India Morning Report: IDFC gets a bank license, India goes to Polls, Sun buys Ranbaxy for $4B

Though the trend is no longer on the up and up, BS revealing that IT and Pharma earnings have reached 20% of India Inc scorecards in 2013, doubling in 3 years on the depreciation dragon that caused a 14% run on the rupee just in the December Quarter. Meanwhile the Rupee is ratcheting back to 55 levels. According to RGR, the threatening levels of the Rupee appreciation start near 55 where it is overvalued to even 50. Remittances from the Middle East are flowing in mercilessly , leveraged by 5% loans in dubai and Abu dhabi as NRIs continue to fuel the investment boom’s precursors almost like any other Fed stimulus (QE)

However, as traders picks have shown in the week gone by, almost all shorts have been closed out and a further upmove for stoicks is not ruled out from here even as PSU banks and leveraged realty stocks like DLF remain outside the reach of good news and hence hold back most of the trading capital. As mentioned on Friday, March closed with $3 Bln inflows and almost two thirds is in Debt. A modi rally pre elections is scored in at 7000 as he steps closer to an absolute majority but it may prove over ambitious even for the NaMo juggernaut and markets may accede to pleas for a reaction this week before or after 6800 instead of hitting 7000 before counting closes on May 12. Assam and other NE states go to polls today

Bank Nifty has done creditably in this rally at 12550, without flatulent acccession by PSU stocks that have tripled NPAs ionthe Banking system adding INR 65 Bln NPLs to INR 3 T in Gross NPAs this quarter. Apparently metals continued advancing last week on news of a Vedanta upgrade to stable by Moodys, finally a piece of good news for the merged Sesa Sterlite and the acquired Hindustan Zinc

Arun Shourie and Arun Jaitley made the customary election time appearances for the party and are unlikely to be part of the governance framework in a Modi government that  has also sidelined MM Joshi, Yashwant Sinha, Jaswant Singh ( standing as independent from Barmer)  and son, even as LK Advani made a reasonable comeback on Modi’s behalf on the weekend as Modi asks for a personal vote for PM in the final stage. Sonia and Rahul also continue through a tough election schedule, made grueling more by continuous adds in Election surveys and a virtual estoppel on government business

IDFC’s bank license is indeed welcome for the strong business model of the company but as it starts running up to a grueling 18 month schedule to conform to all guidelines required for executing its license, most investors will be watching at current levels as a plan for reducing FII stakes to 49% is also confirmed within the new NOHFC structure for the bank. Bandhan was the other licensee. Most NBFCs in the fray including L&T finance which fully well knew the limitations a year ago, led the mid week breakdown as the RBI points to existing NBFCs and corporates to explore a differentiated licensing model. Policy day macroeconomic report for the quarter showed a limited recovery underlining the unlikelihood of any further improvements in RBI stance as recovery remains limited to fringes of the economy and a panic over the incoming government’s reform stance slowly takes hold during the crucial polling month

The mega deal announcement by Sun Pharma, taking it off its Japanese buyers for $4 Bln is still being digested by the market as the ramifications are mostly negative for Sun Pharma unless the game plan from the group is cogent and quick acting

Yes Bank is still a buy at 423 levels. Market indices are likely to continue adding straddles in the 6500+ ranges this week, unlikely to allow a sharp correction except for other news.

 

 

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 will breathe easier at 6300

Many market commentator see further moves north as highly unlikely and it does seem markets have done a fair bit already including the choppy start to 2014 as buying overwhelmed short trades. However one does not see any of the selected scrips losing much from current price levels. The Ukraine crisis fade had much to do with the afternoon bullishness and fresh buying will be allowed at lower levels in most of yesterday’s increases. Pharma and Infra trades may yet break out again with Pharma yet to take off, Cipla the ‘only’ big positive trade continuing to dominate sectoral picks. IT scrips finally yielded ground with HCL falling a few notches as market spine trades keeping interest in the stock finally seem to have exited the ‘always trying’ bellwether

New affordable housing targets in China as US and China complete their budget exercises point to the realities of the new post crisis economic melee as US Arms spending takes a backseat and China continues to increase its Defence hawkishness and faces increased executive flight risks from the Smog. Australian GDP gave the Asian markets much to cheer pre dating a secular return of investors to Asia even as China is finally deprioritised at some bigger investment houses

