata Chem (Mitesh Thacker) or even shorting in Titan with buying Idea (SS) even as indices jumped to near 5400 levels at open after a scare from banks not jumping in at 8600 Bifty levels RBI norms on Developer loans from banks on the other hand obviously come as Banks’ lack of opportunities again lead to a ramp up in rel estate loans through 80-20 loans allowing developers to drawdown on bank project facilities before starting construction.

The precipitation for yesterday’s 650 point fall on the Sensex and near 200 points on the Nifty was the missile test by Israel and Obama admitting he is deciding between Congress cooperation (prefered) and otherwise attacking Syria after the Chemical Weapon deployment by Assad Bashar

IDFC and ICICI Bank are slow on the uptick and more worrisome is the Power NBFCs failing to shore up the trends as Powergrid falls thru in double digits in 2 sessions, to 87 this Morning. Bharti is still a buy and Bajaj Auto has started off the day smartly.

REC is floating around 166 levels and PFC and PTC are up barely in a bullish market, probably moving only on a sustained move up from tomorrow. Oil risks to the CAD seem to be contained with India already having reduced its exosure to Iran to less than 15% and unable to increase it.

Jet and ITC may sustain higher levels as domestic aviation price realisations are set to jump in airlines’ and encouragingly Jet would just be following Spicejet. ITC jumped its own retail price ponts in the tobacco business by around 14% per brand variant

Tata Motors rerieve as it counts its chickens from JLR based on last quarter’s EBITDA seems short lived and may be an avoidable investment. Tata Steel however is a good lace to start your post crisis 2013-14 portfolio

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

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

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

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

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

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

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

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

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

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

India Morning Report: IT’s the big short.(Inching towards that 6100 mark, to inch back to 6000~)

English: WCAM- 3 locomotive at Kurla . It is D...
English: WCAM- 3 locomotive at Kurla . It is Designed by Bharat Heavy Electricals Limited. (Photo credit: Wikipedia)

Inching towards that 6100 mark, to inch back to 6000~

Markets never had such a foggy idea of where they were going having just cut up all paths withs chances of an India recovery but yet fogged by the fact that there is hardly any other choice if you exit India as a Foreign investor. US markets in fact have much the same prognosis ahead of the QE withdrawal as most of the money staying in any markets would unlikely move between markets. In fact Indian debt is back in “currency” as a new auction for buying rights saw the permits from the Central Bank covered to $4.33 Bln (@60INR=1USD) However, exits for indian debt since the fateful announcement in May were a humongous $10 Bln and RBI auctions have been unattended last when they thought banks would respond to excess liquidity mop up initiated in response to the FX crisis

Yesterday’s measures go further, es the ingenious channeling of Gold imports, committing a fifth to exports and assigned to custom bonded warehouses. mports are allowed for Gold businesses only but should fairly benefit the Economy from here after the thud from the extreme shock in June that dd bring the trade deficit back 40% to $12 B for the month

Markets and commentators seem to be losing faith in Cap Goods “monopolies” in India like BHEL who are fairly regular in printing bad numbers every three- four quarters and as banks have bottomed out, the short trade would start from any such market reaction to bad results, good results already baked in. L&T’s results for example seem spectacularly bad for market sentiment despite the Capital Goods major stuck with the same pipeline for well on 9 quarters now as it has been highlighting frequently and deterioration was probably unfortunately still not baked in

The GST reform may not be done but as ET reports on the front page the Capital NCR state of Delhi is finally getting bar codes to track elusive alcohol revenues , an important arsenal of funding for States in the Indian Federal system. in the southern idyll of Karnatak, in fact alcohol lees and extra state duties on fuels ( esp Petrol) make more than 90% of the budget’s income streams

Mid Day update; IT sector seems to be set up for the big fall as markets drop the dollar factor and go back to business left in value from the big move to IT last month. The IT short could well start before the expiry as IT stocks are not big in derivative trades esp with TechM, KPIT and infoedge not getting th bg speculators who play in derivatives

Also Walmart, Carrefour and tesco ventures in India may finally be closer to expanding statewise as the policymakers write in a waiver to 30% local supplier clauses allowing them to go for their preferred favorite supplier strategies sheltering them for producing exclusively for them, much a good thing for the supply chain deficiencies in the country

In stocks, you should have been long banks and you could hold from here. You can also keep longs in ITC, Bharti, Bajaj Auto and IDFC irrespective of current levels. At 6100 , the markets will head south for having run out of reasons to stay up and make room for a few margin trades on the short but expiry may well happen above 6000 levels as the ‘comeback’ trade (sic!) would just try and get a fai trade for shorts before closing up again with select stocks and sectors really sparse in this deep and big market, making impact opportunities a likely opportunity for those with 1005 data access. if you are game, you should look for changes in liquidity impact of the NSE 500 stocks and probably a dozen will show up interesting changes in trend to pounce upon. Those stocks toking up and ready to go downhill may also be camouflaged especially if you see large volumes in trades as prices go down on sustained basis(more than 2-3 days of this week )

Sorry Ashwini(ETNOW), going short ain’t so easy if you are betting on India, much like its hindu rate of growth, the nations stocks are probably stuck at these levels unable to channelise a trend

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

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

 

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

 

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

 

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

 

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

 

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

 

 

 

