India Morning Report: And it is clear thru to 6250 from here?

Most short strangle/ straddles would be in profit to have exited and is you have been a bit late you should close out here because the markets are going to have a position either way, mostly likely trying to forget the break between 6100 and 6250 as markets have been given the mandate to a new bull run, which might well start around 6250 again. For a change both networks are carrying investor conferences, apparently not the same but more importantly, the post budget rush to 6100 (more like 6150 ) came yesterday and was backed by real flows, the current levels thus likely to have fully bought in leaving a new index level before the argument over the direction for India starts, global equities being decided on the up.

The bet o f going short on the S&P500 is not necessarily linked to the single up move in Emerging markets and while the longs in Emerging markets continue, the shorts on the S&P will either become OTM hedges or extinguished as US markets also resume an uptrend

An INR 12.7 Tln expenditure budget is fair enough but the optimism allowed to him on tax revenues from a recovering India economy is likely to have brokerages just the right busy for traders and speculators to remain ahead on the risk trades  before being called out by their analysts. For example, yesterdays dissection of each such number as a “little too optimistic” finally seems to have gone unheard as it should in a believable bull segment. However, despite our India story being better than China, a sscal e of 10X will likely apply in comparing flows to the two markets alone and India will be able to win that argument for $10 Bln every quarter.

ITC, Bharti are not overvalued in the Consumer space. We cannnot see value in the HUL trade whose markets have matured in India. Other consumption stories never scaled anyway and that therefore is the limitation of investing in Indias FMCG story except the ‘other’ 2010 winners as titan and ttk remain down and the domino’s pizza is no longer the story as expected after the DD ride, showing up the absence of a secular market and pizza hut coming back out in investments despite the Dominos’ 65% share (Jubilant Foods)

Bajaj Auto may not have substantial price cuts that have  shown on the radar for Hero after the budget giveaway

There seem to be big earnings leftovers with DLF and ABB following on , ETNow catching them for a change, but one understands that CNBC mode better, having ignored these latecomers and even penalised them. Its definitely my strategy with such presenters. DLF has a 60% higher sales revenues , with or without their main contribution this quarter from the sale of Aman Resorts as costs remain high for the real estate company

IDFC, YES, PNB and ICICI correct after yesterday’s rush for buying the select list while shorts on Kotak lead the cut in all such Financial stocks. I will look to shorts jumping SBI again, but probably waiting to coalesce th ebull candles into a stronger up force. PNB is coasting at 540 post a week long correction mode after a day’s ibig wins in the post analysis.

LIC Housing is probably as good for the medium term as the Power NBFCs, all the 4-5 stocks at the bottom of their range and Sundaram and the Gold NBFCs unlikely tpo o be competitively buoyant. Axis Bank would support Bank shorts as Kotak and thus Bank remains available as a short hedge too. Cipla and Lupin present a new problem as they continue to activate a bundle of no good stocks they were partnered with in their defensive mode and are not trading bets as they reach the top of their range near 450 and 1200. There is no secular run in metals, none in construction and Tata Steel remains a buy with the auto stocks without Tata Motors or the Unitechs and the HDILs

Modi is looking at some obvious chinks in his own armor as he stands on a half poant English speaking tour, showing up equally worse off in Oratory as Rahul, but looking comfortable with one new round of Desi dose goevrnance for India Inc

From my end, Chidambaram was more than right in showing UPA’s 8.4% and 6.6% 5 year periods ( 4 year periods) against the 6.2% average, but apparently there are not enough Financially literate voters around, despite the preoccupation with growth

 

 

India Bank Earnings: SBI Q3 turns out the ugly parade

The bank created 39 bln in restructuring as INR 114 Bln added to Non performing loans in a single quarter, adding pressure even as the bank decreased provisioning in the last two quarters of the fiscal, to 58% in Q3 . However a 4.5% increase in Advances ensured another double digit increase in Net Interest Income to INR 115 Bln and Assets of INR 11Trillion with Deposits running INR13 Trillion at a 16.7% clip . Gross NPAs at 5.7% are likely just more than three quarters there yet and a Net 3.24% NPA looks ugly.