At home, one is still foxed by the marginalisation of LK Advani in the BJP as frankly NaMo seems a little banged up for the big job and AAP is well, a one issue pony. ( at best a canard) The fate of General Elections also thus has to be separated from that of the markets as India’s residual growth and any strategic direction will never be delivered by the Legislative arm given the state of our politics. Inspiration may be missing from the Executive or the Bureaucrat/Technocrat nexus but there is still momentum for the populace per se and India remains the best bet in global equities in such confusing times, making do with a much smalller stock of FDI for it knows its limitations. Our advantages in the English language could compare to an additional factor production given the dominance of Services and along with our expertise in more intricate subjects of the business management disciplines , we can well fashion as many competitive advantages any corporation needs to win globally as required Rajnath Singh returning to Public service will be NaMo’s other card but Congress and SP have got no leg to stand on even as the issue of the State’s division holds extreme potential before it also becomes a BJP manifesto dashboard line item.

And Nitish finally replies after 6 days on page 17 (TOI-Blr)

Seeing as NaMo’s other credentials being weak are still the best bet, Nitish finally gatecrashed onto national topics, catching his favorite Paswan in his horns. Meanwhile,  NMDC has corrected more than 17% and apparently has stable lows at 110 levels to allow further accumulation post the new CERC regime in progress with the 2014 guidelines. The Power quartet had a great start yesterday as expected and may strengthen the trend in the Power sector going forward even as cyclicals try to start back for the longer trek to the top uninterrrupted by market momentum taking the index for a roller coaster ride, including the Energy infrastructure stocks and the powerful Consumer staples like Bharti and ITC which arenot going to retreat in the bull scenario while remaining a defensive bulwark

Private Banks remain the most important component of India Bull portfolios with YES Bank leading the charge yesterday and Kotak taking a breather in the secular run. ICICI Bank and HDFC Bank continue to capture market share on and off the bourses from the embattled SBI and BOB pointing to the limits of an upward move in a side like PNB even in this critical move for the bankers, as PNB continues to show good profitability

Nadar is finally offloading HCL stock as his offspring looks to focus on the Education and philanthropy sectors even as both listed and unlisted Tech  and Outsourcing businesses battle the problem of employee commute in a society where broadband connectivity is unlikely to bring any solace or a formalised structure for the telecommuting options. India thus, retains one of the greater habits of managing to jump over bigger social potholes and non lasting technologies. ( in practice i guess with cities = potholes 😉

VIX trades apparently careened over from 15 levels itsel fin Tuesday trading back to mmatching US Vol levels at 14 as the Ukraine issue was wiped off investor tables.

The Great Indian Premier Tennis League Auctions

In other unlisted business, The mega sports franchises era continued untethered with Tennis joining the ranks of other popular sports making a commercial comeback as a four location auction saw  Mumbai grabbing the top three in Nadal, Djokovic and Andy Murray at $2 million each ( less than $2 for Djokovic and Murray)

Ecommerce has enticed Walmart to India too, even as PE players move on to above par valuations after a year of job cuts and enthusiastic middle/senior management recruitment at Management school campuses and Amazon opening its second FC in India in Bangalore

The Dell Foundation makes a return to Indian shores after the Gates Foundation confined itself to outright charity in limited indian programmes. The Dell foundation will be backing a BOP Private equity set up Intellegrow.

ET also headlines India pharmas second attempt to break into higher market shares in US generics in Complex molecules that could well go to the PE companies given the investment required and the uncertainty of time horizons ill suiting listed companies like DRL or Lupin.

Aviation revenue miles are likely picking up in the final month of Fiscal 2014 and Fixed income markets also likely to accelerate demand led price increases bringing down yields as Crude becomes a bear trade and Indian currency moves up on redenomination of the dollar forecasts down for the year in 2014. Policy Day in two weeks is unlikely to be busy for the Reserve Bank of india though the Central Bank may choose to exercise a rate hie whence the yields will come back to 9 levels before investments make a mark in the Indian recovery still flatlined below 5%

 

