India Morning Report: A sudden rush for crossing 6350, nipped again

Corus trein 823 Tata Steel train
Corus trein 823 Tata Steel train (Photo credit: Wikipedia)

The Banking system’s woes are fresh wounds , blisters nary a bluster with NPAs at most PSU banks except BOI and PNB likely to cross 5% on Net level. Despite market’s favour for State Bank vintage in equity markets , the SBI scrip may provide most fuel for the Domestic Institutions who prejudicedly also treat the scrip as the holy grail along with operators. As we noted earlier within this fortnight, the results showing bolstered by reduced provisions for banks generating PAT growth mid year is a mirage.

Apart from the fact that NPA and AFS loss impacts have been spread over the remaining two quarters to March 2014, provisioning may be updated one shot by FY14 at all such banks and as yields continue above 9% the results will speak for themselves.

However, that is not the reason to be bearish at 6200 levels, neither is the bluster on ITC and Tata Steel by Network analysts likely to bring markets back to last week’s 6000 levels again. ITC is a good trade and Tata Global and Tata Steel seem to be capped for now. AS expected, YES BBank has moved on trading supports and IDFC is also maintaining 108 levels instead of 100 a week ago

Results from Sun Pharma last week, though not the digital upstarts like Sun Tv (SpiceJet) and Dish TV (reported today) are likely tobring rosiness back to the markets. One winner as markets tie of the Maruti move at 1700 levels will be Biocon, both scrips from disparate sectors, especially found in favor in Institutional and ALt trades looking for the India  Shining flavor along with the alpha ( which undoubtedly is missing in both stories) However a rerating further upward is likely only for Sun Pharma, having posted 58% growth on last September and having grown some claws at long last in the Indian Domestic market and margins of 33% (ex-Protonix) are good for the mile. Six month FY 14 EBITDA margins are a healthy 44% and the stock can well bring Cipla and the Midcaps out as well into more international baskets. R&D spend is likely to increase in the Indian markets in the short to medium term but current provisions, reasonable as % of sales are not good for a longer brush in the generics and domestic markets. A lot of those investments across the rest of the industry are likely lost in Process repair having been cut by FDA riding them even as Brownfield investments in the quarter exceeded $1.1 Bln and guidelines have been further revised allowing more such investment again.

India Morning Report: Pass around the peanuts :: Losing 6200 now(not really), I am sinking, No EMs aren’t a great buy or great “SELL” either

corus / Tata steel IJmuiden velsen beverwijk
corus / Tata steel IJmuiden velsen beverwijk (Photo credit: Wikipedia)

Choosing a daily headline is a challenge, quite so. Instead of helping and supporting you are acting like a pack of chihuahuas who have been given more than enough to eat . Write back on every post , this kind of reticent observation posts on my writing are not helping your cause (Dear Readers)

The Sun Group results, mostly Spicejet, tchah why would i call that or the iPhone launch a headline in any subdivision of this country let alone online with so many obervers, NRO accounts and eligible bachelorettes. That’s another franchise down the drainpipes. (gutterball, say!) I am not talking IPL though Sunrisers also went down rather for the same mismanagement.

Debt worries may have more to do with Spicejet losses, I would hve said on a cursory glance, so I leave that one to you . I am probably wrong as Bad Debt is definitely not my worry till I am operationally efficient and thus viable again. The entire new industry of innovation relies more on such mis-accidents and so any bank with an innovative model though feted by the markets would continue to go down in the melee and PSUs are not required to instead encourage losing sectors for Export

Each “Quimvadanti” above is a torture for any reader without ad libbing the rejoinder mind you

EM analysts are right that EMs have been scoring negatives thru 2013 and that the same will be recompensed without a Bull run though. However, India is getting inflows thru November and the so called funding trades are now just shorting down a blind alley every time for the heck of it as retail and DIIs stay away from buying. Portfolio buyers are alerady selecting known performers.