India Morning Report: 5750 is here and it’s Friday

The week will close out thus with FIIs exiting some equities occasioned by DIIs entering the market finally buying 3 days into this Friday and likely to end the day near INR 25Bln in buying ( ` 2500 Crores) for the week

Mid term traders would do well to avoid exploratory tips like SS bidding out BOB into a new spin after it hit 630 yesterday which is unlikely as Markets respond strongly to the week’s closing glad to go home with no outstanding positions and no Rupee trades left. As shorts exit the Rupee ( if they were still on after the GOI move mid week) there may be even more bullishness to close the week. EM bonds as of now do not equate to India and with DIIs also buying, any resumed buying will mean quicker move up in volatility providing keen traders new choices in scrips going up not down

Jet Airways and the sharply corrected YES Bank would be my picks to start and if none of the two work for you, switch to ICICI and IDFC or ITC and bharti as each of these twoples are likely to work together on different sentiment days on the upside not unlike Axis and Bajaj Auto or Axis Bank and Idea two weeks now. F&O straddles at 5650  were a great pick or strangles at 5600 (sell puts) and 5800 ( sell calls) but should be ripe in today’s open , vol having moved into the 2s.  The safer ones going by the network pick recommended at 55/59 should let it sink till expiry and pocket the 44-50 they might have turned in in the setup yesterday

Europe and US should not have much of a move left  to close out the week.

 

 

India Morning Report: Bharti, IDFC and BHEL make it a heavy result oriented day

A PTV onboard a flight to Abu Dhabi.
A PTV onboard a flight to Abu Dhabi. (Photo credit: Wikipedia)

Though the market watchers are almost thirsty for a correction in the new series, habituated to aa trading range being established in a market that has more than INR 10 T in daily volumes on a good day and INR 4 tln in turnover including derivative volumes almost everyday. The Nifty Call interest has moved from 6000 to 6100 but is short interest and is safe enough as the markets do not look hungry for a move beyond 6100. However, the market is holding and we stick to our ‘call’ of 6000 being an almost distant minimum for the series as big ticket Results from Bharti, IDFC and BHEL follow ICICI Bank, Satyam and Bharti Infratel’s good showings yesterday.

Profit taking has almost ticked up to normal levels with the markets taking the profit taking in its stride in Private Banks and other blue chips including ITC and Glenmark Pharm. IDFC could start a new move today and Ambani cos. follow after their result surge backed down by Monday. ICICI Bank could also start back after the immediate discounting of its par results as its above par situation catches on and markets decide that corrected levels are unlikely to cede new ground. India VIX remains subdued making it more possible each passing trading day that a new high will be made this year.

Jet is likely to sign the dotted line with Etihad this week and UAE’s #3 carrier look to fast recouping of market shares from leaders post consolidation with Jet in terms of synergistic operations

The surging CPI data to 14% and the slowdown in Consumer staples including QSR and snack foods highlighted in ET forget to note that India consumers have easily digested the over 2000 pizza and other QSR restaurants and the growing market sustained by Tier 2 towns despite KFC and Pizza hut;’s earlier failures to expand the category in India. Also optimistic projections in Real Estate industry highlighting the record number of new launches though pointing to over capacity int he future point to a good 2013 with a record 500k new homes being handed over to retail customers this year.

The Rupee is also likely to capitalise on Dollar’s misfortunes without hurting Exporters as Euro and Yen coast to new records after an unprecedented contraction in GDP was reported in the US bringing the year’s growth down to 2%

India Morning Report: Recovering India’s growth, Reminding populations of death and poverty and Replacing lightbulbs

ONGC India Ltd, Kakinada Branch office
ONGC India Ltd, Kakinada Branch office (Photo credit: Wikipedia)

 

Seriously, How many people does it take to replace a light bulb? If you are Duvvoori Subbarao and replacing the lightbulb is the “rate cut” direction, a likely dozen spring to mind including annointed commentator and Bankers’ Trust columnist Tamal Bandhopadhyaya who after more than 20 interviews with Head Honchos of Banks has finally broken through in at least he believes he can also cast Subbarao’s mind with absolute certainty and get friends in high (street) banks.

 

Holding on to the Capex Cycle for Growth

 

Investments that seemed to start to recover in the latter half of the fiscal, January’s FDI flows still an enthusiastic affirmation of India Inc being the growth engine for the globe esp with most looking askance at China for investment growth from equity and bonds. Indian bond markets could well be on the verge of a colossal turn down having locked in a rate cut and equity markets enjoying a flurry every intraday as traders make sure there is a volatility iller with extreme moves intra day souring the longer run investor to no end except keeping busy before the definitive move Tuesday.

 

Bank Policy Tuesday apart, Capex investment in India has also not recovered because of other substantive reasons including lack of executive approval, seminal moves like the ascension of NaMo to the Centre for BJP and the continuing dissing of the Welfare Economy as unsubstantive and too short term for India.