India Morning Report: There is no hope trade in sight

But I’d say keep accumulating as the indices break through a critical 6000 mark. Many blue chips, like in global markets offer extreme value in buys even as the speculative trade fails to take off on a delayed recovery.  Gujarat’s downfall over the small matter of a receding poverty line not helping the cause of the markets rich BJP is a puerile coincidence for the markets, but correspondingly there is no Congress faction left in the markets to buno the tanabana, Markets selling the stable BJP proposition backing out for an increased negative momentum(undesirably sharp)  on the downward side

The IT trade coming into profit taking for the almost first time except for a pre results redenomination, there ae buyers out there who are ok with the premium on Infy to a low 3475 market price and HCL Tech is good for a move of Rs 100 or more. Thus if all sectors move together like the Tuesday open, markets could see almost unheard of hlevels receding to 2012 levels no longer required by the New Dolla r prices. That also means these exits will cascade the Rupee even as it holds at 62.50 to 63 levels , that being a new fresh level for the currency. However it is still possible that with DIIs coming back as markets sell off that the gradual sell off can indeed turnaround and complete the prophesied ( by certan others , also old hands) pre election rally in India. The sell trade on ITC will likely never exit 290 levels an such picks abound with limited downside even in the correction which will confuse buyers into making losing commitments so a wait and watch is necessary. F&O markets return back to index only specials and i the downmove is to be arrested by Vols at 14 this will be a small enough move, but that is unlikely leaving vols (India Vix) ranging between 14 and 16 till the first buyers return whence new VIX levels would only see increasing volatility

However as we were stock specific going up and DIIs look for bargains to pick up pieces, there are gaps in how the markets will rebuild momentum most buyers holding on to prior 2013 selections including the new Aurobindo and Sun Pharma trades( a great defensive for mopping up your prop liquidity) in IDFC at 90, ICICI Bank almost ready at 930 levels ( the next levels are around 871), Yes Bank ( bottom at 267 will likely not reach the same so accumulating should be ready  – like a dark pool premium),  Bajaj Auto, ITC, Bharti and no – not ttk and titan currently as there is much more going down in that specific market despite the penchant of the self funded margin traders in our domestic brokerages like Angel, SMC and Centrum including the overlap with commodities wealth accounts. There will be no dlf trade north, none in Jubilant foods, titan or ttk and none in HDIL or unitech much later. Axis Bank’s orphaned again being misused in the prior rallies, leaving nay of the F&O speculators heading there at great risk from those targeting their brand of stupidity after getting on the right investments. Trading as a game may try not to suffer though sharp bear phases and quick bull recoveries are not ruled out with brokers and traders living the cricket dictum of well left alone even for great value picks in Midcaps The trades are mostly in Spreads, Bear spreads in your choice made by buying Puts at the just OTM (ATM-OTM>= 0) and selling a lower put to part fund the trade. Bull spreads, which wold be due n a couple of weeks, go bought Call just OTM (ITM-OTM>=0) which reflects better liquidity as well and thus better premiums, and partly funded by distant OTM Calls ( nly one or two will have  tested and liquid quotes where you do not pay excess liquidity spreads)

 

India Morning Report: Markets listless orphaned by a Superbowl

Superbowl sold tickets for cheap in the snow

Asian Markets are closed today and lack of Foreign investor interest on Monday Morning leaves an India open totally listless at 6100 levels and falling again, struggling after a brief respite at 6050 last week. IDFC results were inconsequential along expected lines with no fresh disbursements in this financial year but the stock has only upside left at 93 levels where it closed last week post results as it remains the only empowered player not dependent on infra approvals and a fresh book of loans in the pipe likely. Loans continued to make a better ratio of all NII at the Bank as spreads showed up resilient despite a bad interest rate environment in the nine month period reported.  Retail interest aside, the stock will remain on Institutional buy lists for time to come. It’s large provisions also make it a great equity investment with the Provisions unlikely to be called and can always be reduced prudently. Non interest income remains slave to PE principal and proprietary trading business

The Rupee starts the weak on such rumors where the deciding NDF market actually feeding on the panic mindset in low trading volumes and the onshore markets trade down but only for the morning after as the Superbowl even that draws a 200 mln audience in the US and around the world has ended minutes ago and investors will be back to a market fairly under priced by the recent pitai (hustle-bustle/buffeting not to be confused with the sage of Omaha’s investing interest)  Bank Rate will remain higher for the majority of 2014 , the prospect of rate cuts being pushed back and there being no prospects of improved transmission of monetary policy with yields pushing for higher dollar depreciation despite the RBI efforts to clamp liquidity which has time and again proved more amenable to intuitive policy than a counter intuitive rate hike move to tackle measures outside Central Bank policy. However corporates borrowing in ECB might actually be able to break the ice in terms of getting older level low rates and break the impasse eventually with increased investments (starting to flow in consumption sectors) and RBI , maintaining a new inflation hawk stance would likely have to hike rats further after the 200 Marginal channel cation and announce a veritable change in stance on rates first.