JSW Steel production counts are up to 12 MT for Crude Steel but I think the ratio of value added products , at less than 10% that in each variety ( 1 MT ea for 4-5 product “SKUs”) show the limited potential despite the use of advanced technologies in these traditional EM sectors where India does score over the more volatile China, Russia and Brazil. Rio Tinto had to recently leave after a small project to review the potential of Diamond mining among others and POSCO / Mittal have been exiting the Orissa wilderness, but the so called Economic loss may well be a gain. BPO lays claim in the mean time to furthering urbanisation as Tier 2 players post out their Top talent to the 30 odd 1 mln pop towns .

UB, according to ET, has lost 20% of volumes in TN also even as Fosters and Carlsberg move up in alcohol markets in the North. Beer and Whisy markets have plateaued in India again despite a crisis in the last 5 years , an early maturity we have long commented on , in India’s branded Consumer Staples (Discretionary) United Spirits is an easy sell though any pick on news is unlikely to last till Monday close and open positions over the weekend should be avoided, easy pickings for alt Asset cronies stymied for hedges and funding on a flat index

SELL on Private Banks like YES and Indusind or ICICI Bank (Traders 20) will fail again as the banking sector carries the seed for a lot of outperformance out ahead that India guarantees. Credit growth cycles need not renew as they are already back in India at 18% and longer term impacts in East Asia and Singapore are unlikely to trump local Indian growth in the sector as again it guarantees credit growth without the Europeans . Draghi’s rate cut though deserves a mention and the Euro has returned to growth again rapidly losing 1.38 odd levels to end at 1.33 before today’s London open. The London FX probe primarily started around the EUR-GBP cross trade ‘fixed’ by leading banks as sort of a ‘tradition’ as all global banks get busy in another imbroglio obviating the need to explain their non return to Asia.

Muthoot results boast of 620,000 gold accounts even as Gold Assets obviously went down in a bad year for Gold. Consumer recession or inflation impacts would have seen a spike in these assets held as collateral by the bank hopeful

JLR volumes up 32% are but a drop in the Ocean but any uptick post-results will impact Tata Steel holdings till Reliance results come around at least. Hold and add to Tata Steel positions

Siddharth Tewaris appointment is welcome for at least the continuity in policy it guarantees and one in fact hopes that RGR’s futher appointment as Governor indeed sets a precedent , a steping stone as CEA very visible to critics and friends and allowing a testing period for future governors and more importantly a cogent monetary policy


India Morning Report October 10, 2012: Bill these to the neighbours?

Marico (Photo credit: Wikipedia)

The markets continue to allow a much pushed out correction but stand on 5650. While yesterday’s Bank Nifty risers were targeted in the afternoon itself Axis Bank, inexplicably ticks down further strongly to an almost binary state of 5650 = below 1000 target though once in four months mean  most traders have crossed the rubicon and are shortening the trade cycle this week to a daytrading drill even as Emkay pays up instead of cancelling the 509 trades that caused them grief.

Bear Calls on the IT sector are in surprisingly good time as the Rupee weakens this week and thus IT continues to enjoy support wiht Infy maintaining its hiwgh wter mark above 2550 right now. Verdict, irrespective of sectors rerating downwards, traders will play safe IT trades in results season, and will evoke retail interest as well. Consumption sector’s rerating may prove to be tempestuously short of the mark during results season as well

250 (Photo credit: Wikipedia)

as there are no real hopes for good results in Q3 December and the “bottoming out” may have only Q4 of this Fiscal. The prices of Crude, Palm Oil and the Dollar offer injunctive relief and market will probably pick and drop stocks as volatilely it does esp among tier 2 plays like Dabur, Marico and Britannia, instead ITC and YES BANK may continue their breakout in this uneven quarterly evaluuation in the coming fortnight, esp as 5650 is likely to hold.

