India Morning Report: Energy Cos, FMCG follow into the bull segment in January

English: tata steel lake black and white effect
English: tata steel lake black and white effect (Photo credit: Wikipedia)

The news of breaking thru to better levels in the next segment have started crystallising on expiry day as OMCs and  Tata Global catch up while Aurobindo is a strong candidate to become the trader sentiment fundng stock as it battles the challenges from a local branch of the US FDA in its new avatar(US FDA’s new avatar)

Divis’ is another if you think it needs a scratch to win the Pharma segment in 2014. However there still is significant (75% +) investment upside in stocks like Cipla, Lupin and even Sun and Dr Reddy even as they review their competitiveness in the blue sky territory (Ashwini/ET on Aurobindo) for their stock prices.

Mining and Metals are not going to get a broad rally and may sustain bear interest but Tata Steel and a few others are definitely heading for a better future, Jindal Steel on the flip side continuing into the nether. IOC  and BPCL could be strong picks, HPCL having compensated for the lack of interest within the sector in 2012.

The long stretch at 6200  now sees thinning out PSU bank trades and new investors looking for the non Quantum broking “hidden gems” i.e. analysed not in this block of 5 years but surviving the negative glare other trader favorites have been subjected to as Bank and Dealer trading rooms get increasingly traded out of the select short list making the back bone of the as always overall positive prognostication for the Indian Markets as a steady uptrend of more than 15% gain in 2014 has been divined for the overall markets. 

However the FMCG jump backs identified in Talwalkars, and Jubilant or even real estate newbies in listed trade like Prestige or earlier RKJ picks NCC have already shown their limited stamina in such rallies and the same applies to a McLeod Russel or any other such Midcap picks and Tata Global will probably lead a pack of 6-10 such winners . Others likely to be included in such a cross section of winners would be the winning infra trade from IRB, Lanco and even the blue chp pick IDFC,  and another from GVK, GMR and Reliance Infra on better leverage news in 2014. The ones rejected for quitting on the bank licence race or just trying include Shriram Transport and LIC Housing. ITC and Bharti are not good for the day but remain part of this segment of winners to provide fairweight to sucha trending portfolio unlikely to be able to depend on Maruti or Axis Bank (probably just because it was tired by traders thru excessive lay in 2011 slurring it as a bulwark of the bada$$ trader instead of India’s flagship trade) Punjab National Bank alone is making up for the required breadth in Banknifty underlying/components along with the usual volumes in SBI. Seemingly, Powergrid is also nearing a FII limit at its current aproved 24% part of the overall sectoral limit.

The Power NBFCs are good for the rush, HDFC Bank is not out of favor and REC and PFC continue to lead this other mrket spine overall, but the other spine/splines(if you read) would come back in Powergrid and GAIL. As mentioned earlier the L&T and BHELs (esp the latter) or the metal and mining Hindalco and Hind Zinc may not provide such an alternate portfolio enough weight to survive the daily storm in 2014

Also, on the overall, like Reliance in the earlier years from 2005-2010, one should stay away from a Kingfisher like future looming for Tata Motors as cash gets reinvested at luxe rices into JLR and it is fully matted in domestic markets


India Morning Report: Week opens on a buoyant note

English: AXIS Bank
English: AXIS Bank (Photo credit: Wikipedia)

India Morning Report: Week opens on a buoyant note

Despite the run on BOB due to the herewarned jump in NPAs at BOB  and AllBank, the correction in others tracing the trend in BOB like SBI and Axis Bank are unlikely to fall through and banks like ICICI Bank and Yes Bank are likely to be strong bets for this move in February though the pre Budget rally’s happenstance coud be discounted by the end of this week and the market stuck at below 6100 levels.BOB’s NIMs have fallen on quarter by almost 15 bp though they are still 20 bp better than December 2011 at 3.08% and are likely to be hit by a falling knife as at Allahabad bank even as PNB and SBI walk out in the guise of reduced provisions,

