India Morning Report: Infosys still chooses to report into the weekend

One of the Software Development Blocks of Info...
One of the Software Development Blocks of Infosys Technologies Ltd., Pune, India (Photo credit: Wikipedia)

 

After a big jump in pre-morning and post pre-open trading in Infosys, the scrip is registering ‘voters’ for the big positive result tomorrow. That it happens is the hope the rally prospects are living on as investors settle for the stable India an Asian investors nod into the markets after the heady May-September trades finally settled the issue of India being unique with a 25% depreciation of currency that has thence lost almost half its value in depreciation.

 

The Rupee will thus finally head to pre-60 levels and the Janet Yellen trade may push the markets further into rosy cheer, before a forced taper does tick in as Janet Yellen may still prove in a surprise for the markets. Yet, the news of the taper is fading away and US could remain overlevered to shelter its overlevered households and keep the consumption ticker running as inflation remains intuitively positive to growth. That could serve as example to India down the road though the comparison is still too wide off the mark except for specificities India shares with everyone (as usual)

 

Even as the Rupee moves back into stride, expected tomorrow an EBIT improvement at Infy and an expansion in guidance/rater as guidance has already been updated multiple times, a discouragement to those positing further muted guidance may still be required

 

The Bennett Coleman machine TOI mentions IIMs (and IITs, probably)  are facing employment pressures again , sneakily close to reports of net employment increases back at the IT offspring of India including Wipro, HCL and the MNC offices seeded here after a long success rate of the earlier growth phase. Accenture did break trend to show jump in consulting more than outsourcing revenue this time but outsourcing trends have been showing up everyone else again, seemingly the only strategy outside server management that has a direct proven impact on global profits

 

Yields jumped down still refusing to, but picking up real demand (hopefully) as the Rupee criss-crosses between 61.5 and 62.5 at an unnoticed fury of changing positional trades. The trades, still in ITC, Bharti, HDFC Bank, ICICI Bank, IDFC and probably YES as YES slides into 340-350 levels again for the results season starting tomorrow.

 

As noted, EMs like India, without the IT story per se are ready to take the year to a positive close esp. as the worst India could do is 4% growth

 

 

 

India Morning Report: A sudden change of heart(afternoon) as Banknifty breach closes up

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

It wasn’t a wren and martin breach however as the morning saw weak NPA stories slitting from private banks in the Banknifty components, but as that grouped SBI and performing PSBs such as PNB with the weak quality ethic portfolios the breach rather filled up and the traders move on the Nifty south frrom 5950 itself has been closed by the afternoon before morning FTSE and European trades took business elsewhere in the global 24 hour timeline for today’s markets.

Trade data showed exports up to $27 Bln, a nice growth dividend , though a one off in the year  also leads to shoring of sentiment as the weak India story tries to grip old India pockets in Financial centers like London, themselves struggling to make a mark in what started a s  a benign year of recovery.

EMs are back in portfolios and Services Indices n India and US are under pressure from spending cuts with Euro still hot in afternoon trades as the October FOMC passes by tonight with a mandate for Yellen. SBI got a shot in the arm after the duress long exected in the stock, as the SBI GM in place and a likely future Chairperson, Arundati Bhattacharya explained the process of shoring up quality  in detail and IT investors and other traditional India trades tried to ngulf the bank’s weak asset quality in a single south trade on all government owned banks

One still wonders if changing norms to release Government Bills and long dated bonds from controls will work for India wih such strong anti-measures from the  “India Bull” community

Also on the credits is the way Bharti managed the press bytes and the non devolvement of the story around a crushed Walmart in the run up of a Modi inspired changeover at India’s helm in the 2014 General Elections

India’s growth charts currently continue at a flat minimum under 4% and the same was confirmed by IMF in yesterday’s report leading to the morning clouds as Rupee slipped back to 62.5 levels. Since then the Deposit story is back with NRI swas and more and the Rupee is back at 61.7 levels before infy results later this week