JET and JUBILANT rallies may again provide the sparkle to the debate and the KFA story promises more twists and turns with its show cause notice likely expiring without KFA losing its licence. The already pledged USL and UB Holdings’ personal holdings of Mallya are likely to still carry some optimistic tones though you are welcome in anything except ITC, YES, JUBILANT and JETAIRWAYS wtill you can keelp a singular focus on these. BIOCON and SPICEJET probably stand out for special attention and may be surprise picks in the return of the bull tot he likely 6000 targets still open with the bull. That would not be in a hurry this week either.

India Closing Report – Week Of September 24-28, 2012


The CDS currency series on the USD is finally trading below 53 as expected starting back from 53.5 2 days ago an dis this time likely to go below 52 intra day in the Ne October series as gold and Silver importscome to a standstill before Diwali on Nov 13. International prices of Gold move in tandem with Indian jewelry demand and the bottom is a certainty the market has seen over the last 20 years internationally and locally

Retail FDI aspirants are active and biudding up their real final control equation wary of the $100 m in 3 years and the back office requirement as they run for good M&A possibilities int he space. Aviation rerating from FDI is abviously because of more international demand for listed stock from Spicejet and Jet to Kingfisher and perhaps unlisted Indigo and Air India as well

The jump in Nifty is a little bit of a surprise , one expecting the bull commentators to again not again get any returns in the fresh series gambles and while new picks have not succeeded the enduring stories from ITC to ICICI BANK and IDFC have not disappointed. JP ASSOCIAT deserved the run and TELCO’s (TATAMOTOR) mysterious run continues flummosing all and sundry a nightmare compared to REliance Capital and Rel INfra’s expected rise and fall on good and bad days in a spree

BHARTI is still at reasonable levels but given that it is  a less than 50% holder in front office big retail with almart expect some investor groups to leave it for its portfolio fo international /US investments The bump isn profitability if that is the hope is still a mirage a nd a lot tof hard work from the management returned in kind by new consumers and governments important for that to happen. Th eDCHl case is a mite mysterious as ell, ICICIBANK obviously relying on the IPL franchise name to the latest tranche of loansin 2011 and now the immediate restructuring while YES holds out for franchise assurances. USL rise is likely limited from here as promotores have already haked therir stake for collateral , almost the entire 27.7% and their hoep from a Diageo/KFA investor treasury purchase is on debt improving the bottomline from a upto 50% drop in interest costs


THE 11AM UPDATE – MORE NERVOUS ENERGY IN THE MARKETS! (SP pledges issue based support)

A nod from SP as expected and Financial markets actually jumped and are 100 points up on the Nifty today. It just shows when markets refuse to go down after a stinker they really can bounce North very quickly and for literally something that was ” no big deal” as i thas become for players and commentators of Indian polity. This ould have been a chugging along at 550-5600 day except for the move and elections aren’t farther awway than when the day started

India Morning Report September 17, 2012: A New High For Nifty As India’s Reforms Story Rushes Get Canned


The usual climactic rushes surrounding India’s reform measrues have effectively been canned with the coalition stuck Congress able to push thru reforms from UPA2 while keeping the support of the SP, BSP and even Mamata Di.

The usual protests and demonstrations apart, just in retail it’s going to take more than a year before the existing players from Bharti’s EasyDay to Reliance and Future Group reorganise their operations along statewise lines so individual permissions for JVs can decide their partner’s equity in retail

In aviation, there will be no takers for the 49% stakes except for promoters in Jet or new investors in Spicejet while one is praying for air India and Kingfisher.

But, why waste a Monday morning in recrimination ( and last time markets would have crashed on the mere whimsy that the sky is not sunny all the time and it is not raining everyday) hen fibnally everything ont he reform agenda has been finished in time. Well, there is still the case fo a new Divestment target which is unlikely to fructify as PSU CEOs put their foot down but then a Diesel and LPG hike could have made any balanced intelligence see the folly in a downgrade (which as brinksmanship would have it, takes India to junk status)

The markets will hit the path to 6000 today but as outlined above it is likely a messy positics that ill muddy that scenario for indian bourses soon as dollar inflows make markets so steep on the uptick that a deeper fall is inevitable. However, having invested in, none of them ill be planning to leave at this stage, the waiting time being immaterial for the returns expected.


