India Morning Report: State Bank of India results scare, IIP for June -2.2%, $12.27 Bln Trade Deficit

Taj Mahal, Agra, India. Deutsch: Taj Mahal im ...
Taj Mahal, Agra, India. Deutsch: Taj Mahal im indischen Agra. Español: Vista del Taj Mahal, Agra, India. Français : Le Taj Mahal, à Âgrâ, en Inde. Русский: Мавзолей Тадж-Махал, Агра, Индия. (Photo credit: Wikipedia)

Banks growth constraints from old and new NPAs came to be the most heavily landed blow again with INR 150  Bln in fresh slippages to 2.8% Net NPAs and a 5.5% of Book in Gross NPAs for India’s largest bank as markets at 0.9 PCR look to bottoming out with 5500 Puts still popular and Futures encouragingly becoming short hedge currency again for Institutions.

SBI has managed a NIM of 3.49% this quarter and investments currently denominated in low yielding CP will significantly buffer the margins to end of this fiscal according to the Bank resident’s statement defending current results (ETNOW). Auto Sales of 131k cars and less than 11.5 mln two wheelers as MUV/SUV sales plateau and trend down in the last bulwark crumbling for the 12 months are just part of the degrowth in the economy as a whole as May IIP was revised downward to -2.8% and June IIP came in a -2.2% showing degrowth of -6% in Capital goods and taking the April June quarter to -1.1% , negating any growth from the rate cuts before the rate clamp shutter down business in July , August and probably September

Consumer durables have been double digit negative in both May and June degrowing 10.5% on year in june with non durables up robustly another 5% allowing them to improve inflation. Better news from trade with a lower import bill from less than 3 tonnes in Gold and Silver imports each makes a crawl at lower CAD possible as also more controls return to the Economy after 22 years of reform under Manmohan Singh

Dabur and other FMCG could return to strength given the consumer non durables sales upticks and continuing robust inflation in the categories even as input inflation subsides. a 9.64% CPI does not discourage category leaders HUL and ITC also from continuing to improve realisations even if the Rupee completes its move only beyond 65 levels

ONGC results were bearable though the markets are unforgiving for the iNR 200 Bln quarter as realisations are likely to remain near this quarters $40 a barrel than last year’s $45 levels and the coming investment uptick within the week could see Oilcos picking up the slack after abig fall as well and oil purchases down for the second successive month will stress the trade this month for sure.

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


India Morning Report: GDP forecasts look for their pound of flesh, india inc reports (This week in Asia on The Banking and Strategy Initiative:

The old RBI Building in Mumbai
The old RBI Building in Mumbai (Photo credit: Wikipedia)

The Reserve Bank of India pulled up the bank lending rates for its MSF (the emergency lending by RBI at the top of the rate channel prescribed) from 8.25% to 10.25% yesterday and networks are agog with the presumptive lockdown on India’s money markets esp inter bank liquidity finally pushing the short end of the term structure up a couple of hoops to 8.15% at the open as visible in one year forwards.

In sum, though equities will keep a small range around a ower bound 5900 and above, strangles are already priced near 0 at 138 for the short 5900 puts, 6000 calls showing trades to be unremunerative for this week and the profit making probaility of this depleted range is tenuous both fro m the tightness of the range and the inherent balance engineered in the markets giving way to any bull/bear at the slightest pretext

RBA had earlier shown in its minutes released that they considered the rate cuts to be done with, triggering a conventional run on the Dollar in that currency bringing it up by 1% . The Rupee has opened 1.5% stronger in morning trades but as pressure from Economist desks builds up to a crescendo and GDP forecasts are cut 75-100bps at Morgan Stanley among others to near 5% for 2014, we are witnessing a characteristic one time correction as policy locks in to the only possible market view while hoping for a trade led recovery down the line and acts on the limited dollar trade that continues to cause disruptions in our Economic cycle especially related to our dependence on imported fuels

Traders would hardly have been in place for the correction on Thursday and Friday as the markets are still positively rewarding good results which when they com are as big as over 20% sales and bottomline growth on a regular basis. However , the downward move also lacks momentum and like the rupee in the other direction, equities will only trade up the rest of the day after opening 100 points down on the Nifty. Some longer term shorts may stay in as characteristic hedges performed over the weekend and Monday when indices opened down today in differential performance terms to trading positions and long investment portfolios. ETF outflows from Emerging markets were just under $10 Bln in June with $6 Bln exiting the iShares MSCI EM fund but that is still 1 in 10 of the funds and funds will continue to be sticky in India where the growth paradigm is still relatively safe on th ground despite the consumption led industrial production going negative marking the toughest bottom for Indian prospects. Manufacturing makes less than 20% of India’s GDP but is on par with Exports and Global trade lacking growth claws would unhinge the one sided growth story that has always precluded a deeper range of opinions on India from global commentators instead shined by China.