 

Flagging India Defence

 

Naval approvals to be refused to KG6 and other Reliance Gas wells off the coast of Bombay bring out the real Mumbaikar and Reliance supporter who would rather point to Corruption in India’s Defense ( which unfortunately may also be one of the main reasons) than having any substantive debates on India’s security concerns precluded by the Indian proclivity for secrecy which unlike the US or NATO or even Pakistan, seems to be at the detriment of National Policy in the area so that industrialists like Ambani or Mittals or the Executive team at Maruti can duly come out with Joint methods and at least look to be in sync with governments in 8 out of 10 cases while the Defence establishment is probably still awaiting another pay revision and finding other reasons for supporting outdated Russion technology for its Defence plans. Not that M&M is actually proceeding with its businesssin domestic Ordnance but even that was such a coming out for India inc in the sector. Intelligence of Chinese supplying India’s neighbours like Nepal and Bhutan read alongside news of Pakistan ceding territory to China is a real threat and must be realised more substantially than total bans and outright decisions with a falling out later that has destroyed years of planning while China throttles ahead

 

Live issues for India Inc

 

Doubling royalties and ITC’s not breaking even on its FMCG products are ofcourse known hurdles we have discussed but markets also move on other things than Energy’s resplendent freedom bid that is moving ONGC and OMCs currently . Banking will be key to India Inc’s move to new highs likely in the first half of 2013 itself as Profits grow but Sales growth , in double digits in the December quarter could likely continue declining further as industrial production  recovering on controlled costs and higher profits, suffers from flagging demand and Inflation is unlikely to reduce to any 5% level on WPI and will plod around 7-7.5% for the next 18 months one can look ahead

 

 

 

India Morning Report: The Budget(ed) Roadshows, the royalties and the burden of the beast

That beast dropping the burden into the nether world could well be market participants once the RBI Governor reaches the comfort zone of “Sorry, no cuts” later this week before Bank Policy Tuesday strikes markets 2 days prior to expiry. FIIs brought in almost $3 Bln to Indian equities in January and while money flows to bonds had picked up again after being usurped by equities the lack of a rate cut could well force some selling into the 8% yield mark in Indian Bonds.

Meanwhile FinMin denizens with P Chidambaram have started on roadshows that sell new reforms including the ever awaited GST rollout by FY2015 end and the raising of ceiling on Corporate bond investments further to $25 bln. Nonetheless, This market could see Nifty topp(l)ing before 6150 as a disappointment is near certain and the clamour to get back into HUL this morning is now a merry part of the same rerating saga as ITC and Bharti nurse there recent high levels and HUL is still the lowest royalty paying established MNC out there with more than a $1 bln in  Consumer staples sales in a quarter. ITC’s brand portfolio is surely chugging along as nicely as well. Almost as much as the bigger soaaps and detergents portfolio of HUL.

English: India's Minister of Finance Palaniapp...
English: India’s Minister of Finance Palaniappan Chidambaram is the special guest at a plenary session titled Risks to India’s Economy in a Post-Crisis World held at the World Economic Forum’s India Economic Summit 2008 in New Delhi, 16-18 November 2008. (Photo credit: Wikipedia)

India’s consumer consumption jump story could still be just around the corner further along in 2013 before the next Festive season rerates expectations of the secular growth trajectory for India and how China is indeed different.

China and Japan’s markets may not see the expected rush in equities again and it is back to the smaller markets and some of that rerating might again positively influence Indian inflows because of the same reasons. I am intrigued therefore , (as an analyst and a commentator albeit because I have had a punting background) by the consolidation in ICICI Bank as well as YES Bank and IDFC. Not just (a) alone but all of (a), (b) and (c)  could be headed for new levels for consolidation which are more than three times their current high ‘stratospheric’ pricing as their valuations not only underestimate India’s potential but these scrips flag the best examples of trailblazers in India Inc which can ramp up on volumes, new business and secular growth almost effortlessly for the investor as we head for a comfortable 2-3 years from the bottom of the cycle

Of course the related depth of research sitting alone might produce limited results immediately as most is internet only kind of info but one is certainly confident after seeing the fate of erstwhile trailblazers like Kotak and HDFC Bank (incl HDFC) which have been forced to stay down with excuses of sterling quality after they could not catch the earlist kindled growth in any of the last 4-5 cycles they have been a part of. They would probably choose inorganic progress from here to get back into the saddle in the meanwhile as Energy and Pharma also need to prove their mettle as sectors and Aviation and consumption are the only mavericks worth backing right now.

 

India Earnings (Retail Lifestyle) – Earnings Surprise: ITC reports INR 71 B revenues but static EBITDA

Sunfeast 10K - Thrill
Sunfeast 10K – Thrill (Photo credit: Tamal)

The growing strengths of ITC again aided by a price hike in tobacco products in this quarter, gave cause to investors and market makers inthe stock to push northto unheralded levels a sthe rally from infracos receded almost as expected after the bid to 5650 bbecame stronger in the afternoon trades this Friday.

ITC toplines ( excluding Excise) finally seemed to gro respectably after getting flatlined for a few quarters around the $1 B mark with a $1.2 B mark at INR 71 B helping PAT grow another fifth, breaking the jinxed 2-3 quarters for India Inc as well which have almost straitjacketed India Inc to GDP growth and IIP growth levels and consisstent downgrades on earnings.