Late Morning Trading Strategies – An Update By 10 Am (September 17, 2012)


Markets have not gone nose up on news and thus are unlikely to go belly up by next week. As unexpected as it was and as fruitless it might be the sectoral runs in Aviation and Broadcast channels have been well left alone, the improvement in FDI regime resulting in gains of 3% (JET) to 12% (SPICEJET) in aviationa nd 3% Broadcast Cable companies. Sensex is up 100 points.

Holders will gain and it is not really time for fresh buying. The commodities cycles are quite done in the big run up of last month according to us but shorts dio not have a clear run in silver or Copper or even ANtural Gas. Crude should go higher but not ithout a not so shallow correction. The Euro at 1.30 is pointing to a bottom for the Dollar being very nearby though some European investors have again taken Euro into their fold, saving it to 1.36-39 by the year end (HSBC)

The policy data comes out in a n hour


Mid-Day trading strategies August 02, 2012


If you are also quite done with the move down in the Nifty since morning, join the club. However, you should join the club only if you are putting money behind the Nifty now in the afternoon, because that is where the trade is consolidating, rupee predictably still threatening to move to 56 in spot and 56.20 in August

Union Bank results came today ( there are two UBI , Union and United, both are essentially smaller players fighting asset Q) and Speciality Restaurants reported INR 50 Crs mark in sale (49.7Crores) Its premium restaurants include Mainland China

Mid Caps are sneaking up in trade with MANAPPURAM, RENUKA and BALRAMPURCHINI with a lot of upside still left I quite like the Manappuram story with 16 lakh customers and more than $2 B in assets with a 60% margin

Bajaj Auto Sales are down to 308,000 but SL exports have resumed to 4500 units

Shorts are on in Union, United and CBI and Canara Bank but I would suggest to hold on to HDFCBANK and ICICIBANK right now and SBI may have completed the correction

M&M has signed a new JV for Defense equipment which could add large blocks of fresh revenue for M&M. Aviation has a good upmove left in Jet and Spicejet who have been both containing costs and the right sale and leaseback of assets could keep green growth profitable

Maruti is ripe for a down trade if you believe the shorts. The buys have gone by without a run in the morning session again but the afternoon should see one strong move to develop the later strategy on the short and mid term trend


The retail lifestyle champions: Jet Airways saves face , buys new Boeings

Jet’s Q3 losses came at a low INR 1 bln as it saved up from asset sales of INR 1.7 bln and kep itself in operating profits. The jet order for 17 boeings will also help india’s Capital goods indices this month

Jet Airways ordered 737-400s and 500s for its fleet, probably exchanging out older Jet lite planes though it was its fourth straight loss since September /December 2010 conditions worsened in fuel cost overheads, wiping out gains from Jet Konect saving plans and this being their first of many sale and lease backs adopted by the Industry at Indigo and Jet Airways

On sales of INR 3437 Crs in December 2010, the airline flew 13% higher year on year and expects to keep growing sales if hikes are passed by AAAI and if no further costs imposed by DGCA action, the airline will keep posting cash profits

According to mint, CAPA revealed a loss of $30 per passenger in domestic flights in India. Kingfisher and Spicejet may not be able to hold their bottomlines to a sane number as they allow losses to reflect their financial uncertainty, demanding policy action/handouts

Godrej Properties purchase of INR 1.06 bln from the BKC premises and FX gains of INR 1.76 bln also stopped out losses but the airline bucked expectations of INR 3.5 bln in losses

  • Sale and Lease back allows it to keep Debt constant and it cana lso start paying the INR 14 0 bln debt from the SLB proceeds. The 17 aircraft are on options thus guaranteed at a good price.

