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

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

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

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

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

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

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

Individual stocks

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

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

India Morning Report: Rupee still juggling the trap mechanics as water boards up

HDFC Bank
HDFC Bank (Photo credit: [s e l v i n])
 With FDI pronouncements unlikely and more than $170 bln in debt redemptions due in FY 2014, the more policy makers dither on shoring up FX reserves with bond offerings the more the risk to the currency from flat international trade and eager money flow watchers finding it a tempting investment with a small investment and a big payout in percent returns.

However, it is today (and just today’s trade likely) only that the lackadaisical equity moves still risk a big rupee downside as equities are sustaining a large 6000 level in light of the real reassessment of Indian prospects as a flurry of GDP downgrades continue. The cyclical reinforcement of this downside risk aka in Latam and east Asian examples of the past is unlikely as equities are strong and the depth is likely to see the markets after a good show by HDFC Bank yesterday and a likely par for the course from TCS this morning.

Though longs would have to wait for their time , further shorts in this market esp on the banks are unlikely to bear fruit. The money market investments made through mutual funds amount to an expected INR 1.6 Trillion and the Central Bank has immediately provided a reserved window of liquidity for these mutual funds to a sizable INR250 Bln as redemption pressure resumed on Monday/Tuesday. Yields hit 85 on Tuesday market open in the short term instruments but rbi lending to banks is at a minimum of 10.25%

With Foreign banks also reducing their footprint in light of Global Banking regulation of Capital and ringfencing, which exactly are wholesale players in India in the non PSU, well managed banks!! HDFC also reports today and axis a 4%+ margin again on its retail portfolio strength

India Morning Report: Nifty recovers despite Cobragate 2

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

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

 

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

 

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

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

 

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

 

India Morning Report: And the market survives a cut to 5900

Tried and tested , yet new mechanisms of 2013

Of course, the markets could still decide to browbea

English: Wordmark of Tata Steel
English: Wordmark of Tata Steel (Photo credit: Wikipedia)

t the equities segment further from here despite the mild recovery at the end of the session. As of now my plans for going to Ahmedabad are on course and the indian Ph D programs are getting better lookie loos again with Ahmedabad “Management” ranked in the Top 100. More importantly for the markets, delivery based buying cannot be expected to ramp up in this rally as retail investors are not just stung by 2008 as journalists perceive or want to name the shroud, but are infinitely better placed by investing in inflationary spending than in equities for the future canvas.

Mutual Funds, Insurance and Bank savings still come next and pretty importantly yesterday’s negative IIP score and a near 11% CPI inflation clip ( more than 11% decidedly in urban areas, but thats just the trend) are unlikely to matter to this question of volumes. A slowdown in bank deposits could be an interesting quasi middle management at 100s of growing India corporates and IT investors could take to watching as it mirrors the real response to the production slowdown even as investment makes a faltering return to the Indian Economy and the Savings Investment gap recedes.

sinbadRevival of fortunes in steel seem to have hit an “early call” WALL a new block and tackle strategy likely to hit traders nah speculators in the F&O segment and though I normally desist but the morning call on JP Associates straddle buy invites my derisory attention by the spades. The JP Associates stock is unlikely to tank from 71-75 levels and if one expects action in the scrip in this series further it would be a clear positive, likely kicking off the pre budget mini rally instead of the rally we were going to have at the start of the series. Of course those promoting this market hiccup were the ones betting on fundamentals instead and thus calling off the big pre budget move.

Are Sun Pharma and TCS yet Defensives?

Much as Consumer goods led by HUL had been lumped in Defensives with Pharma, so also today while Pharma while awaiting the Domestic breakout remains defensive as a sector, stocks like Glenmark and Stride Arcolabs aren’t and Sun Pharma is probably unlikely  to last in the Defensives list too long (it ould not be shifted on account of Taro, however)

Similarily IT as a sector and TCS as a defensive remain sectoral strategies or more Big Pig strategies at the start of the macro uptrend where Trendlines can be drawn and in such moves as are in 2013, the stock probably would move out as a mainstream investment much like Infosys earlier. Either way those watching for a bottomed out markets are right in prognosing the comfort moves in stocks like TCS and Sun as a likely vote for no Bull run than the other way around and thus the to get cast in the same leagues as HUL, Sterlite and SESA which would be the Defensives the markets could ascribe. While Axis Bank may not get rebranded as the ‘defensive’ for 2013’s mini moves, Airtel still likely will be as the corporate gets shafted out of bull only and 130-30 portfolios for lack of a volatility linked move in the stock

Tata Steel

Meanwhile the Tata Steel calls are good to sell off probably as JSPL and SAIL indicated a slowness in the sector which is to be shed in 2013 and 2014 so it is also the time for buying this defensive as well for Domestic fund houses avoiding buying for so long since August as they get another Start of Rally point to invest surpluses.

Banks say meeooww

Banks are the move I am waiting for as PSU banks finally acquiesce to getting re-rated instead of trying trading jumps to catch up with the gap created by the NPL imbroglio in the last six months at Banknifty 13500. Thus the move from 12,400 on the Banknifty and it is not made today, will be a decisive one as Public Policy recedes and Finance takes over as the bete noir of the India Comeback strategy for 2020 and beyond.

 

India Morning Report: Go pork on your investments said the offended unsaved friend..