While the retail lifestyle consumption growth still did not herald the breaking of the “Limited Feature” score of $1B in Consumer Brand Valuations that seem to cripple most Discretionary and Non discretionary branding

Dabur
Dabur (Photo credit: Wikipedia)

stores, the significant growth provides hope to those entering India as investors in the Consumption story that indeed Multi billion brands are possible to be built despite the experiences of HUL, P&G, Dabur, Marico, Britannia and now even McDonalds and Pizza Hut in India’s prolific competitive spaces filled ith 85% unbranded/commodity plays or the hitherto Mom & Pop space that seems to hit these brands like airbags deploying early on crossing a specific speed

Marico
Marico (Photo credit: Wikipedia)

Bajaj Finserv growth and the resurgence of Insuranc e and NBFC consumer loans stories also underrite the same hopes with Bajaj FinServ posting a INR 10 B income and INR 2.2 B PAT

ITC Net Sales were INR67 B a linked/sequential quarter ago in June and seem to have grown more than 6% sequentially as well. Slower increases in COGS and Trading goods purchases coupled with good cycling of current inventories have been growing ITC margins

Sunfeast World 10k 2010 Logo
Sunfeast World 10k 2010 Logo (Photo credit: Abhijith B.Rao)

in the last two quarters and the same seemed to have stood ITC in good stead as will be cleared on detailed segment results being avalable on the earnings call/ review

 

 

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

Marico
Marico (Photo credit: Wikipedia)

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

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

250
250 (Photo credit: Wikipedia)

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

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

India Morning Report: Markets dodge the overvaluation scare with timed tears in the market fabric

 

It could still be a time to buy..

Ofcourse anysuch big move like the inflow of INR49.50 B in September would cause the 6000 target to be completed in December on the Nifty. The time to buy stems from recent well timed correctionss bringing up time to fill the tears in India’s struggling and listed consumption story.

The tear in the consumption fabric has filled up

While markets are tentatively suggesting a bad Q2 which just means it would not be a surprise when it does land, the mid cap Consumer plays have filled the gap for seasoned traders with Dabur still on play today at 135 levels. One feels similarily Lupin, Cipla and ITC and Bharti Airtel could be buys and no one attempting shorts on those plays will land anything tenable this week or next even if the markets stay in consolidation not uptick.

Real consumption is going to bring the real scare..

It is also similarily obvious that despite the protestations, Q2 results will actually revive profit growth and thus the real scare is that the slowdown has continued from September into Q3 and thus the jump in September results will be actually followed by a dumping result of the real bottom in December while India’s services PMI supports the current India outperformance fable perfectly with a 54 mark from 52 in August keeping india in the lead with 5% + growth globally. 

Time though for the banks to not rise too fast in the meantime and HDFC Bank is right now correcting sharply to keep the indices from floating up beyond reason for pressure on DIIs and other traing FIIs to enter the market at this stage and book 200 points on the NSE indices having already spent two-three months waiting

THERE ARE NO SHORTS on HDFC or HDFCBANK implied in his report

 

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

 

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

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

 

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

 

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

 

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

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

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

 

Morning Trading Strategies – India September 10-14, 2012 (Day 2 – Tuesday)

 

State Bank of India Logo
State Bank of India Logo (Photo credit: Wikipedia)

 

No do not do that. though smaller targets that Ashwini Gujral has suggested work, you never know which short won’t work and thats a good investment on the long you are switching. Of course I refer to the markets enticing show of what’s left in India anyway and exiting by the back door for the show is over kind of morning with dear networks taking turns on shorts for day traders. Yes Bank could very well come back to 320 and IDFC has already shown enough to stick to 122 levels than go back to 114 both indicating that the supposed over emphasis on both banking and infrastructure financing is unlikely to go away and REC and PFC are already at encouraging levels for an uother upmove.

 

We do not expect markets to go for the South side vacation day traders are so fervently hoping for.

 

We do not expect markets to go for the South side vacation day traders are so fervently hoping for.

 

ITC is a buy again at 253-257,  More IDFC can be accumulated at cirrent prices, ICICI Bank is a good buy but the stock ill run below 900 on some quick performance concerns regarding expectations on NPA portfolios, and restructurings as well as business segment portfolios the firm operates without any regard for the consistent high NIMs  and quality credit pull to the franchise.  SBI stock similarly awaits a big bang news before a new positive target thus making a good upmove unlikely while big news is unlikely in this quarter or next, banks having stabilised a volatile operating scenario

 

 

 

LATE MORNING TRADING STRATEGIES INDIA SEPTEMBER 06, 2012

 

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

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

 

IDFC Recommendations off the mark!

Not that many are on the mark, being based on fundamentals alone and not able to find a fair hook on timing. However the FMCG and Health calls are fine as a sectoral calls and I disagree with both exits from ITC and ramping on new Henkel owner Jyothy Labs. Both recommendations define  a very different time horizon than the market horizons currently and this particular rally is obviously not a choice for the house.

Jubilant Foods and Titan shorts are not going to work for long either. the infra NBFCs in Power from PFC and REC to PTC may take a break here as well, IDFC could restart on the run from 137 or 139 itself and has stabilised by itself since the morning.

Quantum, strangely is better placed with today’s picks ( on the ticker) is it just RELIANCE?

UPDATE::2.06PM:: The Markets agreed with both and infact profittaking in ITC suddenly reversed in minutes of this post being published and ITC recovery main part of the run before the CAG report dampened Power stocks like RPOWER and IDFC itself came down after.

