India Morning Report: A dozen successful OFS to close the year

The old logo of Maruti Suzuki India Limited. L...
The old logo of Maruti Suzuki India Limited. Later the logo of Suzuki Motor Corp. was also added to it (Photo credit: Wikipedia)

Last week’s beginnings after NMDC with Reliance Power’s 15 mln shares on offer, were followed by successful closings by Adani Ent(28 mln shares for INR 6 Bln), Eros, Bluedart, Honeywell and even institutional equity sales by Godrej and a PSE sale by Hindustan Copper. 2012 FII purchases have likely exceeded $25 Bln , near the high watermark of $30 Bln in 2010 and wiping out bad news 2011 though India’s Economic recovery is far from incomplete and some indicators even say unlikely to reach 8% again, as for China in the new post crisis developed world economics of a large base and limitations of progress (market expansion) show up. India’s model of the Hindu rate however has shown the fallacy of these being limiting factors and excuses since we took up reforms in 1991 but that was then.

Fixed income yields have not crawled back as fast as they could have after the upbeat

English: Honeywell logo.
English: Honeywell logo. (Photo credit: Wikipedia)

Credit Policy Tuesday but persistently high retail inflation is no longer the limiting cause of India’s problems and neither is a run on Oil prices likely

The Rupee meanwhile is right back up its repair drive crossing back into 55.1 on another start of flat equities to close the year while Maruti and Bajaj Auto climb relentlessly and let ITC and Bharti Airtel scrips slide on lack of interest without hurting the index prospects. Pharma continues to outperform while banks are likely to push for early clearing of margin debt and infraco debt resulting in portfolio sales proposals closing after those holding out for price start staring at

English: Logo of Bharti
English: Logo of Bharti (Photo credit: Wikipedia)

a bleak winter holdout, including those at GMR Infra and LANCO Infra. Why exactly is Lanco scrip moving up today at 10 am?

 

 

India Morning Report: Standing on a vertical ride at closing..

NSE Logo
NSE Logo (Photo credit: Wikipedia)

Does not leave much to imagination or prescience after the Nifty travelled the Vertical Flights of Fantasy to 5950 levels before closing gong struck at the NSE terminals and the soon to be public BSE that the markets are a settled lot in the morning and a final big correction is being ramped up in commentary to a big killa round hopefully over 6100 levels .

That means the Nifty and the exchange has another big weekly move  and probably not immediately next week though looking at the eagerness with which the House of Elders vote on FDI brought to profit taking it is obvious the wait and consolidation has been a long one even for FIIs or as some mention, most of the floating stock is yet gone.

In true indian market fashion I can duly see without undue overanalysis that it leaves opportunities like Jet Airways and Orchid Pharma ( as it negotiates with late lenders like IDBI Bank) for a grand capital appreciation burst. it also shows that markets have matured to the virtual exclusion of retail players though US markets can still claim to over90% retail invested in equities , but one guesses thru discretionary and non discretionary forms of institutional and hedgie managers.

As mentioned yesterday, globally alpha is back in vogue meaning India is likely to remain in currency and the market has thus that upside led by players like YES Bank and other private banks wwith double digit growwth left in this rally for them and other blue chips for the mass of your portfolio to settle down with.

Ramesh Damani looks to be in good form as always making the next level of case for a big correction for indian / DII buyers after the likes of Ashwini and SS failed to get markets to see any worthwhile correction in the meantime but it is probably time to see some institutional buyers move or rather churn their portfolios to the new limelight , even though they might feel like still holding on to Indian Pharma and even dabble in fiscally imprudent PSE banks on their indian panel’s whims.

Stride Arcolab continues its run it missed last week as Maruti and Baja Auto stay with Biocon to catch more idle profits on the take.

 

Bank Results Season: India Earning Surprise:(Flash) Yes Bank Grows Lending Income By 37%

Yes Bank grew NII by 37% over last year in the latest quarter, a high number eve for smaller nimble banks as BoB reported struggling with 3.23% NIMs in the same quarter. With frequent Tier I and Tier II QIPs, the Bank’s Capital has hit 17.5% and Tier I Capital is also high enough to load even higher growth digits as Gross and Net NPAs fall off from already minscule levesl to 0.24% and 0.06% Net Profit is INR 3.06 B the jump of 30% over year also translating into healthy linked/sequential growth

Of course with banks like ING Vysya almost degrowing the Loan assets , static at around INR 300 B and PSE Banks growing NPAs to significant 1% levels at the best of breed banks, the room at the top is definitely available for anothe top notch bank from the 2000-04 ‘era’ to make an impact when new banks with existing lending books and rural branches join the club in a few months

UCO Bank may have disappointed but PSE banks have shown that the markets do not expect more than 20% Sales growth tat best of breed banks and a growth in the range of 40% matched by growing Other income does hand the challenge to established lackeys at Kotak or the survivors at PNB at the bigger accounts as MNC banks also struggle with financing the Global Indian Corporation and India’s trade grows to 3 times the current levels in the coming decade.