Rajiv Gandhi International Airport: interior view
Rajiv Gandhi International Airport: interior view (Photo credit: Penn State Libraries Pictures Collection)

 

..not that the traders had any worthwhile savings. Both Savings and investments have been down for india inc in the last 4 years and the trend has not recovered despite India standing out as a n island of prosperity relative to the global carnage. However, the whole Dickensian/Edwardian or Premchand ridden spectre ripe for a Saki short is really just in the wind because of not Services Economy GDP being down on the bend disparaging India’s lead but DIIs or others who missed the bus in August are not the only ones aiting now. Most traders have been out of deployable cash including the first edition foreign brokers’ clients who were the original invested Capital at 5000 and 5300 level but nothing a normal profit taking and reinvestment cycle would not solve.

 

Those retail investors are not likely to come again as even if they did some profit taking it was not available in their accounts for reinvesting and that also holds for any infracos / construction companies and their promoters or mid cap promoters running their banking on margin economics and unable to plough back if any of their plays have recovered. Yet, any sign of a short is likely to get quashed, tha’s all will happen in this market probably over the next 3 months till a bout of finally too untenable 2013 projections will drop the bottom out of the correction around still likely 6200 levels.

 

Blight

 

However, close calling on the indices every minute not being required, is still probably 4-5 years to go as trends are big and easily discernible (to the naked eye) and investible additions to Mutual Funds and Insurance savings are unlikely to be anything but concurrent to that except for active tax nationalism guiding a few more investment rupees to the insurance cos who thankfully report more new business from SME and MSME /Prop businesses and salaried employees who realise the enormity of the nest egg requirement now in 2012 even compared to 2002 when a big rally and a 8-9% boom of annual real GDP growth had barely kept India in the hunt.

 

Valreson

 

The leather hunt we are now part of, definitely is a sign that we are precluded from all those portfolios that are banking on inspirational growth or a viable threat to China while policy agendas from the nineties will continue to have items unrequited till now and enabled by weak governments standing on a strong constitution and thankfully apolitically activating bureaucracy that is also able to handle and changing mandates from the people but which mandates have literally all been ridden to the borderline of it cannot matter in all possible ways with or without coalitions and third fronts.

 

saving and spending
saving and spending (Photo credit: 401(K) 2012)

 

Save Money
Save Money (Photo credit: 401(K) 2012)

 

 

 

India Morning Report: Yes this is the bull run in progress :)

Though it would not seem like it to you and me and even those who were lucky to get into the hallowed portals of JP Morgan and Goldman Sachs before us, this is a continuing bull run ith just too many interruptions and cavilling to ignore. Witness how there are not more than one nay sayer in a crowd of 50 commentators. Witness also how market traders like Ashwini Gujral and SS keep trying to put out short picks every now and then but come back empty handed at 3:30 pm. Also witness how the ruepee’s weaknness making the IT sector attractive means suddenly all other fundamentals are “poof” vanished in the air. Importantly, as someone caught me on telly today, ( I opened the screen to TV18 as he wasz speaking the subject) , portfolio inflows are strengthened by Rupee’s unbroken move towards the lowest on record 56 levels and odollar sales are washed up by the high tide of month end Oil purchases and the burgeoning trade deficit as is usual for our second half of the fiscaal, and for the second year running, we follow up on daily tidbits of how India will no t be able to manage the fisc target but the bullishness remains on call.

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

Did i cost you a fortune? I may have because as a single hand I was unable to suitably direct you on big time nbullish calls like Stride Arcolabs which has always been an emergent blue chip on my card like much of the remaining sector including the crop of MNC pharma led by GSK which as known for ages is going in finally for a fresh buyback to bring its stake up to the now standard 75% for MNC players in line with SEBI requirements of a public company. But I do not regret sending more the way of IDFC who also has an active PE arm in non infraco projects apart from its starting blocks it purloined from StanChart’s Mutual Fund in India.

On global cues, both Europe’s new Greek agreement and China’s slowdown had nothing new to offer for global portfolio investors and hot money trade fronts while FDI related or otherwise Policy execution remains on hold in India that also been duly discounted by the market aand any pyrotecnhnics by flailing oppositions and Catalonian adventures are unlikely to firm up as a new trend into the mix, favoring the recovery of Europe into a mild recession and now despite growth in UK and Germany while the fiscal cliff seems to be ready to become a new non event yet someone should not get their hopes all up too soon.

Gold and Commodities look unwilling to make a move but the Dollar is not getting any stronger and the Rupee’s weakness is another capitulation to current deficit demands by our policy makers as our champions of growth budgeting find themselves unable to get to the next watermark or making a stand in execution or in substantial politics.

And Hindustan Copper is back to 155 as the price was marked in the Offer for Sale, letting investors keep hope in the IPO process ( with due discounts and ready profits without issues devolving on others – excepting LIC’s coffers that are now an unbridled part of India’s budget machine)

 

Predilections: Manufacturing a perfect pre budget rally

Mutual funds in India
Mutual funds in India (Photo credit: Wikipedia)

Unmindful of the gross excesses reported by falling revenue and growing imports, the large $50 bln subsidy bill in FY2012, the uncouth handling of the elections by the incumbent government hitting chances of a reform friendly budget and the low scratching IIP ( irrespective of statistical aberrations) the pre Budget rally started at an equitable 5300, not waiting for a lower tab, allowing reasonable hopi chatter on the networks and making budget experts out of such midcap CEOs that are rarely heard, the mdeia will get the maximum mileage out of this pre rally as the content is mostly fit for filibuster with an insipid agenda ensuring that budget day will find everything on a bullish cndlestick.

I expect today and tomorrow to be more about finding the right mid Caps for a good bang for the buck for India Funds which remain few and far in between, a random occurence in between US entries and exits, European analysis and Scaremongering about China with every $! bln of the $10 bln reaching the middle kingdom every month, while India fights for every cent of interest

RELIANCE AMC gets follow on investment from Nippon Life

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

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

India Fund Impact: Balanced Funds an ideal choice

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

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

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

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

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

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