The Solicitor General’s resignation might be a significant blip ont he horizon for India baiters and because such a category is waiting in the wings, the intellectual discussion around the government’s decisions pushing thru new ordinances that led to this falling off are likely to be muted and ignored as India Inc and investors look to firm policy moves in the wake of a wasted 2012 for India when it should have been coming in to prominence for its Economy’s staying qualities and instead was largely ignored despite new FDI invitations in aviation and retail

Banknifty is likely to start a new move from 12600 (12654 at 12 noon today) and probably has at least 10% to offer even as ICICI Bank’s opening gambits helped the bankex and banknifty realign losses from weakness in SBI and BOB post BOB results The bull run in DLF is a red flag though and might sour the uptrend as IDFC is rerated down with no moves on Infra financing in wake of the Fisc, though an untenable assumption, being a driving force in irrational investor minds. Reliance Infra and other Anil group companies however would be at the forefront of the markets vertical climb if it happens anytime this week.

For rivate Banks atleast the turn in the economy signifies the rush for CDR is over.

India Morning Report: Is that the big breakthrough to All time highs?

Questions of consolidation have changed to ways of finnagling the new target for Nifty though Domestic institutions keep selling as on Tuesday and not many found reason to miss the India Morning Report yesterdayas we probably cowered by the repeating of underperforming by ICICI Bank to expectations today decided to skip the report 9 strictly for personal reasons but no one would believe me)

ICICI Bank has also not outperformed though it belongs to a sector where PNB has managed to underscore recovery with jumpo profit growth and profits of INR 13 bln on NII of INR 37 bln ICICI Bank would likely out score  them by Q4 itself in NII terms and did by no means perform badly though PNB’s beating estimates is finally carrying the banknifty into tomorrow’s new series. Expectations of high volumes in F&O expiry are likely to come to pass as TV18 yesterday itself reported a 44% rollover in Nifty futures into the February series.

The first 6300 targets from domestic broking houses have sneaked in and we are thinking more in terms of markets managing expectations as necessary without losing 6000 or 6100 in the Feb or next series and then steaming past 6600 is likely the plan but each is more defensive than the rest and it will be our recommendation too.

For one, policy execution has not improved, another, people could actually believe and wait for an up rating of the sovereign in the background of the current roadshows by the FinMin and thirdly the main perpetrators of missing NPAs coming back to bad debt like Allahabad Bank will be reporting pretty bad numbers as All bank reports today a 40% decline in Net yoy to INR 3 bln

Important reasons otherwise for keeping expectations hedged would include the importance of having a welfare budget for Chids’ Rahul and congress (UPA) and NaMo’s ‘threat’ to quietly come over to the center and rule which would likely spark off an important after reaction in India despite India Inc protestations of support with industry in Gujarat likely to be seen as a big positive for his candidature

ICICI Bank has reported a better NIM of 3.07% improving by 7 bp over last year and also sequentially keeping its new NIM targets alive and might even guide much better ranges Chanda Kochchar has hinted at in the last 3-4 quarters


Bank Results Season (India Earnings): ICICI Bank flashes positivity for a Nifty re-rating

While not beating expectations, ICICI Bank’s improving fortunes, better retail traction and control on NPAs seem to have paid off for it to score the #2 bank in the country soon aheadof PNB and HDFC Bank (Pvt sector)  with NII coming to INR 37 bln in the quarter and Other income INR 22 bln (standalone) , mainly advisory, dividend and fees and charges in commercial and retail banking totting up from its tarried state two years ago. Since, foreign banks have virtually skipped the Indian unsecured market making a fresh start. CASA has dropped in 2012, with even PNB scoring just 38% in CASA. At their best performance, ICICI Bank CDS still trade at near default scores of 160 bps

With the bank likely to report hawkish NPA policy compared to the PSU units looking to cop out of provisioning at the first sign of improvement, its profit growth in the Q3 of FY 2013 being flashed is indeed muted on year, but much better than the Q4 of previous fiscal and improving in course of the eyar but missing YOY growth except at a 30% growth in NII and just 20% profit growth even in Operating profit terms.