Late Morning Trading Strategies: July 11, 2012

English: The photograph is of SBI Mumbai Main ...
English: The photograph is of SBI Mumbai Main Branch building taken after sunset to capture the glorious architecture of the gothic styled building that was built during the Raj. (Photo credit: Wikipedia)

Buy GAIL at 355, IDFC at or below 140, buy ICICIBANK and AXISBANK for at least one more jump

SBI, ITC and HDFCBANK are buys, CIPLA and BAJAJ AUTO are the immediate defensives that will stay positive and up, HEROMOTO may keep the uptrend

IT companies are not going to get anything fromt his depreciation, Only if MindTree could correct to 636 and I could Invest in growth instead.

RCOM is a big buy with CDMA out of licensing costs fallout

Rid yourself of strangles and straddles, volatility is going to be very low and then very high when it moves, If you sell a 5500 call and 5300 put for example you already don’t make even 70 and then it could be out of both of these ranges in a jiffy, if instead you straddle for immediate move out of 5300 with a put ancd call buy or 5400, if you prefer ( hich may hand you better breathing space) the volatility may stay down from 15-16 to even 12 and lower

Do Consumer Pdts have the ability to grow the scale?

Staples (Canada)
Image via Wikipedia

Consumer Staples have been in the less than 20% branded category and probably retail supply chains will take more of the branded yet wholesale share in biscuits, candy and soap in modern retail . However the growing consumption boom has always left the Hindustan Unilevers, The P&Gs and even the ITCs in the cold.

Despite category development and brands worth INR 750 mln in quarterly sales as also a gross $1 bln brand value in Consumer staples, ITC itself has seen a need to bleed in the sector and the growth of the unorganised sector is yet not capped keeping a 85% market share in all Foods and personal products as well as home care products for well over two decades that India set otut on the reform path. A critical bridge between Food security and Luxury spends on lifestyle foods at the top of the brand value chain, the unorganised sector , even importers from the middle east may not thrive but manage most of the volumes in the industry.

The question of course comes from the happy developments for Dabur and Godrej, with forays in Africa underlining India’s outward thrust, but the challenges that remain int he emerging markets and in India and China for branded or aspirational categories of atta, soap and dye are limited for indian brands, P&G and even the body Shop or L’Oreals of the world. The challenge may well serve them in 5 out of 40 such proucers and 5 out of 40 such product categories, but India and China have time and again proved they are not in a hurry to go anywhere domestically, unlike cellphone plans for example, like dishes and Television which are a priority for most of india’s domestic 220 mln household s and mby corollary more so in other underdeveloped markets.

Governance structures and mandatory NGO participation with development aid in Africa may change it for Healthcare or Green farming categories but other infrastructure will fall prey to military / energy coups and cheap imported Chinese goods..just first thoughts for our foray into the dark continent outside and the unbranded continent within, which needs a Cadbury;’s name to sell some Oreos in the confectioanry sector a brand of $1 bln for us being the final pinnacle in most product lines in food, personal and home care as HUL has found in the last two decades.

India Earnings Season: ITC did well again, why not enough?

Somehow ITC’s profit growth to INR 17.01 bln inspired the market to invest in its stable model causing a sell of fnear the usual 210-215 mark even though results growth is on call

FMCG business grew 25% while overall sales grew 14% and Net Profits 22.5% Growth in Agri and Hotels remains weak from management expectations Cigarettes also grew at 25%. Hotels revenue is 5% at 311 crs and profits at a 34% margin at 101 crs (1.01 bln)

Net Sales for the 9 months are at INR 181.71 bln or ($3.6 bln) with FMCG sales at INR39.1 bln or $800 mln up

ITC Welcomgroup Hotels, Palaces and Resorts
Image via Wikipedia

25% and Tobacco/Cigarettes at INR 90.74 bln or $1.80 bln up 15% only. Agri and Paper have grown to INR 60 bln in nine months or $1.2 bln

PBT margins on Capital in hotels is just 6% and Branded FMCG goods in the Foods, Apparel, accessories and stationery have not reached breakeven losing INR2.29 bln in nine months (PBT/Equity(Seg Capital) = -15%) Return on Agri in terms of Capital employed is higher at 30% and that on Paper business is a good 15%, leaving Cigarettes to be the mainstay of the company with a 20% return on Capital.

The Retail Lifestyle Champions: ITC grows prices, Foods and education in H1

Line results are in: EBITDA margins up .4% tp 34.5% as Net income grows to INR 5974 up 1.8% Q-o-Q PAT up 21% yoy INR 1514 Crs for a good margin of  25.34% Acc to UBS ITC lowered staff costs and inc EBITDA despite missing sales in paperboard and agri. Price Hikes in Tobacco would count for margin expansion the most to 300 bp from the June qtr

Rumman Ahmed at India WSJ writes:

Pre-tax losses at the non-tobacco consumer goods segment narrowed to 559 million rupees from 669 million rupees, while net revenue increased 27% to 13.41 billion rupees.

Net revenue from the hotels business rose a muted 1.0% to 2.11 billion rupees, primarily as the second quarter is a lean period for the hospitality business.

The paperboard, packaging and printing business’ top line rose 9.4% to 10.05 billion rupees, while revenue from the agricultural trading business rose 13% to 14.35 billion rupees.