India’s exports at $26.8 Bln were nearly $2 Bln ahead of the staid $5 Bln average rate we hit early in 2012-13 wih the plunging  bottom of the growth story and were fist signs of growth in exports let alon import substitution after the currency went thru serial pangs of double digit depreciation from 47 levels

Bharti will easily survive the retail FDI wind-down while it remainsan important ndia focus brand to own as does ITC. Yes Bank and HDFC Bank also remain great picks with a lot f investing capacity for foreigners and IDFC is catching fire again to fill any gas from “lack of confidence” in India’s branded consumption stories like Bharti, ITC or Bajaj Auto

 

India Morning Report: Bajaj Auto reaffirms successful transformation in September sales

Rajan Bharti Mittal, Vice Chairman & Manag...
Rajan Bharti Mittal, Vice Chairman & Managing Director, Bharti Enterprises, at the 2010 Horasis Global India Business Meeting (Photo credit: Wikipedia)

 

Sell Heromoto, Buy Bajaj Auto – A pair unheard in India trades till 2007, post crisis we have seen it win since 2011 and have been telling our investors. Of course September’s 367,000 unit sales could well have taken the sheen off festive season in October but the bigger news is that the company feels good enough about a price hike of up to INR 5000 and export markets have responded well, as he just quoted examples spanning Nigeria (46,000), Kenya and Uganda. Its RE60 may well survive most objections in India for an introduction before 2015 but even if there are hurdles, the company is protecting profit margins and market share in an uncertain situation.

 

September may in fact have seen sales being advanced from the festive season because of an extremely dull prognosis and Indian consumers are diving off consumer staples brands in general. However, one feels that this current secondary upsurge in inflation/WPI may well see better realisations and hence profits from price starved staples companies and so the queasiness around ITC and Bharti”s retail foray may well serve to mark the return of Dabur,Marico and these two bigwigs itself as results show better profits and earnings growth , any positive number would be  consistent with market expectations not th double digit growth consensus reached  earlier in the year. As for Bajaj Auto itself, it is protected from flagging sales year on year in festive October as it is going through with  new launch of Discover whose sales make up for it

 

Meanwhile, the market took 5750 /5800 levels as a sign to return to performing PSU Banks but with the punters preferring sinking ships earlier, the take off in PSU banks thu PNB and Bank of India is rather subdued even as Private sector banks make almost one off corrections between yesterday’s F&O buys and today’s trading.  Th incremental AD ratio of 83% actually is rather standard for India Banks as Deposits proceed to grow at 14% behind credit recovering to 18% thus meaning the RBI will be instead under increasing pressure to conduct OMOs even as banks hang on to over INR 150,000 crores (INR 1.5 T) in overnight borrowing from the Central Bank, washing off any advantage except the sentimental from reversing of more tightening measures in the October policy.

 

The Rupee pirouettes around 62 levels again but Gold prices in India falling , accepting the global prognosis sounds ominous for subdued growth in 2014 as well apart from meaning better diversification and disssemination of global fund allocations even post Tapering at least in equities, markets having taen to bonds again in the interim till the schedule for the Taper becomes clear.(Duct tape now that Octaper is almost certainly gone- Duct tape = December Taper)

The new ABCs of Indian stocks, listed as Asian Paints, BHEL and Coal India figred among those fastest and strongest in the rally to 5800. All three stocks have however lost their leadership of trends as 2 of the 3 fall into sectors creating corporate goevrnance hols and braking India’s development cycle prematurely. Nifty meanwhile keeps catching up wth the air gap creatd by its futures moving faster in the morning (bigger premium) in turn as Singapore Nifty reaffirmed no investors had left and moved quickly to 5850 and higher levels. The rally will again falter around 6000 levels and as the fight gets dirtier its better to dig your heels into the better stocks we listed including YEs, IDFC, ICICI Bank, HDFC Bank and Tata Global if ineed Starbucks follows thrgh with the plan to ramp up outlets to more than 200 this year

 

 

 

 

