India Morning Report: State Bank gets ready to report with PNB carnage still fresh

English: Wordmark of Tata Power
English: Wordmark of Tata Power (Photo credit: Wikipedia)

 

PNB ofcourse claimed to stabilise NPAs again but with INR 50 Bln more in restructured assets that are  now INR335 Bln on the Books, the bank has lost a lot of investor stars in this quarter. However, the bank seems to have acted as per strategy to release larger NPLs ramping up provisioning and so even though Profits were lower, the NIMs are 3.47% an industry best and NPAs at 3%  might yet be excusable keeping the bank firmly in our buy list aheadof Bank of Baroda. PNB bulk deposits are down a huge 2/3rds  at INR 220 Bln from more Than INR 900 Bln

 

State Bank will report much lower than expectations however as market expectations onthe scrip have been unnecessarily optimistic, its being in the buy lists always a function of its special charter and its exposure to SME always a much more risky diet for investors than even BOB, BOI and NB but the bank is the biggest in India and has been trying with great returns for its size in the retail lending markets, not in NRI deposits

 

PNB will continue trading higher provisions for lower PAT as the coverage is still 55%, lower than others in India and the only risk factor is its high reliance on the restructured book which for PSU banks has turned out to be  window dressing game, skeletons of which cupboard may be expected to be found industry wide in a couple of yearswhen they are reclassified a s NPA instead of standard assets. PNB may perform better at that time when actual results are available  and its Treasury revenues ( Gross of INR 339 Bln) remain best in class

 

Currency and Bond markets are still twirled up in a tizzy and the Dollar Index at 81 levels may continue to rise though confirmation of continuing EM inflows will change the sentiment positively. Indices flagged off below 6000 levels and Sensex may well see sub 20k levels keeping short itches alive this week after a seeming end of the line earlier in the week as trade data was seen in the right light. 11 more sessions in this series which hidden to most, has even seen Ashwini Gujral and the Institutions change their staple trades, IDFC and YES back in lay as mainstream sentiment carriers

 

I for one consider the State Bank to be fair valued at more around 1400 levels, a purveyor of bad asset quality for whicht he rub off on PNB and BOI is almost unfair and that the State Bank can be punished isolatedly instead of crowding each and every constituent of the Banknifty

 

Food inflation should e allowed to continue at 10-12% levels the CPI component having come in at 12.56% yesterday. The IIP at 2% was well below what could be and expectations cannot be lowered to where the series presupposes to lie in the coming election months. Tata Power has irrationally picked up its pair with RPOWR and Reliance Inra again, turning south after Reliance boosted its results fr the companies earlier this week

 

 

 

India Morning Report: Nifty recovers despite Cobragate 2

Capital Group Companies shuttle bus, Irvine, Ca.
Capital Group Companies shuttle bus, Irvine, Ca. (Photo credit: LA Wad)

The follow up “revelations” of almost all due process (sic!) used to manage fund accretions thru mutual funds, insurance and deposit products in the Sub continent’s private Banking/Wealth Management units failed to enthuse the markets despite the expected ‘seriousness’ again to be accorded by regulators, finmin and banks’ compliance functions as known tricks of the trade admittedly still deplyed by at least 17 of the accused banks are so commonplace that cooperation among banks also part of the revelations is a defacto quantity and yet not news at least to those who try to engage the markets and develop the discipline of asset allocation between short term liquidity and longer term investment/retirement and event needs. Though some youth might be encouraged to consider this as a sign to push for transparency and progress and banks will show them the clean house they need, these practices are not even necessarily questionable and are known to all salaried taxpayers who remain most enumerated in the Indian taxpayers contributing revenues to the government.

 

One wonders the efforts for black money recovery could further gain pace but only from continuing increase in banking deposits and registered investment products though you would agree that a full fledged DTC implementation and that of an integrated GST would have had the benefits to revenue one expected. The morning has recovered since the Cobrapost expose with the Sensex up a 100 points and the bank rally is still alive if you do hold long positions on the bank nifty

 

Fixed income yields have not ticked down with an eye on CRR pushing pressure from rate cut to extra crisp liquidity in the coming policy or two and RBI also will be busy with arranging OMOs and as always look at its longer term SLR/CRR obectives in this light a s needed

The Rupee in this leg is bound to follow a complementary target to the equity moves but with lesser dissonance between the two markets the atmosphere this week is overall more conducive to building up long sides of the trade and even expecting Thus do not play for volatility trades in this series or look for too many day trades unless it is your favorite mid caps or blue chips still not out with their results and outlook for the rest of 2013  and which you are fully informed about.

 

South Indian Bank
South Indian Bank (Photo credit: Wikipedia)

 

Pre Closing Trading Strategies- October 18, 2012

The week has been good for those waiting for a clear trend to emerge as the road to 5850 looks swift and clear. It may easily target 6000 on the Nifty depending on the Rupee and the levels of the Sensex that can get the indices to a 6000 Nifty/20000 Sensex orbit before seriously considering a technical correction.