ITC – Outperforming expectations
Though much more analysis is required before the company settles down in the second YV Deveshwar term and gets back into the new M&A game, The retail lifestyle star with good new brand launch traction since 2009, posted good growth nos.
Tobacco business has posted steep price increase at retail POP this  quarter  at 10% with more hikes coming after inflation lasted more than a year and input costs are out of whack. Profits of INR 1729 crs or $ 346 ml sustained the new non tobacco businesses

Still the price increases that ITC has taken will boost EBIT [earnings before interest, taxes] margins by 80 basis points, they say. Its cigarette volumes are expected to grow 7% in July-September,

Bank of America Merrill Lynch sees ITC’s margins surge 115 bps in the quarter.

Kotak Securities expects ITC’s cigarette division sales will rise 13% from a year ago, helped by a mix of price hikes and volume growth.

While the cigarette business remains robust, its non-cigarette FMCG business is also expected to remain on the growth track. Sharekhan expects the FMCG business losses will reduce 12% year-on-year. The Motilal Oswal analysts expect EBIT losses in FMCG will decline 16%, while sales increase 19%.

“Improved profitability in foods [Bingo breakeven in the first quarter FY12], education and lifestyle retail will drive the decline in EBIT losses,” say Aggarwal and Kapoor.

ITC’s Fortune has great competition

The 26/11 hit Taj Hotels have two brands competing with ITC’s Fortune and others in the mid-market segments like the Quality Inn. However Only Fortune and Taj’s Gateway have plans to be in the Tier II towns dotting the country’s landscape like the pilgrim towns and those with significant merchant trade. The Taj Gateway for example wants to add 30 new hotels by 2015 in locations like Jalandhar, Mysore, Raipur and Gondia ( Mint – November 18 ) 

The answer is nto that simple however. The available accommodation would definitely make a profitable niche but wll not reduce the shortage of boarding and lodging nor will it address viability concerns of the Taj and ITC Hotels, not to mention home grown players like East India Hotels and the Club Mahindras.

Indian consumer spending in B towns is definitely slated to pick up and double in every 2-3 years for some time to come, but this country hs been in the midst of such boom and not seen enough clientele in this industry yet. Business Travellers and the 5% of GDP that is accumulated by Tourism remain formidable targets to maintain each year even during the good time, Costs of Real Estate, F&B related inflation, wage inflation and the seasonality of tourist arrangements coupled with India’s non voice in international leisure and lifestyle forums , lack of negotiated tarriffs in travel and hospitality all count towards a tremendous dearth of new traffic for any such tourism business. A lot remains to be done and while more and more deluxe 5 star facilities are slowly becoming available because of rush hour and the consequent unavailability that plagues travellers scheduling a trip, too many ventures like the recent Indian Maharaja ( TC/Cox & Kings IPO now open) trins and the 15 year old plans of Gateway and ITC fortune have been non starters. Costs for 5 stars have easily climbed to an average of Rs 5 Crore per room, while the Marriott has managed the same in Mumbai for less tan 3 crore and the Fortune and the Gateway chains have to manage with Room Rents of not more than Rs 800000 to 1000000 per room and 20-30% contribution from F&B implying a 100 room hotel cannot earn a topline of more than $2.7 million a year, a measly Rs 12 crores, a pretty small cake for the employee family. A cosmopolitan venture like Ginger on the other hand would not be acepted easily outside the metros of DElhi, Mumbai, Chennai and Bangalore.  

Also a significant competitor to these brands would be Oakwood and Marriott Suites that provide furnished flats for unlimited duration as they would segment that population of expats that need such spacious living and confine their target market to backpack tourists and pilgrimage bound couples/families

 

Posted via web from The investment blog on Post

ITC Welcome Heritage And Fortune Hotels

This is the third attempt in the last 15 years that the ITC Hotels Franchise is launching an expansion plan in either the superluxury or as in these five years, the Budget and the Mid-Tier hotels. Fortune properties previously purchased across pilgrimage towns and other Tier II towns did spark interest but the consolidation is still only half complete and the business model has many doubting thomases. Nevertheless ITC cannot afford to miss the bus and thence 14 new heritage hotels and a few Fortune properties will come up.
 
One quick word on operational and business model challenges :
 
ITC has found historically that moving towards mid tier and Budget properties actually does not bring costs down as much ( Investments in land are not that disparate as one might naively believe) while revenues on the heritage properties are seasonal and at the Fortune and heritage properties are much lower with the F&B component falling further in disproportion and discounts in that tier being much more in vogue because of local competition. However, a little bird did tell me once that properties named Fortune in Gurgaon command up to $400 per night for rooms.
 
Revenues at this tier are unlikely to exceed $65 per average night for boarding and less than 20% in F&B with Capacity utilization unlikely to cross 65% even at tourist growth rates exceeding 10% per annum

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ITC Welcome Heritage And Fortune Hotels

This is the third attempt in the last 15 years that the ITC Hotels Franchise is launching an expansion plan in either the superluxury or as in these five years, the Budget and the Mid-Tier hotels. Fortune properties previously purchased across pilgrimage towns and other Tier II towns did spark interest but the consolidation is still only half complete and the business model has many doubting thomases. Nevertheless ITC cannot afford to miss the bus and thence 14 new heritage hotels and a few Fortune properties will come up.
 