BTW, apart from auctions for ECB lenders to quotas for buying bonds in FII acocunts which grew the possibility to OINR 250 B RBI also lent INR 77000 Crores or INR 770 B in today’s one/ten year auction

NPAs from the Deccan Chronicle account may be t o the tune of another INR 1 B at the bank but are unlikely to pressure the balance sheet.

 

THE INDIA BUDGET 2012: Food Security moved to #1 priority

Food subsidies will be provided for in full. Other subsidies will be provided to the extent the ecnomy can bear the impact.

Services growth in the year highest at near 9% , Industry less than 4%

Need to address Black money not explained yet.

Mysore (Cash instead of LPG subsidy to account) Alwar and North East (Aadhaar) pilots mentioned for change in subsidy transmission mechanism

Propose to restrict subsidies to 2% of GDP

Reactions: Maruti down on expectations of Diesel SAD/ Excise increase of 10%

Reactions: Banks up on services performance, once tax proposals cleared banks will lead big rally

GST mooted for August 2012

DTC will come. (when!)

Divestment of $3 bln ach vs target of $8 bln in FY12. New TGT $6 Bln (INR 300 bln)

PSE government stake limit set at 51%

(I think Times Now will be carried by Reuters globally for Budget statement)

RG Equity Saving Scheme deduction of 50% upto 50000k investment in Direct Equities upto Salary of 3 Lacs

Qualified Foreign investors to be allowed access to bond markets ddirectly. Electronic voting for shareholders at exchanges , no tlimited to AGMs but for all decision making

PFRDA , Banking laws Amnd , and insurance Bill will be moved in this session

MFI Bill, NHB Bill, SIDBI Bill, NABARD 2012, Regional Banks 2012, Public Debt Management bill 2012 also to be moved this year

INR 154.88 bln for PSE Banks and NABARD


Fitch Banking Report on Asset quality

Cyclical downturns in Textiles, Steel and Real Estate continue adding to asset quality concerns . Power and Infrastructure company concerns could continue and balance sheet rported asstes as per new PSE systemisation to 3.5% and Total NPAs coul d be as high as 10% as per Fitch.

Going forward Fitch reports on better days in light of the growth returning to the economy and seets position would not worsen for the larger banks esp not in agricultural sector but others where stressed assets have already fructified.

 

 

Divestment by any other name..

Securities and Exchange Board of India
Image via Wikipedia

..is still filling state coffers under duress

SEBI’s pronouncements allowing “Top 100” Listed corporates to fulfil conditions of the Listing by ensuring 25% pbulic float euphemised state sponsored filling up of fiscal deficit and much likemedical measures to force ellbeing and welfare of the poor class, the government’s plans fro buybacks from Public Sector Enterprises brought more blowback on to the governemt as the Top 100 companies include MMTC, NMDC, Coal India, ONGC  and  many others who have more than even 90% while SEBI requires them to hold not more than 75% with non public categories of investors.

English: Logo of National Thermal Power Corpor...
Image via Wikipedia

However while earlier dispensations disalllowed transferring of the overages or the extra stakes from promoters or other associates thru QIPs now SEBI has sanctioned the same as two additional measure of Institutional Placement programme and an OFS ( OFfer for Sale) thru stoc exchanges to enable the government to sell down its stake in these companies and bring them 10% closer to the 75% mark while it helps the government achieve its Divestment target for the year.

As neither cross holdings nor use of company cash to buy back largesse in equity was planned as such by the PSEs , the government still faces an uphill task in getting the quorum and using these PSE proceeds ad the Top 10 companies on the bourses today include 3 such Public sector players

English: Logo of Oil India.
Image via Wikipedia

Apart from ONGC, Coal India and NTPC i n the top 3 by market Caap, the next 3 incl Sail India, Oil India and NHPC may also not be a good source of cash reserves for buybacks of the government’s excess holding while NALCO and Neyveli Lignite management is likely to reserve their judgement against the ideaa to save cash for productive business investment making government’s task difficult  yet this approach would have been a feasible opportunity and is likely the only reason why our fiscal creep will remain below 1% to 5.5% of GDP

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