REC had started up Friday and Powergrid should join in after mi d-day if the sentiment indeed looks up. The Equity rally in the Global Markets hit a big snag in January and that is holding markets back awaiting  a confirmation of investor interest with FDI having exited Emerging markets like Turkey, Mexico, Argentina and Indonesia in a hurry with Turkey coming in midweek last to raise rates by 4% to near 12%. Goldman Sachs is in trouble again having started their own EM investments in losses having chosen MINT’s obfuscated markets and a deep and dead in the water China over India’s liquidity given the cross winds. The Rand(South Africa)  also closed above 11 to the Dollar for the first time in January.

However Emerging markets sentiment is likely to get into it in a couple of quarters from here and India will remain one of the best performing destinations having been unaffected in the post taper trade in January if it maintains 6100 levels or at least stays above 6000 levels

PNB scored great results having come in counter cyclically on raising provisions in a known strategy and NPAs under control in a rapidly deteriorating market sentiment for Banks shoring up investors to its ferry/rafters and trades 10% higher at 550 levels still a strong buy. Banknifty starts the week near a low at 10150 and is good for the trade up but one should be watchful with ugly quotes (in both the 10000 and 10500 series) in the bid auction market still holding an initiating trader to ransom with option writers playing ultra safe.

IT stocks are still overbought and Infy should retrace 3600 levels and even TCS should come down to realistic levels (but already at 2200 levels) as the IT/Outsourcing axis is not coming out as the GDP’s saviour this time either. Volatility levels are hardly material at 16 in the current rally agains 14 in the previous segment in December ’13

Energy stocks should start the climb back as and when markets stabilise, GAIL having  started the year smartly. Glenmark and Cipla/Lupin lead the Pharma rally that continues despite an ugly breakdown in Ranbaxy and Sun Pharma. We still do not believe in a robust Arvind Ltd comeback on USPA and other new limited franchises inroduced by the team since 2011. Tata Global Beverages remains a hold but the magic is still in 100% go it alone investments in India ( which are still a far cry from the carte blanche leading to exchange rate breakdowns in LatAm and SE Asia in recent EM history) Aurobindo Pharma on results and Lupin on announcements today provide good portolio picks along with Glenmark which has only $500 mln in overseas debt and among companies tapping a continuing generic opportunity in 2014 with a new pipeline

Interest in the IPL in the meantime continues strong esp evincing interest from global players in the playing XI and a fresh re-auction for all the 8 franchises picking up steam soon after the spectrum auction closes. ING and OBC related good Q3 tales as were also employing covering strategies but have not started lending/stopped losing on NPAs. Yes Bank may not fall back to 280 levels and accumulation is advised at current 300 levels. The BOI /BOB story broke down in January itself as we foretold with both banks still addding NPAs in droves. ICICI Bank’s INR 45 Bln ( including INR 30 Bln pie in restructuring) included the bank can survive the pressures with relative ease having also been proactive on definitions than the PSU penchant for playing it by the ear and losing continuously losing investor confidence and investor money as far as its favorite proprietary traders are concerned who lose another constituency in an unplanned bull attack with construction stocks Dlf and unitech still in a free fall after the ill advised run

Energy Markets react positively Midday

Gas stocks reacted positively as Petronet LNG produce became free to sell to industrial users and IGL and other domestic distributors esp IGL getting commitments to cheaper Domestic LNG in the new pricing regime. This also means domestic CNG in all markets including Mumbai where already 100% domestic gas was supplied prices of CNG and PNG were reduced by 30% and 20% while increasing IGL margins. Petronet imports LNG and will no longer be getting custom from IGL which Delhi used upto 33% imported gas

The move was a n expected one with a new Minister coming back (Moily ) in a sensitive election year . Moily is also expected to facilitate large project clearances with changes at th e Ministry of Environment (EPA Act bottlenecks)

