India Morning Report: Portfolio investment highs let India story dominate

Investment percent gdp
Investment percent gdp (Photo credit: Wikipedia)

As investment flows confirm net positive investments in India on a regular daily basis, making the total for March closer to $3 Bln or close to $150 mln per day (INR 900 Crores) , India and Indonesia keep hopes alive for Global equities and EEM flows remain negative with exits from China, Japan and Korea closing out on any hope for recovery in North Asia with China remaining dull and Japans deficit imports coming at the cost of lower Exports being kept on deficit mirroring the phase of growth investments without concurrent investing flows.

 

6590 levels obviously proved daunting for India Inc and markets returned the gains out of the morning trades after a buoyant day for equities all around, looking for new levels not belying the sad events of 2012 for Corporate India Markets stay away from Banks as markets had a big open on Monday and new levels in private sector banks seem to wait for PSU banks that continue to be neglected for their larger than life NPA sores and aches.

 

Reasons for cheering the performance of Auto and metals however still seem t o be further ahea d on the road to recovery and have hardly earned their stripes. Bank License hopefuls that still include the Aditya Birla Group and a couple of other corporate houses are probably caught unaware by the extra scrutiny imposed by the Poll panel ahead of a new government in steed at the Center. RBI has enough reason to deny corporate houses a chance to play with the banking system but it may be difficult to deny claims of available NBFC models like Aditya Birla Money ( Diversified Financial Services ) AND M&M Financial Services ( Retail unsecured/Auto Lending ) after satisfying the NOHFC structure requirements, giving the CEntral Bank a tytough decision as it probably wants to hand over no more than 4-5 new opportunities

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India Morning Report: Markets digest a rate hike and the new Maruti equation

India Auto ExpoYou heard it in 2009, Suzuki may go it alone:

The 7th Maruti Suzuki plant in Gujarat adding capacities to its 1.75 mln cars from Gurgaon and Manesar which has already seen union troubles in the North, will actually belong to Suzuki in a new Wholly owned subsidiary and as royalty terms have not changed the new production available from Gujarat in 2015 will improve MSIL’s margins. MSIL already is the dominant component of Suzuki’s global sales. The markets are however punishing Maruti for the loss of faith , the automaker springing the surprise from its ranks mid afternoon yesterday. Today’s morning quotes will be 20% lower and likely fall a further 5% tomorrow though 1200 is improbable. A Suzuki coming into India alone means it may be planning exiting its Maruti investment except for its commitments to successive Indian governments over the years. Maruti trade is being closed within this series as speculators likely get ready for a short trade in the new series after having been farmed in the construction sector. The Gujarat plant will supply only to Maruti production

Biocon is back in Volume breakouts from the switchout in cash

Rate Hike

Markets will likely digest the rate hike given good liquidity, as mentioned in Bank Policy Tuesday yesterday however the 8.5% and lower yields will now wait till end 2014 and at least one quarter of good growth with strong positive investments. The higher rate environment may not translate into higher retail rates and credit expansion may also not be threatened, but was it required? Yields did move separately from Currency markets before policy and thus Policy rate hikes squeezed the exchange rate back to 62.50 levels

Airtel again, Idea bhi

Airtel is definitely back in the mix, changes at the top likely positive even for Manoj Kohli who finally moves to the new businesses invested from the Telecom win for the Mittals over the years. Idea’s ARPU gains despite revenue per minute dying means both Idea and RCOM are also likely to see long trades and Bharti remains the back bone of he market as IT and Pharma break down. Tomorrow would probably be ITC again and the day after that Bharti

Bharti PAT is up 20% on quarter and ARPUs to 195 frm 192 spectrum auctions stamp their market print on Feb 03 and Feb04(post announcements). Africa ARPUs are up 10c to $5.80 or INR 360.