However the bank has already shown the required scale to jump into an imprtant #2 position in all parameters. (Rest after the management advice on the Q3 results)



India Morning Report: Value breakdown continues to reassign Nifty weights, banks in trouble

Of course Banknifty still has another 1000 points to go but the ramp down in PSU banks comes at a price for ICICI Bank and HDFC Bank specifically and PNB’s rise similarly would cost the markets more understanding for the non performing PSU Bank portfolio that will also rise, PNB having no real score on NPL performance either, clubbed with the worst of n=”government owned banks” whose non reporting of NPLs in time earlier costs the Bank capitalisation a good 10% on more than 5% of the Loan portfolio having to be put to waste immediately.

Delivery flight to Gander 737-700 Boeing Field...
Delivery flight to Gander 737-700 Boeing Field – Seattle, WA August 9, 2007 (Photo credit: Wikipedia)

Jubilant Foods has a short call on it finally even as Jet Airways continues its uptick and IDFC also corrects till policy execution calls die out or are converted by the government positing as always more on fare hikes which can be rolled back and diesel hikes that cannot be implemented from the looks of it. Add to that , traders and investors (foreign) would also like to see actual divestment in Hindustan Zinc and BALCO as Vedanta has already made a good offer for the residual stake and legal issues bogging down this government would not be easily tolerated. But then the spectrum discussions have already panned out for the government after the setbacks from the Judiciary almost a year ago.

A Jubilant Food, Titan and JP Associates move down could also signal today being the last day or the endgame of the correction as the weekend would likely be positive for the markets when they open on Monday. All in all a lazy Thursday and a reconnaissance up for markets on Friday tomorrow as they figure out any new costs of arbitrage on fundamentals as we remain part of a high interest rate economy in terms of market structure with growth concomitant with inflation and depth of market  ( as opposed to nascent high-speed growth in Indonesia, Thailand and even Pakistan) coming at the cost of lower available floating stock with only 3% of the population at high tide estimates investing in equities and Domestic institutional portfolios and Asset allocation strategies well-worn with two decade old picks.

Pharmaceuticals are doing well as they are not undone by circumspection or saturation at lower levels of penetration still dogging both Discretionary and Non Discretionary consumer plays

English: ICICI Bank - Leeds Branch - Roundhay Road
English: ICICI Bank – Leeds Branch – Roundhay Road (Photo credit: Wikipedia)

Bank Results Season: A critical look at PSU Bank results >> Dena, Karnataka, PNB and BOB


The sector reported in unison on Friday and bad debts rose to an average of 3-4% at most banks that reported. However, first the two profitable ones that improved results, then prioritising the big ones BOB and PNB that have sizable profitability and asset advantages and then the rash of CBI, UBI and others. Global Capex slowdown will continue to affect the INR 6T in Power sector Loans (2010) which have already come to INR 4Tln in 2011 and are likely going downanother 25%

Uma Maheshwari and Nutan of CRISIL/S&P had a ok denoument of their cry wolf and as MOS suggested this could well be the last reported increases in NPLs but then I don’t know what MOS is saying right now.

Dena Bank

Dena Bank reported an NII of INR 612.24 Crs or INR 6.12 B, comparable to some of our food majors like Jubilant Foods (QSR) who reported INR 3.14 B selling pies in the same. Other income was characteristically subdued even at this profitable Mumbai based regional PSE at INR 1.41B

Jubilant’s net Profit margin was just 10% as Dunkin’ Donuts weighed in though the Pizza brand has 489 stores of its own. Dena’s operating profits of INR 4.57B or 60% and Net of INR 2.39 B or 31% underline the stable underlying growth in even public sector units though the preponderence of these inefficient beachheads of government donated welfare and 60s nationalisation dominating the Bank Nifty may still not be defensible