GAIL shares the good news as renewed pressures on its subsidy costs will likely subside as it supplies to city gas companies and others at new revised rates and the policy is deemed stable after LPG quotas to residences have increased to 12 cylinders per year and gas TX likely to increase volumes with good results reported Thursday

India Morning Report: ICICI Bank, Bharti surprises on bottom overriding expiry sentiment

Or rather the headline should probably not read having overridden and markets continue weaker as a Strong Earnings calendar for Wednesday in the US drowns out brokerages and analysts still following the Indian open. Asia is weak on Thursday as US Treasury yields have continued south despite the additional $10 Bln in Taper added to the Global tab by the US Fed overnight. With only $65 B in asset purchases, it is a measure of the importance of sentiment in fund counts as Global markets respond in weakness after a weaker China spectre makes EMs already in a bout of outflows a queasy place. Leaving apart those who believe India is apart of the Fragile Five, this could be a huge buying opportunity as predominantly unlisted markets like Ukraine and Turkey bear the brunt of asset volatilities. Indian Rupee has opened close to 63 and pressures have receded quickly again. 6050 levels on the Nifty make it almost not tradeable in any direction this session despite expiry

Bharti’s results were an eyeopener, and the stock should be an overpowering Buy in morning trades at 304 levels. ICICI Bank also reported positively and is duly being punished to 975 levels for its rising NPA score and a gross total of INR 120 Bln or 12000 crores in restructuring assets including the 100% pipeline ( which is a 100% count on probability) but is a great pick at 930 levels probably and adding the risk it would never fall to that place, I would have been accumulating before he spurt and now after I should continue to buy. IDFC is surprisingly again substituted out for making space in portfolios and is dull ahead of tomorrow’s results, another Overpowering BUY call.

Bharti did well to double profits to INR 6 Bln esp in catching up on Data with a INR 75 ARPU and improving call realisations to parity with Idea at 37 paisa. Quarterly losses in Africa will likely continue around the $100 mln mark (qualitative expectation) Analysts apparently expected much more from Airtel coming in and that is why the Earnings business remain highly qualitative in India and expectations score less than Economic surveys and GDP inflation estimates on accuracy.

Nifty would probably not drop out of 6000 levels, but there would still be a square chance ( in double digits) of the index not coming back over 6100 at expiry and starting North in the mainline trend, with stock specific calls in closing trades today itself for the new series. We still expect a  short trade in Maruti in the new series. Biocon and Auro Pharma have definitely made a mark with investors and Glenmark /Cadila continue to be great picks. Markets at score additions t any blue chip portfolio. NTPC announces a 20% jump in sales as Coal supplies make for better ower generation ahead of new incentive structures

Overall though the correction remains a proactive wait and watch on news from the US and China, it has taken a sharp toll in four short days. IT exits will continue es as Hiring season news is no longer neutral for the biggies and Genpact reduces its dependence on assured GE business in BPO sector

Markets are also looking at thick fund switching as Proprietary books try to fuel the Hero boom and defensives get churned from earlier in the week though Pharma has not seen many exits except in Sun Pharma. Adrian Mowat had a great story to tell in the pre open and we all wait as the market along with Hero also plays out a 10% fall in Titan’s quarterly revenues reacting to proprietary favorites in a shallow market

The Banknifty, after a single trade whisaw from 10600 to 10300 is likely to be a positive trade in the new series after the bashing on the rate cut refuses to yield anything in now undervalued plays except the NPA/PSU stock. ITC remains on the upswing, likely bottomed out in Baja Auto before Hero earnings as well ( less than 50% probability)

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

Bank Policy Tuesday: RGR raises rates to 8% on Repo and 7% on Rev Repo

Maintaining the Channel at 1% and the CRR at 4% , the third quarter policy will go down well if markets in credit ( inter bank markets) continue to gravitate to reverse repo rates for borrowing in lieu of improved liquidity. Most hawkish analysts would improve their forecasts of rate hikes basis the new policy implemented in the third quarter. Our day’s review of Urjit Patel recos shows it is unlikely to be in an implementable form for some time and cannot be proposed into active roster during FY15 and probably FY16, but then it is a function of Central politics in 6 months from now

The Macro review admits to a loss of grow momentum. CPI declined as food groups obliged WPI at a four month low and the report notes the mall uptick in Cre inflation which is still very much below a healthy 2%

Hardening prices of services and key intermediates seen in conjunction with rising bank credit, increase in order books, pick-up in capacity utilisation and the decline in inventories of raw materials and finished goods in relation to sales suggests that aggregate demand pressures are still imparting an upside to overall inflation.