State Bank of India revamps Air India again

SBI revamped AIR India’s loans to an average 15 year tenure as per a recent plan approved by RBI the company alone accounts for more than half of Indian aviation’s debt overhang and over $1.5 bln of working capital and $3 bln in term loans were restructured in the latest exercise. The bank accepted CCPS issue against the working Capital loans allowing the airline to pay the bank thru redeemable cumulative preference shares, the bank still not becoming an equity holder for the sole reason that it is a government owned airline.

Air India is also getting Govt equity of $5 bln over 10 years with $1.35 bln issued this year ( we still use USDINR=50 as rupee tries to make a 48-53 range)

Something tells me that will only pay for the airline’s immediate default and its daily operational losses will continue nothing changing about the management and operational staff habits that make for the demise of the airline. In the mean time fare hikes by private airlines will happen as highly efficient companies like Jet and Indigo bleed and or resort to sale / lease back despite being anointed full service airlines liable to charging “full fares” for their service. Low fare airlines like Spicejet and premium experience jugglers like Kingfisher remain stuck in the middle, having adopted most global best practices and created sumptuous fare without being able to carry home any profit

Energy costs pulling the Indian skies apart

Kingfisher airlines, taxing in Bangalore Airpo...
Image via Wikipedia

Kingfisher Airlines is on the verge of a breakdown on all counts, with losses of more than INR 7 bln every quarter and 1 in 3 flights canceled from the planned 469 flights by the airline, with only 36 announced as rescheduled and none noted to the industry regulator.

Jet Airways losses are the worst in its history at INR 7.13 bln and Spicejet has already reported earlier in the day at a INR 6 bln in losses , the two being in profits albeit less than 1 bln in the September of 2010.

Unfortunately, the only thing you can pin down is apparently something you cannot control and that is the 50% of the costs going to fuel, which goes thru even more hikes than at the retail end. ATF prices are a lowest of INR 61k per kl in Delhi. Energy costs are INR 14.8 bln for Jet Airways on Sales of INR 333.2 bln, and a even higher INR 4.78 bln for Spicejet on sales of just INR 7.2 bln

Airlines woes have led to losses after losses since October 2010, as losses of INR 29.5 bln were reported by indian airline companies last fiscal and have already reported INR 33lbn in losses in the first half of the year

Aviation as a sector needs a lot of gestation and a belief in cash profits. Foreign investments can help and first and foremost the regulators and the Ministry needs to help the beleaguered airline, with only INR 60 bln or $1.2 bln in debt and a fleet of 140 aircraft, it would be unfair for the airline to leave midway. Vijay Mallya’s Kingfisher has asked for more operational credit to run the airline even as dues mount uop for ground handling and fuel with the state oil companies. Some of its staff seems to have gone AWOL yesterday forcing it to cut more flights.

However that the government has to help is also prima facie an issue with india’s bankruptcy protection laws from the examples of GM and United Airlines that has come back multiple times from bankruptcy and earned fair profits. KFA had already restrcutured part of its loans and mismanagement if any has to be monitored and weeded out. Banks already own 23% of Kingfisher. UB spirits is processing a sale of more equity to its global spirits partner Diageo

But all these are just bemused observations as Aviation remains a requirement and unavailability of cheap and extensive airline connections in a country like ours or without quality from being a state carrier make our enterprise no better than that of Greece and its wayward ways. and Indi ais much better off. One cannot dole out aid at will or single out Kingfisher for its cabin amenities at this juncture as the cost charts show up the problem of keeping fares low in an incendiary fuel price on the ticker. Till last year, more may not have been said, but operational efficiency at all the three airlines mentioned can be seen to have been maintained and no cash saving avenues seem to have been unexplored, leading to an inevitable uptick in fares which governments have not alllowed them in the last 2-3 years as also rules of flying low fare competition.

(mint) KFA will now run 300 flights daily to 54 destinations.

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