India’s equity markets being deep makes it impossible for hot money to follow on this morning’s run and even as the spike in Fixed income markets unhinges bank business models the problems will likely be fied with a continuing positive bias before the end of the week unlike such runs in other Asian markets like indonesia, Korea or Thailand However a bottom in bank stocks is yet not known or targeted and ther emay be no directional trades in the interest sensitive sectors in India


India Morning Report: Markets steady, India facing uphill task

Bajaj (Photo credit: Chandra Marsono)


The Indices opened barely in the red after a dull week of Economic data . Trade deficit reported under a $10 Bln for June as Gold imports were blocked out but Inflation on CPI climbed back to 10% in a precursor to fuel inflation expected now to climb back from a barely settled in period of less than 6 months as the drop in Oil is destroyed by the 12% depreciation in the currency. The depleted Forex reserves are already a qustion for the Rupee and the negative IIP for the month is unfortunately unlikely to give confidence in the comeback. Consumption being defeated, one is not sure of the reasons for continuing retail inflation with foo inflation at 12% leading the charge currently.


IIP showed a more than 10% contraction in durables Production index and negative growth year/year for non durables as well. WPI for June has also come in below 5% again And while monetary policy will be challenged by the prospects of inflation and depreciation , consumption is actually flling making infation an easy target to even prospects of deflation in terms of sentiment continuing negative in the economy. Investment is yet to come back to the Economy has become a challeneg desite a Forward FDI policy esp for Defence and Telecom on the cards.


Auto Sales are down almost 10% on year at 139000 cars and 55 lower for two whelers and though markets continue to treat Bajaj and Hero equally one can see performance for Hero worsening in the war with erstwhile partner Honda in the market and Bajaj has maintained euanimity in shares and market segments nonetheless.


Unfortunately apart from the results of this quarter one also does not see further uptick in Exports immediately. Banks despite the low 13.7% growth in Credit for the month of May/June remain fairly healthy in the selected layer as we have pointed out here and Bank  Nifty remains a great pick at 11600 levels markets keeping value priced in line with the economic sentiment


Last week, the India Morning Report could not be posted and the same may not be available from Tuesday or Wednesday till the end of the market week on Friday when the trade data and CPI was posted. For JP Morgan and Wells Fargo results refer to Indian Banks report this week and we will be covering Indusind’s results of last week later with YES Bank performance




India Morning Report: July series catches with investors, Investors coming back?

Large moves in ONGC and Coal india restarted the bull fuelling of the markets, traders assiduously avoiding the to be rally heroes and leaving value on the table in YES Bank, IDFC and other banking applicants while taking the recently hammered value picks in the indices back with defined pairs available to sophisticated and wealth investors and shorts avoiding the markets.

It allowed frustrated “no go” traders like Angel broking who tried a short pick on IDFC yesterday to leave unnoticed while long cash equity futures seem to be a prelude to another rally in the bank nifty. Of course 5800 could still be a level to short the index for the pronouncements of today for coal India and gas prices could still not translate into concrete action in the election year but that looks increasingly remote.

The turnaround is here in process but there is unlikely to be immediate jump in economic data except that future months could see better traction from investors with sticky inflows from the last take on the markets seen in the June expiry above 5700 around 2:30 pm

Gas prices are set to rise in 2014 to market linked levels starting at around $8.4 mmbtu according to the new policy. Bajaj auto has recovered smarty in 2 sharp moves of 2.5% and is still agood nvestment and trade at 1880.  iCICI Bank similarily has a good value at 1050 levels




India Morning Report: Markets ready for expiry Thursday

NSE Logo
NSE Logo (Photo credit: Wikipedia)

Markets have probably decided to test the 5650 mark for Thursday’s expiry and may well show a similar small positive move tomorrow and end up with a big play on expiry Thursday as rollovers would mean shorts have it bad with only index shorts by FIIs evidence of the downward move in the last week. Though by itself that does not mean that the put call ratio of 0.75 or the current 0.85 at open will result in a bullish candle to 5700, traders betting short if any left do not really have returns on the short end of the trade.