India Morning Report: Dead cat bounce, Earnings rebound on the horizon

NEW DELHI/INDIA, 16NOV08 - Klaus Schwab, Execu...
NEW DELHI/INDIA, 16NOV08 – Klaus Schwab, Executive Chairman, World Economic Forum, Narendra Modi, Chief Minister of Gujarat, K.V. Kamath, Managing Director and Chief Executive Officer, ICICI Bank; and President, Confederation of Indian Industry at the welcome lunch for the World Economic Forum’s India Economic Summit 2008 in New Delhi, 16-18 November 2008. Copyright World Economic Forum ( http://www.weforum.org )/Photo by Norbert Schiller (Photo credit: Wikipedia)

And the international  impact of an immaterial shutdown cascading to its third instance in the current crisis after a US downgrade and the shutdown first awaited showed governments globally as it did markets that it was really immaterial. The economics of a shutdown are indeed brilliant and technically still half an hour away(at writing) . It means some  Federal Workers will not get paid and probably more in this instance than earlier when it affected only pensions and some non critical defense spends and not even one third planned government spending which anyway trends down having been minimised earlier

Anyway, apart from the sequestering which will in the long term impact US healthcare and Defense stock, the issue of the Rupee recovery as Oil continues south ( on weaker global /US consumption) and the US Ten year yields looking to bounceback from 2..64% on ‘No Taper’ news, India Inc has had nothing to report. Earnings in Q2 despite the all round scare will remain positive for the few listed corporates that carry India Inc on their shoulders The rebound in software exports in the invisibles however has strengthened the trend towards overweight IT and Pharma portfolios

Mitesh (ETNOW) as usual played a clear long with a pick on ABNuvo in cash that works much better thu the day than the Sandeep Waghle/Gujral technique of trying to short the edges of the bottom as the Dead Cat bounce holds and rejuvenates some banks (Afternoon update: Banks managed well, YES Bank shorts dened and F&O interest likely having picked up in those 6 bank series excl the banknifty index weighed by more than 2/3rds publc enterprises)

The CAD bounce is already in with $21 Bln in a quarter indeed by itself worthy of applause and additionally was abnormally high and the other three quarters of the year will trend barely in double digits if Government estimates for the full year CAD are spread over these coming three quarters at less than $9 Bln each That is due to the reduction of th $8 Bln Gold deficit in Q1 before curbs coming down to near zero ( restricted to 20% of imports  that is not exports thru the regulations introduced concurrent with RBI’s currency control measures in monetary policy

The Trade Deficit keeps growing and again for India as for US the Net Services (Invisibles) Contribution was a surplus of $16 Bln for the quarter gone by, but the blocked imports leading to the same are not available to us to comment on our ‘cutbacks’ impact on growth. Core Industries (38% of the IIP) grew the expected 3.8% after a 3.1% in July, making the hopes of a recovery more substantive as well. Banks like ICICI, HDFC Bank and Axis will reap benefits f any rebound from their larger distribution and shorting SBI is still a neat trick int he market in terms of the looming uncertainty in the short term. In fact I would say it could break below 1500 but for the rising bear trap being locked into by Bulls in India counters selling 1500-1550 puts and looking for a trade positive on buying the 1700 Calls than writing them so its actually a seesaw.

Don’t worry about EM being global victim of the QE and now its withdrawal, the newest setup is on the Euro, with 17 weak countries holding it, as it rises into the bubble-o-sphere on  US Stupidity and is potentially looking to becoming quite a safety wall for all the world’s troubles much like the yen did for three decades since the 80s.

The Banks are trading in the green and this weeks events could possibly split the bank trades between PSU And SBI negative and ICICI Bank and private bank positive in this trading rich sector even as metals struggle to find buyers as the markets still believe in a lower bottom around 5600 (and then lower still)

Tata Steel and probably two more scrips at most merit positive attention and would have accumulation from institution at all levels. The calls in ICICI Bank and IDFC are likely to remain positive though the rest of the week with the low levels of yesterday late afternoon, when the morning’s dead cat bounce ‘resumes’.

 

India Morning Report: Dead Cat Bounce, rebounding earnings on the horizon..