One quick word on operational and business model challenges :
 
ITC has found historically that moving towards mid tier and Budget properties actually does not bring costs down as much ( Investments in land are not that disparate as one might naively believe) while revenues on the heritage properties are seasonal and at the Fortune and heritage properties are much lower with the F&B component falling further in disproportion and discounts in that tier being much more in vogue because of local competition. However, a little bird did tell me once that properties named Fortune in Gurgaon command up to $400 per night for rooms.
 
Revenues at this tier are unlikely to exceed $65 per average night for boarding and less than 20% in F&B with Capacity utilization unlikely to cross 65% even at tourist growth rates exceeding 10% per annum

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Aviation blues, will UDF increase in a year? more fare increases?

Air traffic down seventh month in a row; airport developers hit

While domestic passenger numbers declined 15.3% y-o-y, international passenger traffic, which lately saw some growth, was virtually flat for the first time in January, adding to the airport developers’ woes

Click here to view full story

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A retail comeback story | Mysore Road the new Whitefields « An investment Blog

A retail comeback story | Mysore Road the new Whitefields Mumbai: Consumers have started trickling back to malls and department stores as the economy is stabilizing, say many large retailers, who expect sales to further improve in the months ahead. This sentiment is spread across segments, from value retailers such as Vishal Retail to specialized chains such as The MobileStore, which sells cellphones and accessories and is part of the conglomerate Essar Group, to Reliance Retail, part of the Reliance-Anil Dhirubhai Ambani Group. Pantaloon Retail (India) Ltd, the country’s largest retailer by revenue, witnessed around 8% growth in same store sales for the month of May compared with the same period last year. In April, the company said it had an increase of 7% and 5% in March. Vishal Retail, which shut two apparel manufacturing units and two stores during the downturn, is now seeing sales picking up again. Chief executive officer (CEO) Ambeek Khemka said, “Sales are picking up gradually and the company has seen a surge of around 20% overall sales in the last three months.” A Reliance Retail official, who did not want to be identified because of company policy, said, “From April, definitely, the consumer sentiment is positive and we have witnessed an increase in sales by around 15% in the last two months and June is looking better than May.” Rajeev Agarwal, CEO of The MobileStore, said, “In the last three months the sales of the company have increased by around 20% which definitely indicates a positive sentiment.” The upturn comes at a time when economists around the world have been speaking of so-called “green shoots” of recovery after an unprecedented global slowdown sharply cut consumer spending. Falling stock indices, declining housing prices, rising inflation and the global economic crisis had led to Indian consumer confidence declining by 26.5 points between January 2008 and March 2009, according to a May report titled Winning Indian Consumers In The Downturn from the Boston Consulting Group. Analysts, too, feel the worst is over for retailers and the sector, whose market size has been estimated at about $25 billion (Rs1.2 trillion), is likely to witness slow and steady growth. During the period, most retailers, among them Spencer Retail Ltd, Aditya Birla Retail Ltd, Future Group, Reliance Retail Ltd and The MobileStore, went slow on expansion, closed stores that were no longer viable, and regularly pitched promotional offers and deep discounts to counter the decline in discretionary spending. In addition, some retailers laid off employees, renegotiated rental agreements signed in a healthier financial climate, and consolidated operations by merging teams, warehouses and back offices. The MobileStore, for example, shut down at least 70 stores, while opening an equal number of new ones after November. Reliance Retail added 100 stores and shut down at least 20. However, some retailers such as Subhiksha, Mumbai-based Foodland Fresh, and Indiabull’s Retail Service Ltd were the worst hit. While Foodland Fresh and Indiabulls Retail Services Ltd have only three and four stores operational, respectively. Subhiksha had to shut down operations due to lack of funding. However, things are looking better for the industry as a whole. Kishore Biyani, founder and CEO of Future Group, said, “We are seeing positive sentiments in consumer behaviour due to the sense of security in terms of job and stable government. With asset prices increasing people have started to feel more secured. Moreover consumption in the country is not going to come down and will continue to grow.” A New Delhi-based analyst with a domestic brokerage said in the last three months the consumer sentiment is gradually improving, and that almost all retailers are seeing a rise in sales across categories. “Retailers may once again see a double digit growth in the next few months if the consumer sentiment continues to grow at the present level,” he said. He declined to be identified because he is not allowed to speak to the media. via Retail glimmer of hope zyakaira notes: In other related news, in Bangalore – Mysore Bangalore Infra Corridor is being used effectively by the traffic, while the paid toll roads from and to the NICE road have picked up some traffic though they are not there yet. Whitefields projects coming up include a Prestige Seconds’ mall. Prestige forum in Koramanagala remains the stellar success and malls in Bangalore like Forum and even the new Oasis / Lifestyle Mall show continued traction throughout the week. We are backing the property at Innovative Film City which is available cheap at rents of $4 psft and less and retains 50000 footfalls in a week without the congestion and with a complete leisure and holidaying destination story around it The Mysore-Bangalore Corridor is likely to see a larger support esp. along the SH-17 which is a regular attraction for Bangaloreans. And personally, someone like Kishor Biyani should not be in this Industry at all and there should be more options for teams like Bharti and Walmart to provide choice to consumers rather than start a shackled business under Business to Business pretext because of FDI restrictions