Policy stance incorporates the glide path to CPI envisaged in the UPA report in six months

Term repos were conducted in the later weeks of January despite Advance Tax payments to improve liq after Government Balances rose. Trade deficit is down by 25% in nine months. CAD has been forecast below 2.5% in March and CPI(Combined) expected to be ranging 7.5-8.5% at the end of the fiscal and FY15 before the next target of 6% kicks in.

The GDP fan shows a 4-7% range by Q4 FY 15 with expectations of growth from agri included in the RBI prognosis, forgoing their choice of a sticky move in Repo rates north to 8%. However the new Governor does admit this was an on the edge decision leaving further moves to the south probably open if his version of noise in the inflation is rested appropriately further, and improving chances of holding at 8% on the Repo rate and 9% on the MSF. On the whole, post policy action is still likely to raise interest rates in the Indian Economy now prior to the returning of the miracle grow / prodigal (not RGR reference obviously) though banks may not raise lending or deposit rates and Transmission issues remain with Banks using excess liquidity in borrowing from LAF for investments(govt borrowings/adjustment auctions)

Import controls, mostly on Gold brought CAD 1.2% in Q2 and the liquidity measures on Sept 5 , rejuvenating post impact from the currency crisis resulted in inflows of $9.1 Bn in equities and $14.1 Bln outflows in the Debt segment till Mid November (since May) were balanced apparently by $3.8 Bln in inflows in Debt since

MSF rate was only brought down by 150 bp since with elevated inflation expectations resulting in a repo hike of 50 p till now, which is likely achieved objective but still leaves the threat of increasing repo rates out, we would say another 50 b p is ready in the bag assuming yields travel to 8.5% , which would have been stable conditions this policy but are likely to be six months out from here given normal growth henc as yields likely move back to the 9 benchmark in the intervening period

Markets dipped on worries of UPA report making it and the unexpected rate hike before biting the bullet at 6130 levels during the presser.

India Morning Report: Crude down, Gold trade dead, MSF cut a real boon?

Boon Lay Extension
Boon Lay Extension (Photo credit: Wikipedia)

Sorry, I’d rather understand why the party for reduction in MSF and INR 170 Bln of Borrowing added in .25% of the Deposits. The channel to the low repo rate of 7.50% is still 150 points after the cut and the 10 yr yields are not really expected to move south from 8.6% ‘except at the low rate of’ 50 basis points in the next three months it had already proffered before Rajan made the change.

Anyway, markets at least recognize or get their bank spokespersons/contacts to say banks are at ease again so the 5950 mark has come. already on the markets. the Upward potential is truly limited at this juncture, all the media noise budget (DAVP one mite bite) for showing activity in the Economy not making up for the spending cuts to stay  in and the investments still a far way off.

Again, however, markets per se are undervalued excpt that they wait on such changes in fundamentals which are India’s bane for moving up while China gets a free look again just for having underperformed as it finds no legs in manufacturing worth reviving the Economy in goods production.

Cabbage Market
Cabbage Market (Photo credit: Wikipedia)

Rajan seemingly has made it clear he will be taking the Repo rate up again, and as the October meet approaches, markets will be equally quick to reach the bottom of the 5750 – 6000 range of the markets. the Reo rate at 7.50% already looks steep enough to me esp as trading markets stay idled to a high rate pre Taper.

I rather liked the Welfare flavor of August & September and wonder if it will come back again. At least its things we can do. The exchange rate is no good at 61.77, and hopefully its just waiting to go u to 60 levels as signs of others interested in the breakdown to 77-78 recede.

The inflation rate Formulatonomics of getting to that ratio as differential to  ‘PPP’ are rather lost to most with a real India, Economics or Finance background though.

You want PPP, you should go for a reference you can live with and that still counts as the Mac or the Pizza probably where we are definitely looking for a rate under 40 instead.

Indian inflation would count as facts show as deadbeat deflation at 6% itself, as the Economy at 4% is almost a dead duck in the water ( in India references, it being the flat minimum of National activity)

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