Bounce(game)
Bounce(game) (Photo credit: Wikipedia)

 

And the international  impact of an immaterial shutdown cascading to its third instance in the current crisis after a US downgrade and the shutdown first awaited showed governments globally as it did markets that it was really immaterial. The economics of a shutdown are indeed brilliant and technically still half an hour away(at writing) . It means some  Federal Workers will not get paid and probably more in this instance than earlier when it affected only pensions and some non critical defense spends.

 

 

 

Anyway, apart from the sequestering which will in the long term impact US healthcare and Defense stock, the issue of the Rupee recovery as Oil continues south ( on weaker global /US consumption) and the US Ten year yields looking to bounceback from 2..64% on ‘No Taper’ news, India Inc has had nothing to report.

 

 

 

The CAD bounce is already in with $21 Bln in a quarter indeed by itself worthy of applause and additionally was abnormally high and the other three quarters of the year will trend barely in double digits if Government estimates for the full year CAD are spread over these coming three quarters at less than $9 Bln each

 

 

 

The Trade Deficit keeps growing and again for India as for US the Net Services (Invisibles) Contribution was a surplus of $16 Bln for the quarter gone by, but the blocked imports leading to the same are not available to us to comment on our ‘cutbacks’ impact on growth. Core Industries (38% of the IIP) grew the expected 3.8% after a 3.1% in July, making the hopes of a recovery more substantive as well. Banks like ICICI, HDFC Bank and Axis will reap benefits f any rebound from their larger distribution and shorting SBI is still a neat trick int he market in terms of the looming uncertainty in the short term. In fact I would say it could break below 1500 but for the rising bear trap being locked into by Bulls in India counters selling 1500-1550 puts and looking for a trade positive on buying the 1700 Calls than writing them so its actually a seesaw.

 

 

 

Don’t worry about EM being global victim of the QE and now its withdrawal, the newest setup is on the Euro, with 17 weak countries holding it, as it rises into the bubble-o-sphere on  US Stupidity and is potentially looking to becoming quite a safety wall for all the world’s troubles much like the yen did for three decades since the 80s.

 

 

 

The Banks are trading in the green and this weeks events could possibly split the bank trades between PSU And SBI negative and ICICI Bank and private bank positive in this trading rich sector even as metals struggle to find buyers as the markets still believe in a lower bottom around 5600 (and then lower still)

 

 

 

Tata Steel and probably two more scrips at most merit positive attention and would have accumulation from institution at all levels. The calls in ICICI Bank and IDFC are likely to remain positive though the rest of the week with the low levels of yesterday late afternoon, when the morning’s dead cat bounce ‘resumes’.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

India Morning Report: Banks earnings, GDP scares markets despite inflows

English: comparative advantage in economics
English: comparative advantage in economics (Photo credit: Wikipedia)

The longer term investors can finally see the difference between potential and fact in India inc but are unlikely to leave in light of the comparative advantage India still holds, while trading flows may well continue to come back to India at 5900-5950 levels as markets bother with important questions across Bank earnings disaster spilling over to Private Banks despite the unlikeliness of the scenario.

Banks apart, breadth investors except for passive funds and India bulls since nineties are also likely to be worried instead of being enthused by the markets remaining bulls getting shepherded into Pharma and IT which remain defensives but are being listed only for their Rupee Depreciation advantage, and thus not a real page turner for Indiaphiles

The Rupee strength thus breaks correlation from equities and with GDP numbers likely o breach negatively in non agri sectors, the situation for Monday open is also grim as is the PCR rise in the rally till Monday/Tuesday. US yields have come down pretty low yesterday after the GDP announcement. Ambition targets are back in Gold and Silver and retail consumers might even be hoping markets ring the bear in Energy markets and Oil goes below 100, which might erase the questions rought forth by Export parity removing margins for Oil Exploration and Oil marketing Companies

Rupee raging stronger than 62 levels might also see slower additions to NRI Deposits while raining inflows on to 5950 levels was easier for all categories of India attracted offshore investors, QFIs and NRIs

However if markets expect better Auto and consumer sales performances in non durables to shore up immediate performance, then this might well b the end fof the rally. Money is staying in however and Energy and Metals are likely to be th new stars apart from the continuing rlly in Pharma. With Sun Pharma and Glenmark leading from the front today, Cipla and Lupin cannot be far behind and next week will continue this discussion of India’s prospects from much the same levels than breaking below 5800 or such as whatever possible policy measures are enacted , look positive and on eecution rather than playing to the galleries.