Posted via web from social networking and new markets

A retail comeback story | Mysore Road the new Whitefields « An investment Blog

A retail comeback story | Mysore Road the new Whitefields Mumbai: Consumers have started trickling back to malls and department stores as the economy is stabilizing, say many large retailers, who expect sales to further improve in the months ahead. This sentiment is spread across segments, from value retailers such as Vishal Retail to specialized chains such as The MobileStore, which sells cellphones and accessories and is part of the conglomerate Essar Group, to Reliance Retail, part of the Reliance-Anil Dhirubhai Ambani Group. Pantaloon Retail (India) Ltd, the country’s largest retailer by revenue, witnessed around 8% growth in same store sales for the month of May compared with the same period last year. In April, the company said it had an increase of 7% and 5% in March. Vishal Retail, which shut two apparel manufacturing units and two stores during the downturn, is now seeing sales picking up again. Chief executive officer (CEO) Ambeek Khemka said, “Sales are picking up gradually and the company has seen a surge of around 20% overall sales in the last three months.” A Reliance Retail official, who did not want to be identified because of company policy, said, “From April, definitely, the consumer sentiment is positive and we have witnessed an increase in sales by around 15% in the last two months and June is looking better than May.” Rajeev Agarwal, CEO of The MobileStore, said, “In the last three months the sales of the company have increased by around 20% which definitely indicates a positive sentiment.” The upturn comes at a time when economists around the world have been speaking of so-called “green shoots” of recovery after an unprecedented global slowdown sharply cut consumer spending. Falling stock indices, declining housing prices, rising inflation and the global economic crisis had led to Indian consumer confidence declining by 26.5 points between January 2008 and March 2009, according to a May report titled Winning Indian Consumers In The Downturn from the Boston Consulting Group. Analysts, too, feel the worst is over for retailers and the sector, whose market size has been estimated at about $25 billion (Rs1.2 trillion), is likely to witness slow and steady growth. During the period, most retailers, among them Spencer Retail Ltd, Aditya Birla Retail Ltd, Future Group, Reliance Retail Ltd and The MobileStore, went slow on expansion, closed stores that were no longer viable, and regularly pitched promotional offers and deep discounts to counter the decline in discretionary spending. In addition, some retailers laid off employees, renegotiated rental agreements signed in a healthier financial climate, and consolidated operations by merging teams, warehouses and back offices. The MobileStore, for example, shut down at least 70 stores, while opening an equal number of new ones after November. Reliance Retail added 100 stores and shut down at least 20. However, some retailers such as Subhiksha, Mumbai-based Foodland Fresh, and Indiabull’s Retail Service Ltd were the worst hit. While Foodland Fresh and Indiabulls Retail Services Ltd have only three and four stores operational, respectively. Subhiksha had to shut down operations due to lack of funding. However, things are looking better for the industry as a whole. Kishore Biyani, founder and CEO of Future Group, said, “We are seeing positive sentiments in consumer behaviour due to the sense of security in terms of job and stable government. With asset prices increasing people have started to feel more secured. Moreover consumption in the country is not going to come down and will continue to grow.” A New Delhi-based analyst with a domestic brokerage said in the last three months the consumer sentiment is gradually improving, and that almost all retailers are seeing a rise in sales across categories. “Retailers may once again see a double digit growth in the next few months if the consumer sentiment continues to grow at the present level,” he said. He declined to be identified because he is not allowed to speak to the media. via Retail glimmer of hope zyakaira notes: In other related news, in Bangalore – Mysore Bangalore Infra Corridor is being used effectively by the traffic, while the paid toll roads from and to the NICE road have picked up some traffic though they are not there yet. Whitefields projects coming up include a Prestige Seconds’ mall. Prestige forum in Koramanagala remains the stellar success and malls in Bangalore like Forum and even the new Oasis / Lifestyle Mall show continued traction throughout the week. We are backing the property at Innovative Film City which is available cheap at rents of $4 psft and less and retains 50000 footfalls in a week without the congestion and with a complete leisure and holidaying destination story around it The Mysore-Bangalore Corridor is likely to see a larger support esp. along the SH-17 which is a regular attraction for Bangaloreans. And personally, someone like Kishor Biyani should not be in this Industry at all and there should be more options for teams like Bharti and Walmart to provide choice to consumers rather than start a shackled business under Business to Business pretext because of FDI restrictions

Posted via web from social networking and new markets

Indian Market Tweets – June 24, 2009

Waiting for a test drive. I did like the Honda Civic, this one is the Optra Magnum _TYY4 ( la unlisted mncs of asia’s largest stock market)less than 20 seconds ago from TweetDeck
 
These Wealth Management reports conned poor Sunil Mittal into starting a new Mutual fund. The team is probly better than Lotus & Mirae _TYY41 minute ago from TweetDeck
 
TCS & Infy leaving obvious hints about better results! _TYY4 (la lost techs of offshoring, printed, bound and hand delivered by GenXvoters)4 minutes ago from TweetDeck
 
Global banks report reiterates our merit lists! check check check! _TYY48 minutes ago from TweetDeck
 
The Bharathi Shipyard offer for Great Oddshore was to be upgraded to Rs 403. Any time now.. _TYY49 minutes ago from TweetDeck
 
NDTV & UTVi continue to be on the job on the Indian Budget. I think TV 18 will be losing a lot of traction this year, unless revamped _TYY4
 
– 12:50 by my watch

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