India Morning Report: Markets catch the flu , ‘one sneeze games’ continue

Rstps2
Rstps2 (Photo credit: Wikipedia)

A single stroke move at  the start of the week followed by one barely hanging Tuesday and the markets are a volatile potpourri. Despite the pre ponderence of institutions, markets have come out of 2010’s downturn having decided to be a one shot vaccine for India’s Economy woes every morning, tanking a 100 nifty points today to 6250 levels on the every thought of having to continue at the new range without a hope of an immediate rise to the promised lands at 6500

As Dominic Barton reminds us this morning, India is not on the priority lists of investors at the moment, anda scary thought to encounter in one’s portfolio despite inflows of $5 Billion since September.

Vegetables in a market in Singapore's Little I...
Vegetables in a market in Singapore’s Little India district. (Photo credit: Wikipedia)

NTPC could well have started the way down an its bounceback probably is just an aberrant move. However give the broader markets would be at an index of 6250 before 11 AM, it is easier to plan for an index going up again tomorrow and traders would be wont to get their choice picks in banks with the Nifty at 11,750 on the Banknifty.

One hears of some news on Bharti but the stock is continuing a slow rally from its 300 lows to 340 levels probably unaffected (LV/18). Coal India also continues down after the new CERC guidelines.

Rumors of an apolitical volte face by the party in power with Nandan Nilekani following on Manmohan Singh’s tenure as PM and a Shashi Tharoor and few other young ministers, seem to be “TOI’ like incendiary flames on the post election fires.  IT recedes as a defensive in rare down trades and shorts on HCL are probably the best way to cash in.  Breakout innovtions apart, undoable extensions on the startup model like being attempted by Just Dial in enabling services are proven time and again to bleed out such fragile new businesses. Energy rice raionalisation continues with easy increases for LG distributors to match the new cost structures.

English: Railway network connectivity map of t...
English: Railway network connectivity map of the populated regions of India. The Indian Railways is the world’s fourth largest railway network spread over 64,000 kms and transport 30 million passengers a day. (Photo credit: Wikipedia)

Most investors would accumulate ICICI Bank and Axis on shorts made today and shorts would probably exit at current levels. YES Bank remains an investment bet but policy is around the corner on Thursday next.

The Fitch warning on fiscal indiscipline is unfounded while the US sartups ranking updates IITs as a Top 10 force in the coming Economic rankings of the world. The Dollar Rupee however looks to be on the run to 61.50 and not 62 levels since Monday’s single Candle move up.

11 AM update: Exports have receded back to under $25 Bln and the deficit is a heartening $9.23 Bln with imports under $34 Bln, Rupee catching the worm before the 2-m/5pm RBI update for the reference rate, OIL bill fully paid and UCO (The Iran Bank) coffers full, Sajid and Ruchir fighting hard , taking turns to stick to their recessionary discipline induced by Bombay duck speculators in their circles waiting for the taper to break the straw on the Camel’s back.

Invisibles were a humongous $116 Bln as Samiran points out, only $20 Bln – $40 Bln from foreign inflows on a full year basis and Defence Imports aded to the trade deficit just $15 Bln, leading to a CAD score likely under $45 Bln. Oil is confirmed as having a lower tick in the second half of the year too. Non Oil data has dropped below $21 Bln from above $22-23 Bln in the prior months, an unhealthy increase)

Hopefully Stanchart traders have changed their call in time in the Q3 parts and there is liquidity following the bullish rupee trade outside notoriously trend lagging wealth bank forecasts(Julius Baer/Chris Wood week ago) trying for a share of the NDF trading volumes

Equities are in the meantime marking probably the time in FY15 when Gold and Silver imports at $1 bln in November , come back to pre curb levels

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

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

Pending Cabinet decisions, Parliamentary Debates, Ordinance and Laws

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

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

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

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

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

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

India Morning Report: A Resurgent India, A Resurgent Festive Season?