Sell 6100 Puts

If you are finally tired of shorting the market and Ashwini baiting from your camp you may join in too but ahead of expiry, 6100 uts are likely to look tempting and markets will close 6100 with such a huge magnitude of newsflow  getting hope trades shucked off by early market moves last week and shorts on DLF , Unitech and HDIL would likely be the biggest winners of the series. The days trading would likely see a similar mood sneaking into 6200 uts , which however is a function of the other market forces discussed with a 40 point increase in NIFTY being par and leaves tthe markets at 6160 and markets may not want to control further BEAR GREED till todays close whence the 6200 trade still rewards that additional risk

Banks are a big buy

10,600 seems to have done it for the Banknifty and investors are likely to stay glued to ICICI and HDFC Bank on the rise. Axis Bank fell 3% yesterday at the fag end of the correction ( on markets breakdown post Maruti announcements) ICICI Bank reports with India Starbucks (Tata Global) . Starbucks ma also prefer a new 100% investment in India after 25 stores have opened with Tatas.

After ICICI Bank’s clean sweep today, tomorrow will see earnings from Hero sandwiched by Bank of India and SBT and after the Adani and IDFC reports on Friday we close out earnings season with a fairly robust performance, near 20% profit growth still standard fare for the biggies.

Other Results

REC, M&M and Cox & Kings report on the 14th of Feb, ILFS Transpo, Page (and Lovable?) and Finolex Cable on 12th and Bombay Dyeing on the 13th. Lovable is doing well in the trade prioritiising for the New FMCG adds in 2010 IPOs

India Morning Report: IDFC on way to become a financial conglomerate

IDFC Project Equity
IDFC Project Equity (Photo credit: Wikipedia)

 

If its the currency dragging equity confidence down despite the healthy capacity in the market, wel land good. If the hit is however on the asset quality situation of the banks, it would be a quicker reversal tomorrow as ICICI Bank publicises its bigger Power plant accounts (Dabhol-II) Walmart leaving India, is probably most of the impact.

IDFC already is, one of the most far reaching shadow banking institutions especially since it caught one of those fund houses in 2005 and has been actively floating new funds and operating advances thru its infra NBFC as well as PE funds and others.

 

However, the treatment of NOFHC can be proprietary and thus the only risk to their getting a Banking License as it gets into an endless loop of what can be done without the regulator cutting off the air supply. Their objectives and disparate infra rules have to be kept independent and if the company is looking for flexibility there or some sort of understanding instead as Indian houses tend to treat discussions with the regulator, it may not turn out rosy for their ambitions of a license. Its an independent NOFHC subsidiary of the other non financial services business and Financial services business has to be outside the purview of the NOFHC so it will probably be under the independent NOFHC in the most pliable case but the funding requirements at 51% f the NOFHC equity as it owns probably more than the INR 200 crores of the bank is the deciding parameter of the bank.Tthe NOFHC allows promoters with public holdings to create a tightly controlled subsidiary with RBI denominated investors including 51% from such promoters, but the independent banking compliant structure has far other important functions than just that and may not be dispensed with.

 

There is more than enough of that, with the Dept of Post also turning out to be almost operationally untenable to do the deed and get a banking license within the parameters.

 

IDFC however is one of the best candidates already operating independent projects without mixing up and unnecessarily skewing up exposures. I would proffer LIC Housing too, esp if we actually want enterprises that have the understanding to withstand and grow in the faster growing non metropolitan India. As Foreign Banks have shown earlier, regulatory standoffs are costly for the banking model, and the sooner we get off that hobby horse the better.

 

The index is faltering again and the reason is really not easy to understand esp as the Put Call Ratio is just over 1 as of Friday closing, and really not that weak that everything be unwound. Markets are anyway unlikely to go below 5800 levels for more than a nary second, and the Rupee being weaker is a pretty range bound move. The MCX saga at the commodity exchange with its e series has still to unfold perhaps

 

Infra projects being cleared faster, its still happening as we speak and is unlikely to create any CAD resecting Dollars till the May ’14 General Elections

 

 

English: Kedarnath range behind the Kedarnath ...
English: Kedarnath range behind the Kedarnath temple early morning. (Photo credit: Wikipedia)

 

 

 