At this point another market created distinction may be also worthy of reminding. ICICI Bank  portfolios in loans , retail and commercial are likely as resilient and more than HDFC Bank which is already recognised among winners in the Higher interest rate scenario and the pressure on ICICI Bank may well be just the wishlist of public sector banks and DIIs and margin financed players trying to equate the inefficient public sector with the private sector counterparts.

Bharti, ITC and Bajaj Auto lead my list of high performers, while IDFC , YES and ICICI Bank may see lower levels yet but are good investments. One feels SBI is about to take a nose dive for its own follies rather than be part of the market standoff, and is not really at value levels especially as the higher interest rates hide its already bleeding NPA portfolio and the ssame is not true for PNB and some others but not UBI and BOB either. ING vysya may b a good pick but their emphasis has not returned to India and Indusind has probably already done whatever it could and will enjoy some sedate growth yet along with HDFC Bank will be scoring 20% topline and 30% bottomline growth regularly

BHEL is obviously our only turnkey project executo es in the Power sector and probably will not hit any below book value pick (from Religare) in  a hurry and at worst may prove a big struggle with the bounceback already started. One might look at Kingfisher’s example which lasted a full five years as a everything for everyone scri from 2007 – 2012 on the back of a improbable comeback and which has just started paining lenders while paying slaries yet to executive management Which remids me, heling Laloo with the Ordinance delaying incarceration due MPS suspension/exit may actually be quite a big setback for India tan imagined by a coalition government extending the courtesy

India Morning Report: The Question is if the Rupee has bottomed out

Full bloom
Full bloom (Photo credit: Wikipedia)

 

By all visible indicators of technicals, as can be seen in a shallow traded currency, the Rupee has bottomed out before hitting 63 levels after a sellfest/beatdown on Tuesday. There was no edition of the India Morning Report yesterday, but he essentials of the currency , awaiting selling pressure to find out sustainable levels, are that it will look for another step in its recovery after a potentially false decline in value since the Fed pronouncements in May.

 

 

 

Yet, we have noted that the Rupee seldom responds to Global up moves, like caused by the current global lowering of Oil price targets with any substantive moves without buyers in the currency. The Rupee thus will go back to 61 levels only from here. IF the Rupee does move back that brings blue chips and banks selling at value back in the limelight.

 

 

 

The equities moved north yesterday till they corrected mid-session and today’s move essentially will be another recovery towards 5950 levels and beyond though one is not sure that will just help F&O bulls unwind from sold puts to leave the September series wide open or bring back the bulls which is likely if the currency recovery gains steam in the afternoon. Crude has fallen further to 103 levels overnight and Brent is close to 106 levels as peace talks resume with Iran

 

Unfortunately without a catch up from banks esp the Private sector Banks, the return  of buyers into the market is now more or less questionable and that is one of the two or three big waiting games developing in market circles.

Lupin’s new deal in the USA seems oto be a sales and marketing arrangement that adds directly to the topline. Its mainline US market drug Antara has just gone generic and the company seems happy it has recovered lost sales on that front

 

 

 

Discussions on the Tata Motors’ domestc valuation being recovered by JLR $12 Bln valuation escaped some of my notice ut overall, Telco has hardly shown any change despite the blatant push in sentiment by buyers. Tata Steel remains a much better buy for 2014. In commodities, Dr Copper follows Oil south on the charts as the return of China’s production led demand fails  to rejuvenaate the sentiment as expected by us.