English: Prime Minister Manmohan Singh in the ...
English: Prime Minister Manmohan Singh in the Opening Plenary – Resillient india: 25 years of Economic and Social Progress. Participants captured during the World Economic Forum’s India Economic Summit 2009 held in New Delhi, 8-10 November 2009. (Photo credit: Wikipedia)

Bad news economics may have won both 2011 and 2012 but 2012 has come out strongly with India emergingas one of possibly three-four investments with a continuing positive return even after a 20% return YTD. Of course netwoks are trying hard to stay relevant during the bull run with all the blue chip[s having run off the top in the last week if not before and the rest of the rally looking like receding as the reform news flow is kept up by a government ready for the Election battles looming up ahead.

Straddling SP and BSP unfortunately does not give a clear window to bears and again their ould be heightened risks of a last moment cut off ( a sharp sell off) in the market when eventually Manmohan Singh “runs out of options” As of now 10 states have shown that other parties really have no hope and that these changes to India’s fabric are irreversible

A slew of festival holidays should keep investors relaxed thru october and november before Global markets slip into holiday mode while mid cap IT and HCLTech will be  hoping for more weakness in the Rupee. I am expecting Healthcare to make a return tothe buy lists but not CIPLA and DRREDDY

The Rupee has really strengthened int he opening , however likely just a calm before the storm as the weakness in Global crude benefits FX reserve poor nations like India on inflation and Tdeficit fronts equally fast but at $92 it is unlikely to last too long. 

India Morning Report: A resurgent India, a resurgent festive season?

 

Bad news economics may have won both 2011 and 2012 but 2012 has come out strongly with India emerging as one of possibly three-four investments with a continuing positive return even after a 20% return YTD. Of course netwoks are trying hard to stay relevant during the bull run with all the blue chip[s having run off the top in the last week if not before and the rest of the rally looking like receding as the reform news flow is kept up by a government ready for the Election battles looming up ahead.

Straddling SP and BSP unfortunately does not give a clear window to bears and again their ould be heightened risks of a last moment cut off ( a sharp sell off) in the market when eventually Manmohan Singh “runs out of options” As of now 10 states have shown that other parties really have no hope and that these changes to India’s fabric are irreversible

A slew of festival holidays should keep investors relaxed thru october and november before Global markets slip into holiday mode while mid cap IT and HCLTech will be  hoping for more weakness in the Rupee. I am expecting Healthcare to make a return to the buy lists but not CIPLA and DRREDDY

The Rupee has really strengthened in the opening , however likely just a calm before the storm as the weakness in Global crude benefits FX reserve poor nations like India on inflation and deficit fronts equally fast but at $92 it is unlikely to last too long.

 

Bank Credit Policy (September 2012) : Fixed Income Markets Celebrate India Reform 5.0

 

Given that Inflation was also expected to be lower before the Wednesday announcement for WPI and the Diesel hike importantly, it is understandable that 1 in 5 economists in the latest surveys still expected a rate cut to put pressure on the unruffled Central Bank Governor. Nomura economists and even Breakout Nations’ Author Sajjid Chinoy however point out again that the government has no room left as do we. Though you may not be able to scroll back to views as we were also away for a month on the subjects of Global Policy and Economics, you will be able to find the thread in earlier bank policy writings here and at advantages.us. And of course as the public sanecdote demonstrably admitted to everyone, there are no CRR cuts in store.

However having been fed reform policy the markets are unilkely to react to their v”dull and drab” version of the credit policy later today. Infact except for Economists at the banks above most in the industry will be relatively busier with deals happening in the wake of Bharti Infratel kicking off a public sale of PE investments with a not so untoward calendar in just 5 years of investment. Back to the calendarised Economics though, the dip in IIP is scary and continues to run down the Economy alongiwth a double digit in Exports but none of these would improve from an easing of credit conditions as bancks get don to safeguarding their margins by cutting deposit rates to the eventuality.