The Sensex is holding 18500 levels and even if the nifty drifts lower instead and there is an outward risk of a big short, no new shorts have been added in the last 7 days on the BSE or the NSE according to the network reviews Discounts on the June series are obvious and should not have been treated as informative for trend with June longs hoding a healthy enough 10 point premium for a market move in any direction and is unlikely to accumulate speculative long only interest in this market . The pull up might again weakly ensue in OTMs as without active shorts markets amy still make a feeble attempt at closing June closer to the starting point if not in positive territory which can easily be ruled out.

Bank Nifty is holding 11200 and July may well not shout for lower levels though there is still a definite probability of a deeper negative move purely n the extent of unidirectional momentum created by the Fed pronouncements for fund managers using it a s an opportunity to pare holdings in US bonds and thence global assets including EM debt and equity as that would avoid them frequent shocks when outflows continue as a result of the Fed prognostication of a complete recovery is roved wrong for the US and its trading partners.

Pair trades with ICICI Bank on the buy side are doing well as also those who have chosen the bankNifty for the buy and shorted a PSU bank with negative prospects. Today’s move is well treated as a dead cat bounce till expiry is closed out.

India IIP Report: (September 2012) An incipient recovery may not take monthly comparisons

Though providing monthly updates may have its advantages, quarterly tracking of the monthly IIP itself solves most of the cyclical trading and investment decision needs of the data as the organisations involved mull another ‘restructuring’ of the data series that relies on 31% Capital Goods and 38% Infrastructure production in the series. Ming and Utilities are reverbing as the more critical pieces having benen down from their averages longer and deeper. WPI data follows on Wednesday. CPI was reported a lower 9.42% instead of 9.76% for Octoeber almost concurrently to IIP announcements as overall CPI is 9.75% static over the September data while rural data has tipped to almost 10% at 9.98%

Electricity series has recovered well to 3.9% . Of course year on year figures are really not indicative after the big jump still keeping sentiment at its depths re performance but is up from 3% on August and negative in June 2012

Counterfeit jewelry
Counterfeit jewelry (Photo credit: Wikipedia)

Consumer goods data has gone negative again at -1.3%  from 5% in August and Intermediate goods are almost flat at 1.8% on month and 1.6% in June 2012. In June, Consumer Goods data was stronger on durables growth of 9% at 3.5% and Festive season has been good enough despite the discouraging data for September (Durables -1.7%, non Durables -1.1%)

The overall PMI Composite for India stood at a high of 55 in September and is only 53.5 in October but still among the highest globally. The September IIP data is a degrowth 0.4% after a degrowth of 1.8% in June 2012

June data was sharply negative on Capital Goods at -27.9% The September series continues at a double digit negative clip of -12.2% but policy hurdles seem to be out of the way from the brakes still on in June

August IIP has been revised downward to 2.3% as well, showing up the incipient recovery in the face but Mining sector’s chugging back to normal is reflected in the statistics well at a positive 5.5%

Basic Goods growth was a positive 3.5% in September over 5.3% in August and the overall Manufacturing Sector is a negative 1.5% against a negative 3% in June and positive 3.5% a year ago

Services and Utilities data have been very strong in India’s version of the crisis in IIP since 2009 but have finally hit a big disruption canyon in 2011 which has continued ravaging India’s growth prospects into 2013 as it returns to the fabled Hindu rate of growth of near its least 5% even as China transitions into the Developed World ready to strike at per Capita benchmarks set by Europe and the USA




The India Inflation report July 2012


The WPI data begins the catch up with economic data from India for July 2012 after global trends could not break India’s earlier rhythm, though still contused by global shock, with a 52% PMI and a 53 in Services PMI.

The inflation came in well below 7% from a 7.25% revised number for June to 6.87% number for July likely helped by the lack of demand in durable goods witnessed in the IIP and the continuing low basic and intermediate goods that continue to fuel production indices. Markets hold out hopes for aggressive rate cuts turning into a rate sensitive led rally post the inflation data release.