Interestingly the rise in EBITDA margins at Cement companies expected at Ambuja, Holcim and ACC has come in tandem with th jump in old textile scrips with Century and Raymond going up 4-6% in the session giving one quick shots to move into for Friday and for next week. The EBITDA was reported at 18.4% at ACC up 500 bps

Infra and Banks may not move together this time but older stock market favorites could turn up like a Shanghai surprise for investors and traders, with Raymond itself tipped for a 400 target ( Mitesh Thakkar, ET Now)

Cement scrips are a good pick as JP Associates finally gets a higher offer from Grasim (Aditya Birla) as well to 130 per tonne capacity for its 11 MTPA plants on Sale to reduce the group’s debt burden and synergise in construction services and Infrastructure/Power

Sun Pharma unfortunately could be a miss for Friday and Monday as the markets review the loss of its Lipidoc sales in the US as the original drug from JNJ is probably back in the mearket

ACC Net Profit of 2.42 B makes it a good pick but Axis and BOB are already up too much for a 30-5% move and I would prefer to go with PNB, SBI which at 821 and 227- are still underpriced and ICICIBANK and HDFCBANK. The isolation of CNXIT could infact augur well for Switching strategies later lengthening the move in the broader indices. A NSE 5850 target is obvious so F&O interest in Futures and Calls for the next two weeks are interesting but it is the latter half ogf the series and any carryforward positions are equally likely to bite overnight

IDFC could start the infraco bite on Monday or Tuesday for another 10% catch up to earlier stable levels from the current depressed prices including L&T and BHEL and not mid cap infra or DLF and construction biggies or IBREL.

 

 

India Afternoon Report: Sensex winds down to an Expiry Thursday

 

icici bank
icici bank (Photo credit: Wikipedia)

 

Nothing much happened though we missed the morning report because of the Bangalore early morning traffic and associated hassles. if you were one  of those who did not miss the Morning report then you ar elikely one of the associated reasons this blog and these reports are not dropping in on time or making such a difference e all make. So all of you out there do start missing anything we miss and get a little verbose on it when you do.

 

The markets ofcourse know its time to unwind traders itching to but no one is really ready to exit at these levels nor are they going to lgo low enough to trigger buying from those who wait.

 

The dichotomy between the investing priorities of the FIIs and the DIIs was obvious as ICICI Pru started unwinding on consumption initiating sell coverage on FMCG and consumption plays while FIIs and investors look for more market expansion plays in the wake of retail FDI each listed stock unfortunately quasi indicator for almost the sector than the promoter or the business strength esp at plays like Britannia Marico and Dabur even VIP almost undifferentiaated behind Jubilant and Titan.

 

Healthcare accumulation is what we root for and is already happening at more than just European banks and erstwhile short heavy india baiters. S&P reratings have helped the cause of the crrection and the result is a 30 point sorrection still above 5650 and a tad under 18400 for the Sensex.

 

Here anyway is the outlook for next week after expiry, tentative buying in banks 2 days out of 5 and a rally day run by a big hefty for the banks who have increased their contribution to the GDP to nearly 10% and banking assets with their continuous 16-20% growth esp with policy segueways for infra funding making infra stock of credit more than two fifths of the 45-50 Trillion credit stock we run to from a 44 T start of the deficit heavy fiscal.

 

 

 

India Morning Report (June 28, 2012) – Expiry Day is here, Nifty on way to 5300

The Big Thursday is here and stocks still have potential of a positive run despite a continuing more tentative move that seems to be taking Nifty the hole 9 yards to each new high especially ith the Dollar linkages still in the equities segment. Dollar should be weaker in CDS trading today as the upmove is confirmed and most tail events behind us with the Presidential battle on. The SGX is enjoying its moment in the sun as a leading indicator of the collective sentiment and Sensex futures are doing fine too in this and the July series. July series positions include good rollovers in Public sector Banks like Bank of Baroda, big moves in the Big Four in Banking and that could mena a big upward correction for Axis in which shorts continue unabated.

Reeforms are not likely to be germaine with  a valid impact on the markets as most would be actions on direction we have seen turn out to be wishy washy temporary cliffs for bears in the wild. india however continues to hold the solitary hope for a global recovery with China yet not buying and the BRICs sentiment challenged globally by fears of hyper inflation which india watchers and India bulls know to be unlikely in this part of Asia

Reeforms are not likely to be germaine with  a valid impact on the markets as most would be actions on direction we have seen turn out to be wishy washy temporary cliffs for bears in the wild. india however continues to hold the solitary hope for a global recovery with China yet not buying and the BRICs sentiment challenged globally by fears of hyper inflation which india watchers and India bulls know to be unlikely in this part of Asia

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