As DNA also notes however, there is no time like now for India Inc and this will take almost a year to fruition in Services and Goods uptick while inflation including the dangerous fuel subindices about to make a bigger come back having come to 8%+ in the August announcement. Bond yields will be going down because of inflows and that should not be confused with a likely rate cut for now.

 

Late Morning Trading Strategies – An Update By 10 Am (September 17, 2012)

 

Markets have not gone nose up on news and thus are unlikely to go belly up by next week. As unexpected as it was and as fruitless it might be the sectoral runs in Aviation and Broadcast channels have been well left alone, the improvement in FDI regime resulting in gains of 3% (JET) to 12% (SPICEJET) in aviationa nd 3% Broadcast Cable companies. Sensex is up 100 points.

Holders will gain and it is not really time for fresh buying. The commodities cycles are quite done in the big run up of last month according to us but shorts dio not have a clear run in silver or Copper or even ANtural Gas. Crude should go higher but not ithout a not so shallow correction. The Euro at 1.30 is pointing to a bottom for the Dollar being very nearby though some European investors have again taken Euro into their fold, saving it to 1.36-39 by the year end (HSBC)

The policy data comes out in a n hour

 

India closing report : Rupee Rally to continue, Stocks to jump to another gap opening

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

As Friday wound down in equities, the morning’s gap opening held up and Wall Street was celebrating the summit as well leaving little doubt to Monday open marks on the Nifty. My personal trading strategy has been to hold on to my good investments and recommendations and buy into the bank nifty by selling a few puts and buying the ATM/OTM calls at 5300/5400. Selling the Put keeps the money off your mind with margin paid and you get instant credit. Of course selling Puts in a rally like this is because there is no chance left to take and thus you will have to buy it back later at you chosen peak ( I would not suggest a number at this juncture as this is a fresh rally for all intents and purposes )

Rupee’s rise will aid the rally sentiment though a perfect correlation is unlikely. There is no shortcovering in this rally the market having stayed up above 5110. Of course a couple of corrections along the way are only too possible and thus Monday afternoon will be a key test of whether the index retraces to 5180 or stays at 5250 levels for some sessions and there are no recent marks in that range. Whence the Infrastructure and Healthcare sector sentiments would be critical as they have been holding back for the big jump and Sun would need to take a breather in Pharma stocks

Bank Nifty is likely unstoppable, banks having shed all their bad data in the last few quarters and results are due in another two-three weeks after Infosys kicks it off here in India and JP Morgan follows after the Alcoa earnings on the calendar

Rupee fell to below 56 levels and NSE Currency segment stayed above 56 but mostly for salutory purposes or hoping for enough exits for another satta on the dollar but come Monday they will largely follow the reform news flow, again a reason for equities to rally if we can just keep up with Manmohan Singh’s dream team for India.

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

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

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

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

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

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

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

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

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

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

Trading strategies follow.

No QE, no dollar depreciation

The Euro ready to give way from 1.27 levels to 1.26 levels, it is unlikely that the Dollar would get brow beaten and the Dollar Index rising would mean the Rupee continues to settle to new final lows as no fresh probability to assuage the larger revenue deficits in India is seen. However, in a few days our imports will actually start getting cheaper and impacting a lower core inflation. When that will translate into CPI inflation improvements or actual action on the Diesel and Fertiliser subsidy programs is anyone’s guess. The currency is unlikely to benefit from small fills / corrections on the Fertiliser policy. Yields in the fixed income market run north to 8.22% levels too meaning more room for the Dollar to take up

Aviation stocks were back for a fleeting moment when the up trend was in acton Monday, but a Dollar depreciation seems to have put out prospects on them in these uncertain policy times. India specific political reasons like NDA have largely become dried up wallflowers but a hope of Manmohan Singh getting FM portfolio being dashed might still mean more pain for the Rupee. Of course with a majority of the GDP benefitted by the Rupee the stock market might start seeing the Depreciation ride as more fun than pain.

Dollar remains a safe haven and Treasuries continue to surge south on yields.

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