We stand by a 1300 price target to be broken on the downside in the short term now, 1280 levels heuristically offering the bank new consolidation. SBI PAT is down one in three to INR 22 Bln and aims to improve Cost and other income as the Chair announces post earnings NPA control committee restructuring. Administrative staff(quasi due diligence at best) has been deputed to front offices in measures listed. Technology may definitely provide a viable solution but Credit scoring of SME and Export credit provide unique challenges.

Employee interests may indeed warrant a look at buyback programs at this stage but the bank continues to need annual capital infusions from Government coffers as the largest bank in India. 15,297 branches with 40,344 correspondent banks, totaling a 100k outlets is definitely a great business opportunity for someone scoring the India puzzle.

As unlikely comparison and bank memes go, Barclays has turned out into a India phobe in the open, it’s Head EM Economist  using the required dissing of China to add the bumbling India quatrains to complete the report. Needless to say any such composition, follows the new meme to instead look for new EMsllike Mexico where one finds the bad mix of resource dependent Dollar imperilled markets like Turkey and Argentina.

Kotak seems to be a market favorite on this bet, if prices this afternoon are a suitable explanation ( with no other important news or rumors on the wires) HDFC Bank has finally taken off even as HDFC investment approvals are awaited. The mid afternoon score of 10250 is barely a tick as the street forgets SBI results.

WPI did make 5% in the December data release a 33% downtick from November’s spike but Core Inflation is at 2.76% . Bajaj Auto faces a revolution at Chakanypt (8%) and a ban on Exports in Eg and Sun Pharma has eased defensive buying , while the Banknifty rests at new 10400 levels with SBI’s degradation no longer a surprise, but the occasion serving a reminder to those indiscriminately picking weaker banks in the index

India Morning Report: India’s flipsyde from global correlation markets independence

All its successful recognition as a unique misstep of policy in trunk Asia investing, still leaves India a unique place in the sun, inviting specific negative correlation from trades and investors in asset markets, marking its independence streak. However, this is just a improbable hypothesis and an unlikely share for the Morning Report (in this form ) except that Dow’s 100 point rush closing yesterday is overshadowed currently by India’s own woeful exits with the Nifty streaking a negative 80 points making the Rupee start this positive Asia morning at the bottom of its current range. Likely this is the stage NDF price discovery also tail lights trends to be in extreme discovery actions and the Rupee easily could have been at 61 levels here with trade purchases and sales in the same range as earlier years Gold would be thus in a greater rush to complete a mini rally in the reduced taper euphoria.

I am apparently getting ducked on Kejriwal and Pepper spray much like I expect Independent Women careerists to, in the office today.  But markets could have easily ignored it and celebrated the successful Spectrum auctions and the India recovery data linked with global news of India’s importance in winning 2014 portfolios. India CPI ended under 9% as the urban CPI receded well into the background while IIP was almost positive with its 189 index score a big jump on the previous month apart from the strong consistent jump in utilities.

A secular Telecom industry uptrend excluding unlisted Vodafone (in India) , is likely after the media rounds prepare a consistent analysis of all players, both Idea and Jio(Rel) having bid INR 100-110 Bln, Jio adding monopoly of 1800 waves in its repertoire against Bharti which with Voda, focussed on winning back existing markets and prepare grounds for improved pricing. Idea having won price conversion over, is unlikely to create another loss making value bid in the retail markets.

In more humane form, India again loses its advantage as it starts off the recovery with an expensive rate hike, a shallow debt market and a doubloon of proprietary traders mesmerized with no good corporates and an officious monitoring and handshake philosophy engrained in Asian culture its common denominator with other closed end markets allowing a 5X US Dollar impact and shallow development hubs. India’s WPI announcements are likely to be near 5.5% .