India Morning Report: It’s Monday and all’s upsy daisy in waiting

The Indian Rupee opened near 62.50 levels, a 2% jump from Friday levels well likely to follow last week’s 2.5% crawlback and the prospects of a bleary liquidity hit SuperFed becoming a scrawnyScrooge MadFed retraced as Larry Summers gave in to a Democratic caucus on the Banking Committee, incl Liz Warren and withdrew presumably in favor of Janet Yellen in the Fed changeover. The Fed will go ahead with Tapering as planned and that news is in by Wednesday. Indian Markets of course are then going to take the opportunity to break away from the global correlation and set a few ground rules for an Indian recovery. The WPI at near 6% again and the continuing pressures of the CAD and Bank reforms are likely to cause markets some sleepless nights too ahead on the turn. But before that a 6000-run as promised is nigh and mostly the mark would even be hit in today’s session itself in late afternoon trading given the Rupee level jumps are not adequately referenced in the 70-point Nifty jump in the pre open

Banks , even the lagging PSU Banks are finally in the limelight and the resulting breadth available to buyers is likely to be good tidings for the market. Reforms in the G-Sec market may well continue as caps on FIIs even without auctions are much easier today and probably reflective of the real appetite for Indian debt at $25Bln G secs and $45 Bln corporate debt now allowed to QFIs

LIC Housing is back in the news but if its that banking licence then one is not sure it is right for the market recovery esp with the 80-20 disbursal rule out of action. IDFC may be done with shorts and Power NBFCs may be ahead in the lead. As more debt reforms pick up steam and remaining restrictions on G–debt are removed, it is likely the NBFC sector’s institutions will also increase in priority for the markets. As of now effectively there is only one on the run (lquid, current) 10 year security available and it is issued by the RBI.

Really, though markets are up the traders’ picks on networks could point to the list of mid-caps just likely to gain from the liquidity rush and may not reflect any real fundamentals and is probably sign that these low mid caps list in the traders favorites needs to be changed more frequently. Notably, Voltas, Jindal Steel, UCO and Union Bank, Future Ventres and NHPC are probably candidates for non performance and “no results” in their respective sectors and will be trgeted wins as market favorites because today nothing can go wrong for the pro traders. But many other pro traders now would pick the over NBFCs and other good picks not at variancce with what Foreign desks have also short listed in the last four – five years

 

India Morning Report: A late last minute judgement call but that pair trade was ill advised

6th century
6th century (Photo credit: Wikipedia)

ET finally let the cat out of the bag but a bit late as the Bank nifty short was paired to the indices in a copycat move of a trade that worked in the 4700-5300 down India jamboree of 2010 then 2011 and then 2012 as well. Anyway it is afternoon as most of my readers realise my busy ness in th emorning with struggles for food and hearth taking over the life and times of accomplished investing advice and career counseling for the world of investment banking. Ph. D seats in India are few as well and a preeminent shortage of goods could well price that education much higher than it is today, the doctors 9 though i m yet to get in) still on the periphery of business and academia preferring stolid credentials to maintain ranks and bag enough fees to supplemennt honored careers in banking and finance (most of them)

Anyway here’s wishing them better luck for the pair trade next time and here’s wishing you use the contact form below to discuss and disect India, Finance, and anything else you think makes sense

No break from trading this week as another broking NBFC tops $400 mln in quarterly revenues following IIFL efforts yesterday and with broking revenues not dipping in one of the most inactive lulls of equity trading in recent times.

Dr Reddy’s results look nippier solely on last year’s poor Q4 but revenues rose nearly 30% at INR 33.4 Bln , annual results topping 20% on Sales and still 18% on profits across at least 2 bad quarters out of 4 reported. Generics accounted for INR 82 Bln out of 111bln in Sales. GVK power results this afternoon were wierdly out of whack with some tussle forming with APTRANSCO while GMR seems to be progressing along expected lines on cutting debt.