 

 

 

 

 

 

 

India Morning Report: A technical correction to make space in the move

Nevertheless, whether the lost steam of the rally is recovered or if markets correct this series a little more steeply long enough to stem selling by Domestic institutions and some investors, profit taking would have been good for your business last week in both the Rupee and Indian equities (NSE Nifty 50, BSE 30 Sensex/BSE 100 or the MCX SX40). There has apparently been a natural disaster in Hang Seng Exchange ahead of the China data release today (Flash PMI) and next and the exchange is closed because of the Typhoon for two hours before the afternoon session. China’s manufacturing jump has gone up from last months record 50.8 to above 51 this month, but it is unlikely that Copper will indeed respond too positively if you are trading commodities. If it is equities, yes markets outside India incl OECD markets are likely to jump at the news , especially the European session ahead of Nifty’s late afternoon sessions. Doing well in China – Mining an Real Estate s something may well be wrong and come out so before next month but definitely trade data will be up as well for August. That optimism may change the course of the Indian markets mid day itself

 

OECD Countries Blue
OECD Countries Blue (Photo credit: Wikipedia)

 

SGX Nifty however leads the Indian investors correctly for a change ( a Feather in the cap of CME and Nifty teams) and the markets will definitely dip below 6000 before deciding whether banks are strong enough or the rebound before the repo rate increase was justified. A Repo rate to 7.5% upset the rally completely? Surely we are better than that. Banks not being given that vote of confidence could indeed decde the quantum of the down move(two thirds of the reason), as also to the other one third of the reason would be any volatility in he Rupee correcting from 62 levels down instead of continuing the up move to 60 levels. A good sign is if banks get new OI encouraged by build up in Put volumes sold at now definitely amongst the lowest levels for the Banknifty, so the Edelweiss analyss recommendations on ET Now could be right on the money

 

Infy has responded well to the Rupee appreciation, avoiding a reaction still correcting to below 3000 levels, but the HCL trade continues to put the wrong risk takers in the lead as even consolidation of the company with HCL Info is only a face saving device for the hardware business and not value accretion expected in the merger

 

The troubles of Ranbaxy keep the scrip in the spotlight and fortunately it never put the Indian Pharma sector under the wrong spotlight despite their brazen actions and the continuing cascade of FDA actions plant by plant at other suppliers as well fueling the anti-India anti-Quality prejudice traditional in OECD investors

 

Urban India also probaby thinks NaMo’s commmunal licences can be similarily ignored as a quirk and the resultant fractured mandate is not just India’s biggest fallibility bu also sign of the inadequate proficiency of Political Sciences in a land otherwise profuse with globally renowned academics and probably the situation in these arts and sciences is more deficient than the lack of educators in IITs and IIMs

 

The Nifty however may not leave the range of 5950 to a new number on the upside, which is still likely and which may see FNO action by midweek

 

 

India Morning Report: No Taper and Nifty on to 6100 levels

A rather unexpected reticence by the Fed, allowed Global markets to uncoil their expectations of a taper and the Indian Rupee opened at its best price of INR 61.5 today barely hours after the announcement. the shorts on banks disappeared overnight as did the opportunity in depreciation lit IT with the Banknifty finally moving 650 od d points to above 11000 today and the 7% increase in ICICI Bank to 14% in Yes Bank possibly still allowing steam in the rally to 6300+ levels and a long awaited rally in the banks with the liquidity measures likely to go away. (what if there’s no taper?)

Apart from the bigger damage to shorts on Banks, the rally has caught most by surprise and thus some may wait out for lower levels to start again, but stopping market enthusiasm at 6080 levels itself is likly to fail with the momentum of the event generated uncoiling allowing immediate 6300 levels. Also the taper remains on the horizon for the US Fed as it tries to tackle the question from a new structural cap to growth in the US and the  Rupee may be allowed to break below  to erase the damage since May

F1 Australia Grand Prix - Thursday
F1 Australia Grand Prix – Thursday (Photo credit: Wikipedia)

Indian yields are back to 8.16% levels. ITC and  Bharti have continued investor fueled upmoves at 350 levels, while Sun Pharma and ONGC and the Energy companies rebound to 2010 levels. Investors also found the chances to get back into Hero Honda and Maruti, both of which may easily by rejected later for Bajaj Auto in the Auto/Two wheeler sector

The Rupee might close a little lower but above 62 till 4pm and in RBI trades after.

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