SBI reports midday with another INR 6 Bln in provisions for pension, INR 25 Bln increase in provisions and INR 85 Bln from an ever expanding restructured asset pipeline in this quarter again but the stock will react further post earnings tipping off a expectations rally at its nadir as it comes out improving the NIM expectations in a better rate environment for lenders from 3.19% in the previous quarter.

ONGC proved great results yesterday along expected lines, profits to 71 Bln , sales at 208 Bln just 1% off last year’s data in the 30% increase in Net profit(28%). Realisations will improve substantially in the current year. Q3 realizations having dropped 4% at below $46  before depreciation earnings. Subsidy expense was more than INR 100 Bln up 10% making the 30% jump more creditable. The company may however get squeezed this quarter as the government defers subsidies with the fisc coming into an expected range.

SEBI added lines of caution on Executive compensation, independent Directors, Women Directors, public succession plans and a mandatory whistle blower policy into the Corporate Governance Code. Along expected lines, The listing agreements at the Stock exchanges will be updated immediately.

Employee stock options have been withdrawn for independent directors and nominee directors are not permitted the dual role of independent directors (DNA India, ETNow).

IT’s attempt to woo the markets with forecasts are likely to fall on deaf years as markets already topped the range on a half rush for new Rupee levels now more likely to be equated back with outsourcing jobs as Pharma breaks out in a good couple of years.

Apparently the stock of debt in Telecom, that can be shared publicly is more than INR 2,000 Bln.

In unlisted business, Kiwis have been bundled out for 192 and India will make sure it has one overseas win in its belt this time after a thorough bashing in all forms of the gamme. RCBs fortunes will be interesting to follow in the IPL with 4 marquee players and none of the local stars like Manish Pandey and Karun Nair.(TOI Blr) Lankans were ignored for an English Summer. Faf du Plessis went back to Chennai as the Gurunath investigation proceeds. Ben Hilfenhaus, will be the likely winner in relatively new entrants this year with TV Networks and Captains working towards the same objectives, Beuran Hendricks winning the Owners’ curse taking in another quality seamer. Dravid shaking down Nathan Coulter’s bid agst Delhi. The list on cricket next atill includes only CSK rosters, duh!

KKR had some money left over too after picking Manish and Debabrata (Ist Round Mitchell Johnson) while Kings XI and The Royals probably walked off , purses safe from prying eyes. This time, even as Shikhar Dhawan is down under, Sehwag bats for Punjab who have Shaun Marsh. KKR got most of the RCB slough offs after the  Fished Fisher dug himself out 

Royals kept Watson, Binny and Rahane, while Mumbai bid in Corey Andersen, Hussey and the Zed.

India Morning Report: It’s the banks, stupid!

The January series, with three days to go in the New Year, has started optimistically and apparently is in no hurry to trade. however within the two trading sessions including the first 15 minutes of today, Banknifty has already managed to 11600 levels without undue weightage to the losing PSUs. That being the target no one probably wanted to exit the 70% of India’s banking in PSU Banks forever not served by the State Bank of India or the PNB recognised as winners earlier separating them from the sick pack.

But given this start on the Banknifty this time, one would expand the role of the Private Sector banks in this rally to 13500 where one first probably evaluates its value score in terms of future March 2015 earnings

Meantime, Havells and Idea seem to be the scrips to nod to given their position in the trend and coming FY results as December numbers get reported only after two weeks and more hints are sought towards the Fiscal close where India would assess its gap in Economic terms as well, having assumed at the start of April that they would be much closer to a 6% GDP recovery

The infraco trade will like to preempt more hopeful whispers from North and South Block, the fate of the Congress government precariously hanging in balance and the hope outlasting the pushing back of most important decisions and any spending to post elections, a Vote on account coming in February to last the interim period

India certainly batted the 2nd Test well but with rains likely to spoil two more days of that game, its a virtual close to the year on a less than even score having barely eked out  a draw in the first to save face.