Nothing of note from Novartis or Pfizer yesterday Given the wierd secrecy arround mnc accounts one cannot immediately comment on 90% of their profits (Novartis) being from other income and being (un)affected by transfer pricing

Anyway the wind out of shorts jumped Wednesday indices to 6150 and markets are trading a t their highest level since 2011 while the rupee from trades on Monday continues to stay around 54.80 and expiry is going to be easy for long traders in options , shorting options now key to an ever changing vocabulary for our middle tof the tail at BPOs earning seven figure salaries or hoping to make some disposable spreads through trading, hear hear..( Three fat tail events discussed in here, find them and write to me for a mid week mania contest entry, your favorite candy ata favorite coffee place for prizes)

India Morning Report: Markets regain 5900 levels, short trade not on

English: Implied Vol. Surface
English: Implied Vol. Surface (Photo credit: Wikipedia)

 

Aftera small skirmish/face off in the morning trades as was likely on expiry day, the volatility smile of the May series was intact with high ranges for out of the money calls and puts and shorts bowed out of remaining scrips before noon possibly. Markets are stable at around 5900 and are celebrating the Jet deal, Tata Global beverages also getting neww found attention as it consolidates thee first year of results of Starbucks and probablyocased the kind of innovation and looks for global scale forced by its jv partners and global coffee markets. P&G global results yesterday showed the importance of innovation and BRIC growth in consumption stocks and India remains an important global destination for consumption industries FDI not just in travel and financial services.

 

FDI, Media and infrastructure expansion and perhaps a stable polity make guessing capital market priorities an almost daily habit for the multitudes but investing funds and managers fail to expand the footprint of the profession while retail investors get knocked out for scale, leaving pronooters speculating on margin an important riceboll weevil infestation in the Indian wealth crop, clearing of which is still dependent on monsoon dusting of crops, That is where similes end up when coffee conversations about the market try to replace in depth research. M&M Financial however seems to have cottoned on to the diversified growth tenets of a NBFC and bajaj finance firms too are pretty surefooted led by their last insurance investments.

 

Jet is likely to cross a near 100% retunr at these levels to four figures but that time frame could be six months or even six years whence it will cycle thru another multiquarter negative round of profits based on the cost of oil. Rupee trade is stong ont he upside and the banks being pilloried for having reached levels at which further investment is foolhardy are still purveyors of both value and more than 30% growth and as long as exit targets are available in IT and defensive sector stocks should continue to be staple of portfolios

 

Rollovers are likely to be subdued and if that happens there could be an entry opportunity in this market around 5800 levels after the new series trades in earnest next week. (ofcourse if these ‘scheme’ is indeed adopted along with the 24% stake approval for Jet, Friday trading could still have already set base levels for the May series before markets start the new trend direction next week but as of now, Friday would be dull and rollovers sparse

 

 

India Morning Report: Sorry Bears and Cartels, Bulls are still hiding in the Indian woodwork

Yes Bank
Yes Bank (Photo credit: Wikipedia)

 

Network analysts sitting on lower support levels and betting short on most new blue chips having seen the infracos slide, are in for another shocker as the march series looks to inch closer to 5600 on expiry day before closing out comfortably ahead of August 2012 levels. Both Sukhani continue on the second month of watchful short betting SS targetting YES Bank further from today while Bharti and some others responded in kind to the lack of interest to back the market interest to significant lower levels but the buls seem to have won on real strength of fund inflows for the time being. Markets will correct but not by much in April and while the upside was capped to 5850 levels by the weakness that just means the lowside is still as high as 5550 even for safe investors and 5500 puts should be real rich making sells for bullish investors. (We personally are not conflicted by any position here)

 

Five Rupee Coin
Five Rupee Coin (Photo credit: Dinesh Cyanam)

 

BRICS Development Bank aside, which we look to fund the Indian Infrastructure gap in due course, India inc starts off results season in a week and its profitability scores that already improved on identified sectoral leaders in Q3, are the ones that will be identified with the successful India story and not the politicking as enough stability and forward looking governance is guaranteed by incumbent ministers if not the party flags.