This bank counts 1% Net NPAs and 1.8% Gross NPAs. It counts 80% of its income from Treasury and Corporate thoughin this case Treasury independently contributes 28% of that combined income and a slightly better proportion in profits

The Bank has 0.91 Tln or 45% the size of an ICICI Bank. EPS 6.82 down yoy

Karnataka Bank

KTKBANK reported just INR2.26 B in Net Interest income and INR 0.91 B Other Income and a Net Profit of INR 0.83 Bln or 83 Crores on an asset book of 317B (FY2011)   Net NPAs even at the profitable unit are already 2% and Gross NPAs 3.31%

Treasury and Corporate (Lending and Bills) equally split the non retail business of 67%

EPS of 4.43 up sequentially from 4.42 and up 67% yoy

The Bank counts deposits of INR275B and Advances of 175 B last available for March 2011 The bank’s private sector advances do not count agricultural loans. Total Assets of INR 317B would be assumed to have grown only in single digits

Punjab National Bank

Gross NPAs are just INR 99.72B and Net NPAs INR 49B but 3.38% of gross and 1.68% of Net respectively. The bank has guided final NIMs of 3.5% so does not expect mrore than the mandated increase in provisions from here and recovery income is honeycoating the pot

Profits grew hardly in double digits below 15% for the megalith with INR 2.66Tln in non food loan assets that beats ICICI in loan assets by 20% and INR 6.7T in  “business mix” or balance sheet assets with Deposits of INR3.85 T and Loan assets of INR 4.59T, Credit and assets having grown 20%

NII is up a shade under 20% at INR3.7B and Other Income stable at INR1.2B, Net Profits growing 12% to INR1.25B Provisions grew from INR566Crs to INR900 Crores or INR16B incl Tax assets

Fee based Income is INR 549 Crores or 5.49 B and Net Interest margin despite a dip continues at 3.7%  ahead of all others the drop in NIMs having hit the third consequent quarter, still supersized from other competitors , the best NIMs being near 3.5% The Cost of funds for the bank is below 6% and Credit Deposit Ratio 77% to 76.4% in the current quarter. CASA is non standard at 35%

The banks retail assets are barely 10% of its loan portfolio, Power and Telco 8 and 2.6% an dthe bank holds INR 1.2T in investments This quarter’s restructured assets are just 5% of its total INR255B

The bank should hurt those going short at current levels

Bank of Baroda

Reported results today NIMs are don from 2.96% to 2.73% Restructured assets have however added only INR573 Crs or INR5.73B NII of INR27.98 B reasserts it is the top of the heap with PNB

BOB restruured assets have added INR7.5 B not in power and telco but in Textiles


IOB NPAs are up to 2.97% at the fag end of the results day. Allahabad Bank NII has gone up 12% to INR 13.7B.  IOB NII is 13.28B but provisions of INR5.2B may still be low with Gross NPAs half that of Canara and Union Bank at 44 Bln Allahabad Bank PaT is INR5.27 B and OBC at INR 3.94 Bln among others today


Morning Trading Strategies – India July 30, 2012


ICICI BANK And IDFC start trending down when the exodus becomes clear in the coming weeks esp after the GDP data.  TILL THEN ICICI BANK may actually reach never before highs with ITC ITC results up 20% were an eye opener after they showed up plateauing on consumer brand sales in Q4 data Consumer brands do show continuing losses (minor) but traction shows capability to tap the 10X higher unorganised market in Atta, Oil and readymade foods.

Regardless of HDFC’s 20% higher profits the Consolidated income of INR12.75B, the markets remain topped off and likely candidates while the rupee wants to correct to the Dollar to 54 levels before trying a jump, leaving markets pushing for an upside.

However, my earnings capacity and the trade in the Rupee Dollar have been hit adversely as I get targeted in the ring to sort out their confusion on the irection of how to get out of a dollar positive trade because of the weak markets.