Happy-New-Year-2014-HD-Wallpaper

 

The LNG hike in Delhi seems to be a good marketing strategem launch timed to last throughout 2014 and players in IGL , GAIL and Reliance that starts producing under the new price from April 2014 sales. Diesel cos lasted most of yesterday with more than 1-3% gains fo rthe reported news of increasing the gap closing of diesel subsidies at INR 10 per Liter

Food inflation has shifted from Onions to potatoes, but will tick down the overall cPI before the fuel inflation statrts up in Q2 FY15

 

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: State Bank and Maruti not the best indicators for India Inc

State Bank of India was feted for its increasing NPAs as fresh additions stoppd at a huge INR 80 Bln instead of INR134 Bln in the linked quarter and again markets celebrate banks that fail to provision correctly, while punishing the good PNB for the same. I would switch that PSU bank trade to PNB and take some of the Satte Bank trade as well. Meanwhile after a good ‘pakao’ hour with ASK, Emkay(KK) did well in its 5 minute bits of glory on ET Now as they pointed out to a few good picks a nd a flagging MAruti. We eblieve too, the December quarter would be a big shocker for those putting faith in Maruti as it posted a 295% rise in PAT on the Yen trade in the quarter just closed

Markets could be closed for Muharram tomorrow. The coming Winter session of Parliament will again get washed out in the coalition of noise. Cipla earnings erformance as usual gets lost in it being the funding trade for the market back in the bull sights

Sachin smiling
Sachin smiling (Photo credit: Wikipedia)

Natco pulls off second court upset for Pharma

Natco Pharma scored again in courts, this time against a gag order requested by Teva Pharma for a generic of Copaxone, the appeals court upholding the ruling which ensures the Teva patent expires in 2014. Taro’s contribution for the quarter in the meantime was nothing to be scoffed at, and even as SPARC takes off without Taro and Pfizer contribution, Sun Pharma reports later today. Naco also makes Nexavar, a drug patent denied to Bayer in India under the compulsory licensing regime for 3% of the cost charged by Bayer.

ONGC may pay off Oil swaps in Rupees

Rajan (RGR) in the meantime talked the Rupee Swaps into Rupee as payment currency again and the Rupee is obviously back up below 63 levels. The Fixed Income markets also saw welcome buying but the rate hike is coming as any move above the 7.50% pre October was bound to trigger. I still think the MSF channel could have been 100 basis points without raising Repo rates and with Exernal debt being an overhnga nd domestic debt unlikely choice of Corporate Treasuries used to world class Cash management and Treasury Bankers, India Inc growth is tweezed harder from this rate creep

Sachin in 200th Test appearance

The Sachin 200th Test begins today with West Indies being ut in to bat and the last of India’s renowned Mumbaikars taking the crease at home near Shivaji Park where both Sunil Gavaskar and Sachin Tendulkar learnt their Cricket. The game has also changed tremendously in these years an Sachin will continue in a key role with Nita Ambani in the Mumbai Indians

Meanwhile the KG D6 row has granted Reliance a reprieve in that the 20% left with the firm is being reported the most lucrative and thus market will expect a quick turnaround on that 50 MMSCMD mark promise being touted in the whispers

WOTD: Tata Steel shines in Gold Earnings season, Banks shine 

Tata Steel , however was definitely the shining star even as Banks make a comeback led by State Bank and PNB and ICICI Bank on cue from 1000 levels. As SS pointed out on TV18(CNBC), Axis is definitely in the stars during midafternoon trading. YES Bank and IDFC remain on BUY lists importantly for those willing to invest for the coming 6 month bang