 

The Rupee keeps most of its strength in the new series and the may series may give pointers on the new range for the currency as Fixed income yields cross back into the 8+ range having lost the rate cut and pushed the bank to the reverse repo rate on the corrridor

 

Given the strength of equities and currency going in, profitability concerns of consumption and auto plays should be watched closely for bear victories even as IT forecasts and IT results will remain damp and not affect sentiment. Healthcare could lead stocks nose down but not up even if it maintains good profitability and revenue growth and any weakness in bank performance including Q1 FY14 forecasts will be a deal breaker.

 

Infra debt funds have indeed taken off and execution perofrmance of projects still hanging will come intpo play on the bourses also in Q3 FY14, QIP fund raising shifting out from infra and bank fund raising to NBFC or Capital expansion plays across manufacturing and services businesses with CDS holding sub 200 levels , a great performance for an isolated Asian performer.

 

 

Morning Trading Strategies (addendum to India Morning Report) : Shortson IDFC and LIC Housing seem…

English: Logo of Etihad Airways
English: Logo of Etihad Airways (Photo credit: Wikipedia)

Yesterday’s move up was a defining one and is likely to be bet dowwn in today’s reaction. Also, infra is likely to be rated down as Election year approaches and India inc battles with inflation. However shorts on larger movers like LIC Housing and IDFC are unlikely to give more than the required minimum in the reaction and remain larger movers on the upside. Also Jp associates as expected followed last week’s DLF into the quagmire of being shortlisted wwithout a salary for the bulls on offer and are unlikely to be further good for more than a 5-10% move down or up. Similarily Bharti , another favorite on the downtrade, has already reached barely 300+ levels and may not move.

However, the loss of control in the Aviation investments being sidled in are a serious issue the market swill discount as Air Asia gets sleepy Tata and Bhatia (mittal in laws) investments and Etihad goes out demanding CEO and COO positions for its investment

Maybe a leg in Pharma before an upmove and that highlights Lupin and Cipla, while OMCs also offer an uptrade and private banks below ING and Indus ind in the pecking order get picked up further on deal buzz (warranted or otherwise) including Karur Vysya Bank, Federal and South Indian Bank all with almost no

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

available float for takeovers or buying of a NBFC to expand footprint.
Maruti is still not a blue chip for the Indian Market and Hero and Maruti infact make for a big short i would try as they can be kep t open well into next week a day before budget moves take over

Bank Results Season: India Earnings (The Old and Weak) Will India jettison its Public sector behemoths as instruments of policy [SBI Q2 FY2013]

The deterioration in asset quality though well within control at SBI to 5.15% or INR 491 B does not meet management statements of no more deterioration in asset quality. The written off loans of INR 14.92 B and reducing provisions of INR 18.5 B from INR 22.73 B a quarter ago raise questions of capacity and capaability even as the Central bank has obliged with CRR cuts and the bank continues to manage the loest deposit base in the country ith the status as largest bank int he country borne in measure by share of loan assets and the size of asset book  as well as the market share computations for the sector in both retail and SME/corporate banking

However a future for India Financial Services may need to have a larger NBFC role designed aas per the latest policy documents or otherwise continue privatising bank franchises and allowing new banks with rural and priority mandates make the competition tougher whence sucha weak showing by SBI with only 5% growth in NII below INR 110 B for the quarter makes ita tough pill for the market to swallow. However, the current macroeconomic revival may let other banks pick up the slack and allow investors to ignore this quarter’s SBI records while the markets again take a fact check on how good the India story is.

Net profits for the quarter are INR 36 B ahead of estimates by more than 5% but the stock will drag the Banknifty in the current run with management guidance not being welcome. The year on year groth in profits does meet the benchmark of 30% at a 25% score bu tthat  is on a low base from underperformance after the bad loan cliff ensnared the bank

REstructurd loans are INR 46.94 B or 5% of the loan book roughly Additional slippages are INR 85 B compared to INR 103B last quarter (linked/seq)  but recoveries are also up by nearly 17% at INR 14.3B The loan book has grown to INR 9.56 T

 

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