Marti’s scores in Q2 were bad but more than results actions in Manesar and its swift rebirth in Gujarata this time are going to have positive ticks on the price sooner than later. BIOCON and healthcare upside has definitely been ;lost excep t for one shadow snook with the telco stocks. The IT jump is illusory but if you hold them, it is good for you

Someone did say PSU bank shorts, but if you try CBI or even UBI they may be climbing back today.

Snatch and Jerk (Intraday) therefore offers few available opportunities left on the shelf. 

No need to add positions now when you can get them cheap later BOB and PNB should infact come back into the green and rise sooner than later. Indusind is not a good pick. Yes Bank holds.


Morning Trading Strategies – India June 28, 2012

July (Photo credit: kurafire)

Expiry Thursday means buying would not have picked up in July series and some are not quasi currency forwards for a change. IDFC Calls at 160 levels for example are cheap and buying should be done today and yesterday. Those avoiding options can sget into July series infrastructure futures in ICICI Bank and IDFC, ICICI Bank looking like a candidate for 900. SBI could run to 2350 similarly and HDFC Bank left alone for the next run after the market corrects from 5350-5400

Yes Bank is likely to see an important correction as HSBC exits Yes and Axis Bank holdings of $500 mln each at 3-5% discount t o market

Auto companies would be great in the july series, Star (Stride Arcolabs) good for purchasing at lower levels if it comes back after usinfg $300 m from sale of Ascent for the $110 FCCB repayment

State Bank of India Logo
State Bank of India Logo (Photo credit: Wikipedia)

HDFC is my all time underdog favorite at this time of fast rising indices and there could be action to start the bear in Sterlite and SESA soon as their VAL load becomes clear ahead of the board meeting hich will still likely approve the actions

All the usual recommendations for this week apply as per sectors recommended especially if you are not day trading within june. kingfisher got shorted already, JP Associates, one feels may get left behind again and BHEL and L&T are buys only till the trend is up

Jubiland and Titaln shorts should also be avoided while the trend is up PSU Banks like BOB and PNB should be very good picks. Many hedgies picking up PSU bank strategies in the last quarter

Foreign Banks in India: DBS grows its #3 market to $4.7 bln

DBS Bank Ltd logo
Image via Wikipedia

Foreign Banks in India: DBS grows its #3 market to $4.7 bln

DBS assets in India grew to INR 237 bln according to results discussed by CEO Piyush Gupta and reported in ET. The bank is hoping that subsidiarisation nod from the RBI will come with better branch infrastrcture hopes for the bank. ING Vysya and Indusind bank would compare in size with DBS with INR 335 bln in assets

The bank has 12 branches in India. DBS has a 10% Temasek holding. It has 39 branches in Indonesia and 15 in China (wikipedia)

Piyush Gupta operates from Taipei ahile DBS counts Singapore and Hongkong as its largest markets.

India and Singapore operate in each others territory thru the Comprehensive Economic Cooperation Agreement including GIC and Temasek holdings in India and tenets on free transfer of information between the two nations including banking wealth questions

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Bank results season : ICICI Bank begets the vote of confidence, PNB grows NPAs

English: ICICI bank in South Road
Image via Wikipedia

ICICI Bank Deposits are now INR 2.7 Tln and only 101% of advances against the expected 125% or the ideal 130% As a proportion of the $ 95 bln balance sheet they are tracking and only 65% are retail deposits That means the NIMs are overoptimised and s and when ext borrowings are added to leverage the balance sheet it might erode further from 2.7% Based on subsidiary incomes and its NII and other fee income it has been growing well however.