Tata Steel was rerated up at most brokerages, Deutsche Bank taking the cudgels for a push to 525, as the sector rerating turned into real numbers at the Steel presser. Arcelor Mittal remains subdued on European market woes but Tata Steel doubled Gross Margns with rices picking up in China and SE Asia as also domestic demand pick up form Automobiles. Steel prices in the US have firmed up and Tata Steel scored a year on year 20% growth including NAT steel in Thailand when global markets for steel grew by a robust under 5% score at 4.7%. rice realisations apart, Steel markets also favor diversified roducers like Ttata Steel for the value added flat and rolled product ranges they can produce. Apart from new flat capacity added this year the producer will also e adding capacities in Orissa in 2014 while competitors like Jindal and the erstwhile Ruia behemoth stay busy in Crude Steel volumes

Manappuram Flash Earnings Q2  FY14

Markets may go all the way to 6300 in this uptick but are unlikely to go north of that mark as results for which ever camp from state elections, murky up the coming khichdi government prospects for India to ride into the 20s

Power NBFC results yesterday were in the expected direction with 30% increase in Topline while Gold NBFC Muthoot reported a Flat quarter last week. Manaappuram reported a 11.78% margin again this quarter, o fresh disbursements of INR 50 Bln but NII significantly cut back to INR 2.5 Bln this quarter. The IIP hoo haa turned out to be a damp suib despite a 8% growth in the Core 38% as the IIP for September was a slow improvement to 2% even as the Electricity sector was back with a bang as Durables joined Cap Goods in along drawn ‘winter’ of demand led production.

One would have thought that should have seen higher Gold Loan volumes but apparently the Gold consumers are able to hold on to their holdings despite a poor economy prognostication as Gold prices remain subdued in a CAD challenged year. Global Gold prices are still headed south from last week’s 1280 levels

India Morning Report: State Bank and PNB ride off BOB, BOI earnings

A Maruti Driving School in Chennai
A Maruti Driving School in Chennai (Photo credit: Wikipedia)

Markets remain equally challenged after a victorious close to the series as there is no sign of retail investors ever coming back to cash equities let alone Futures and Options but BOB’s great recovery earnings built on the same devious Syndicate Bank strategy of reducing here to fore provisions to a large quantity as they are no longer legally required to keep higher provisions. BOB gross and Net NPAs continue to grow sharply with NPLs reaching more than INR 105 Bln, and still rising ven as the street celebrates its doubling of Net from a year ago after a long hiatus of subdued quarters. BOI seems to have really made inroads but here again the restructured asseets shot up to more than INR 10 Bln on advances of more than INR 2000 Bln in the September quarter. Net NPAs actually climbed down for BOI and prompted the big rally that took markets to record Sensex levels since Jan 2008. Unlike US banks making profits out of reducing revisions, BOB will likely have to make fresh provisions in the coming quarters as the NPA rates keep up.

Sun Pharma has grown to 5X times its prices in the 2008 boom and mor such rerating in the index shows a more focussed approach in the Indian markets as retail faded away in this edition of the Global crisis, Tapering fears still on tap after having induced a crises from withdrawal of excess liquidity over the summer. Lupin has also rerated up 6X times

PNB has climbed a further 5% in the morning after a 8% climb yesterday. SBI which is still unlikely to report a great comeback next week gained a further  5% yesterday to near 1800 levels developing into a ripe short even a s performers like PNB finally get their due from the stock markets after having survived on a dedicated core following as it gets sidelined in favor of the macabre theatre of the underperformer s who apparently provide more value from the sharp cuts they faced. Bank nifty  started the morning beyond the 11,500 levels it closed on expiry Thursday. BoI is a good investment. Allbank and BOI both reported 2.93% NIMs for the quarter below par but rising for BOI while ll Bank continues south in further NPAs that are likely to hit the INR 100 Bln mark before  the rot stems

IDFC as expected has taken to the bulls in this month’s series at 108 and YES Bank broke 360 levels to go north. Meanwhile as moneycontrol informs automakers Maruti have jumped turnover 2.5 times to INR 100 Bln since Q2 FY09 when the Sensex last saw these levels. As F&O analysts informed the Network audiences yesterday thi s series is likely to see further inroads into the Sensex and the Nifty will easily cross the 6350 levels. Th long term targets of the Nifty will thus be closer to 6600 peaking between 6650 – 6750 come 2014

