India Morning Report: A bright festive pre close rally to 5450


Of course that is about all the market could take as it prepares to correct today after another long run on the positive side. It is unlikely however that the correctiobn be anything more than a shallow dip and those waiting for a flash restart of a steep rally will likely have to plan it a bit further don the line at this point. It is more about safeguarding capital flows already in the market than about more news flow driven markets responding to policy inaction or any inaction with a fall.

The IIP disappointment will also likely survie a big dip as the market took pains to ride out the news without any adverse moves. The strength in transaction volumes contineus but 5450 may invite some profit booking in due course when the move snowballs to the south.

OF course a downgrade would set the ball rolling and that is one effect of policy inaction we cannot avoid. Politically they should also get to defend why India is anyway treated near the BBB levels by the rating agencies despite its more traditional and even public spending dominant structure for its banks .


Fixed Income Report: Credit Policy tuesday likely unsatisfactory

It just hit me that with the fixed Income markets moving so tenuously, the yields of 8.44% ruling on 10?Y today will likely be wiped out within 2 weeks of the trading after a 25 bp rate cut, as markets also expect yields to go back to even 9% and RBI unlikely to follow up with OMOs so diligently after the rate cut.

The Rupee fortunately has a lot of head room in the new range , coming in to policy week at above 51, with March GDP likely to stay near 6% than 6.9%

India Infrastructure: Tax Free Bonds from NHAI

Detailed map of Indian national highways.
Image via Wikipedia

NHAI has 70,000 kms of highways to be awarded under the National Highways Authority of India umbrella, targetting progress of 15 kms per day by end March 2013 (FY 2013)

NHAI avers that to reach the target of 20 kms per day, it needs to have 20000 kms or 30% of its inventory awarded. For FY 12 they have awarded 4,300kms projects. The company is raising $1 bln with bonds of which 40% is reserved for Institutions and 30% for HNIs. 15 year, and 10 years bonds yield 12.45 and 12.3%  (8.3% and 8.2% coupons) NHAI puts up the public portion of the funding of the highway and retains a 100% oversubscription ( likely institutional) for its 25% share of any project(tentative)

NHAI already has operational projects of nearly $800mln revenues and has recd $400 mln this year as premium from 19 projects

The retail consumption level off: Hero Honda perks up

Hero Honda rider
Image by Danny McL via Flickr

After sifting thru monthly Auto sales nos. ith great aplomb in 2010 and much muted in 2011, we did warn you that the Indian retail consumption story and the car sales are no longer tracking and are way behind the $5 Tln chinese economy where $2.5 Tln is the Consumer component. India’s $700 mln consumer consumption yet relies a great deal on two wheeler sales though and while Honda now sells 100k a month on its own, its partnership with Hero Honda was always the leader in the motorcycle segment since its advent in 1991.

Its quarter’s sales are up to $1.4 bln ( Rs 56.38 bln) up 33% yoy Profit Margins remained in the double digits (<10%, but almost there) with a Net of $139.5 mln. Its Apr-Jun sales were 1.31 mln motorcycles as reported earlier this week(BS Motoring) with June coming at 512k much a consistent 20% jumpp  year on year despite Honda moving on into an independent motorcycle producer, which terminates their active role in the JV later this year

Hero honda did give an ant i indication before the uptick when the markets opened and we will look for whats amiss here too as we adopt the Indian Auto and Motorcycle consumption story as a leitmotif of our India research here

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