PNB grew Gross NPAs , with Net NPAs rising from 0.84% to 1.12% losing momentum with NII growing 10% and NIMs down a fraction to 3.84%

ICICI Bank however grew NII to INR 27.1 bln and Profits to INR 17 bln in the December Quarter. The profits were 20% higher from December 2010. ICICI Bank NII grew at 17% and Net Npas fell to 0.3% , provisions a further smaller 3.6 bln The compoany’s loan book is now at INR 2.31 tln or $46.3 bln

The bank’s 18 international operations still make 50% of the book and mortgages only 35%. Retail deposits are only 65% of the deposits and the loan book will grow at 18% incl the March quarter for FY2012

September’s Profits were a bigger INR 19.92 bln. September provisions were INR 3.2 bln CAR remains above 18% and 13% (Tier I by Basel 1.5 calc) as per RBI directives for 8% CAR reqts. September NII was INR 25 bln and the current is a 8% QOQ growth

The bank plans to cement its growht with recovery in retail growth and the clampdown on corporate lending effectively continues. CRE is less than 4% of the Company’s loan book. The bank’s $100 bln balance sheet is the second largest int he country behind public sector SBI

ICICI Bank NIMs continue to languish at 2.7% but are likely to improve with focus on retail It has grown free income basis in Transaction banking fees and remittance fee income while M&A fee also languishes in current market. Life insurance premium has grown by a healthy margin again

India Earnings Season: Is PNB a one quarter phenomenon? (PNB Q2 FY2012, H1 2012)

PSU Banks deal a blow 

PNB , Punjab National Bank followed with great results after IOB, UBI and others excl Canara reported

This is a photo showing the Bank of Baroda Bui...
Image via Wikipedia

great sales upmoves yesterday limiting growth in NPAs at the gross and net level.

PNB reported a NII of almost $ 700 mln at INR 3454 crores or INR 34.54 bln to post a large operating profit of almost $ 500 mln and a net of $ 241 mln at INR 24.5 bln and INR 12.05 bln respectively. Though Net NPAs grew from 0.69% they were limited to a creditable 0.84% Though going by record these results may not be replicated in the coming quarters, the bank has again posted great half yearly numbers and profits

Systemisation of their Credit mechanisms has led to a larger NPL hit for all PSU Banks and the same is expected to ease off from this month as UBI even continues posting its profits ony from reduced NPL provisioning in the last two quarters

PNB and BOB are preferred PSU banks from an asset quality point of view

PNB has also posted a 30% + Net Sales(NII) in Q1. Interest Income topline is a 8% growth over Q1’s INR 83.5 bln at INR 89.5 bln, and net profit is 9% ahd of Q1 ‘s INR 11.05 bln

PNB’s total Advances add up to $50 bln just ahead of Pvt Sector leader ICICI Bank and Deposits (as of June 2011) were a large $65 bln or INR 3.24 Tln

Op Profit has been more or less static since the March 2011 announcements (Q3 2011, Q1 2012)

Other Results

India’s cement story seems to track to a full loss as ACC’s doubled profits of 1.86 bln were still a far cry from a successful year and Ambuja thus tracked down since morning. I could even think of some non Cement / Finl Services stocks to replace them in the indices..

Banks look for Fee Income push (India Earnings Season)

An HDFC Bank Branch in Hyderabad
Image via Wikipedia

Despite paltry box office pickings of just Rs 1300 Crores for the Corporate Finance teams, private sector banks are set to make a profitable killing for the quarter’s results led by Investment based products, bancassurance and commercial banking charges on Trade and retail customers. The kicker is almost 40-50% for Private Banks like Kotak and HDFC Bank while even PNB and UBI will bolster their effective interest income growth with 20% growth in fee income.

Banks have recently been allowed multiple ( up to 4) insurance partners for their cross-sell desks in wealth management and even longstanding wannabes like Indian Bank will pursue the course to bolster their banking incomes. Axis and HDFC Bank expect almost a fifth of their income from fee based lines

Also deals may be looking up in the latter half of the year if retail regains color and FD”i approvals come through

The public bank conundrum: PNB to pay dearly for results?

india calcutta bookstore

An aggressive competitor trying to leverage its balance sheet assets, PNB also works with the retail consumer at top of mind recall, running to raise deposit rates ahead of the herd and change its public colors to something more acceptable as a competitive player without investing in expensive ( maybe pro bon) marketing / rebranding efforts. nevertheless, with a downtick on the banks, it will pay dearly in terms of eroding sentiment (The ship to run away from ahead of today’s results)

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