India Morning Report: Here comes 6000? and what the banks will do in 8.6% yield scenarios

Yes Bank
Yes Bank (Photo credit: magnusvk)

Apart from the unremediated concerns in the Fixed Income market, yesterday’s rally created an awareness of the potential inflow obvious to insiders earlier this year. i.e. Around the Globe, India remains the most attractive investment destination after being clamped on with the rest of the globe in recovery awaiting elections to be over here in policy action and growth parameters and local consumption and investment makes this story unique.

Infosys is also likely to deliver significant outperformance at the Q2 announcements a week later and interestinly, the markets are correcting Infy’s recent run up already to 3000 levels and that could mean one rally is due in October and even September saw 6148 based on the return of inflows.

Banks of course in the meanwhile are looking askance and a standoff with the Central Bank is in the works while Markets continue to worry about Banks other than PNB, BOI and the private Sector banks. Banks probably still look for opportunities with the currency not stabilised and may have to worry about increase in Deposit rates. The Bank Nifty churn would have been isolated easier if they had concentrated on shorting SBI which despite its distribution continues to spring a growing NPA basket every quarter instead of delivering on the retail growth and profitability they continue to tom-tom to any analyst who would spare time for management commentary

Considering that this 8.6% yield on the 10  year comes after banks got a whole Trillion and Half from non penal overnights at the Central Bank and NIMs are protected and increasing, it is quite likely a matter of concern es in the light of the Rupee strength that yields are wary of coming down

Penal rates and those new effective rates on the MSF may however still be withdrawn another inch or more on the October policy to bring the channel back to 100 bp. ( For details flip thru previous issues or ask us) PSU banks received another large Capital infusion yesterday to keep lending rates in check(SBI is funded separately)

Bajaj Auto and ITC probably continue their northward rally till the mid results change of weights while those looking for a correction in Tata Steel are likely to have given up now, while Tata Global investments may take off only after the company itself stakes out a minimum of 200 Starbucks stores ven as wholesale auctions improved pricing for India exports but output and hence export takeoff was lower

Pending infra projects are not going to take off in a hurry but 5900 levels should see both DIIs and FIIs buying and F&O interest has definitely moved up the range from 5900 to 100 &6300 than yesterday’s 5900 Call OI that signified markets ranged to 5900 levels on the upside. Gold and Silver are still negative. India and US in the meantime, the two strongest markets and recoveries continues to once again falter in Services PMI and thence composite PMI because of spending cuts

 

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: 5550 and nose down, Banks give up consolidation

FO Update: Bifty(BankNifty) strangle could be a good sell so vol moves are up but one should stay away from buying bank puts individually or shorting banks per se. They are quite in line for a jump and won”t be characterised as the villains of this move

The day started well enough Banks shifting chairs with HDFC Bank and Kotak taking over the upside and ICICI Bank facing a small (less than 1%) correction and Axis Bank moving up smartly as well, but as we prognosticated, the Rupee is touchy and tus 5550 seemed like a top off, barely opening at 5573 before trending South. On the bottom again, the move is capped at 5400-50 and the Bifty could well stay above 9000 throughout esp if the Rupee manages to keep the bears happy at 67 levels itself, as the markets decide the new direction of the move in the rest of the Financial Year (Fiscal).

The Rupee has received considerable global attention it has yearned for and sellers have been keeping quiet not because of fundamentals or flows but for the attention alone. ( Any study ignoring other parameters and attending to the correlation with global fourth estate exposure would thus be able to prognosticate the new founts of pressure on the Rupee. Oil is going down and 4% GDP is post a not so tough Oil Bill prognostication at the umpteen downgrades that heralded the start of the week. IT is almost overvalued again, one windfall quarter per 25% loss in Rupee value (YTD :D)

GDP (PPP) Per Capita based on 2008 estimates h...
GDP (PPP) Per Capita based on 2008 estimates http://www.imf.org/ (Photo credit: Wikipedia)

On the market performers, accumulation of a disordered undervalud opportunity variety has started making itself felt in Caital Goods companies and infracos equally as Reliance industries which may look to E&P approvals in 6 different fields. Thus the sectoral technical picture is additionally cluttering the fact that no policy decisions would be forthcoming till after May 2014.