Primary Articles Inflation has settled down to a 10.38% same as 10.46% in June as Fuel price increases have been shelved and Meat Fish and Eggs continue to lead food inflation increases. We believe RBI may hold off on rate cuts till those fiscal changes have been implemented or the alternative disinvestment plan counted as success though the RBI will likely stay away from confusing the markets on the simultaneity of fiscal and monetary impact in terms of its equation with governments.

Inflation values for Food categories have dipped to 10.06% against 10.80% in the previous month and manufactured pdts inflation is just above 5.5% also down from last month


Bank Results Season: HDFC Bank showcases awesome retail growth

An HDFC Bank Branch in Hyderabad
Image via Wikipedia

With deposits increasing 9% over the June quarter and Savings accounts increasing 6% year n year of the total 18% growth in Deposits, HDFC Bank did well to run in to September end with a NIM of 4.1%. Advances have grown by 25% from September 2010, for Balance sheet size increase of 20% based on retail loans growth of 30%

The Bank has proved again that efficient management can still help it scale its mature management model as Net NPAs remained a low 0.2% of its Net Advances. and Capital Adequacy also remained at 16% and 11.5% for overall and Tier I based on the current Basel norms in India. India’ s breed of banks continue to grow on equity infusions than a hankering for Tier II capital and thus the bank sizes are inherently not comparable in size to those in China and the USA.

The bank increased PAT to a humongous INR 12 bln ( INR 1199 crores ) or $240 mln for a $1 bln runrate in FY2012 total Balance Sheet assets now exceed INR 3 Tln against INR 8 Tln for SBI and INR 2.5 Tln for ICICI Bank

Advances rose to Rs 189,917 crores or $38 bln and deposits outgrew past the $40 bln watermark More details would be apparent in our series after ICICI Bank results come out at the end of the month and HDFC bank results presentation is formally created/shared for the bank

Advances rose to Rs 189,917 crores or $38 bln and deposits outgrew past the $40 bln watermark Fee income was higher by 15% over 2010, at INR 983 crs comparing well with Q1’s 1100 crores. The year on year growth in Topline is the same as for Q1 and profits are up nearly 4% from June Other Income also grew more than 8% as Deposits grew 9% from June 2011 keeping the CASA healthy at 47.1% ( CASA had reached 49% last year)

Net Interest Income rose above expectations to cross INR 3000 crores rising less than 10% QOQ from June 2011 Loan provisions were 393 crores or $78 mln a mere 12% of the NII and the Cost Income Ratio was less than 49%

India Earnings Season: ING Vysya Bank uses the gap, Indusind builds on

Footbridge on the Indus River, Pakistan
Image via Wikipedia

ING Vysya used the gap in under performing Q1 results to come back with a vengeance. The bank scored early with 20% yoy growth in NII to INR 304 crores or $61 mln after a slow Q1. Both ING and IndusInd improved over Q1 NIMs to 3.35% ING claims it is growing advances 5% higher than industy\ry rate, this year at 23% IndusInd outgrew ING with $84 mln in NII (INR 419 crores) and added $42 mln in Fee income (INR 212 crores)

ING’s centralisd Risk management makes it maintain 85% Provisional Coverage on its Loans compared to a high 70% target briefl introduced by RIBI last year to create a contingent facility foor rising bad debt ING Vysya maintains a CASA ratio in the 30s, coming down to 32% this quarter and under pressure for the rest of the high interest regime period. IndusInd on the other hand has joined hands in the Consumer Finance boost strategy claiming to have turned around its DB Credit card portfolio and adding fee income from reference income for HDFC home and car loans

IndusInd has also grown the TRansaction services feee basket this quarter smartly to keep its 30% growth circle, ING in the meantime has grown profits on a larger asset base from $20 mln in June to a 20% higher $23 mln or INR 1.15 bn this quarter Indus Ind net is almost double at INR 1.93 bln or $39 mln based on a higher contribution from fee lines and Transaction services 

Both banks have also tied down their Net NPAs to 0.31% in the quarter.  

IndusInd has an Advance book of INR 301 bln and is growing fee income by 30%(on year) comparing favorably with the larger network of Vysya in assets and outperforming on the new equations in Fee Income and Consumer Finance

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