Savings in the Oil ill are coming  from the 13% share of Iranian oil, which because of shipping lines and insurance issues, are unlikely to be raised. True to form, Irnians do not really want t o use Rupee payments made to buy Indian exports except for its rice and tea demand.

Auto sales jum is more a victory for the two wheelers again, Bajaj Auto recovering Exports to 144K ths month and domestic sales on breath with value #2 Honda (301K). Maruti’s jump back to 87,000 units is still a poor performance below its run rate of 100k cars on average  pre 2010 itself. M&M tractor sales have dropped to near ZERO at 14,000 r month and Hyundai has been wiped along with Tata Motors for all the improvements in traction at GM, Ford, Toyota and VW.

Glenmark Pharma is a good pick to start the mid cap ride. Yes Bank and IDFC should e among the non controversial movers and shakers as the markets operate in an unwilling tight  rang waiting for the Rupee pain to go away. Sun Pharma will bottom out above 500 levels and start on its promise again as it builds on the INR 1 T capitalisation. The September trade data for India is due in a week

I do have a couple of questions on the detailed NH survey on housing price trends released yesterday. The 670 mln sft inventory for example seems to be a little bit of an over estimate and prices in Bangalore ,Bombay and Delhi are unlikely to move down despite huge inventories in residential , affordable, commercial rental and commercial spaces overall

Also ATF prices ( 71k per kl in Delhi and 77k per kl in Mumbai) are probability going to  strain the almost barebones domestic aviation pricing again and UDF are up for renewal. These are likely to remain hygeine factors to the India story ( low growth high cost aviation and high inventory of property) because of obvious inelasticities in the real estate pricing and the elastic nature of demand, roving a sea of red for aviation in the last decade. Thus inflation fears are probably dead in the water with Oil and Gold moving down globally.

Metals esp Tata Steel is back in the Buy lists in this run which will probably peak immediately after mid 2014 till September 2014

India Morning Report: banks weaker in the new week. Market affirms Capped below 5500

 

Fortune (magazine)
Fortune (magazine) (Photo credit: Wikipedia)

 

As we digressed from networked opinion on Tursday / Friday, there is no such thing as the 5500 mark for the market as leaching gets underway. Barings PE in the mean time made a play for a 135 per share valuation for Hexaware, the only Fortune 500 roster which has never operationalized a growth strategy meaningfully. Apparently growth is already underway at Hexaware and this is not a play at capping India’s further Dollar erosion led woes in the future or a transparent play at India’s notorious inefficiency stability motive. A Hexaware and a KPIT do gain disproportionately from the Dollar’s move against the Rupee as they price transparently and Hexaware also has untamed T&M contracts that price at competitive levels onsite and thus remained Dollar heavy, unhedged at least n the nineties. Most others have lost the Mid Cap IT space from investing in product and premium services and/or Indian Rupee/Output based pricing still capped in the$50 mln realised deal values after years of wooing.

 

Banks got cut mercilessly waiting for the HTM circular (SBI, is waiting as always) and saliently otherwise:

 

The Bifty(BankNifty)’s ‘stuck-up-pance’ at 9400 saved the straddles on the Nifty which you should have sold if you were in the market after the first hour in the morning.

 

The rupee is starting the new climb again as the Rbi loses room to intervene and stays away after this week.

 

No, these are not conventional range bound trades.

 

Yes, we did not anticipate the market to wait so assiduously for Thursday expir which can now assumed to be the final plan.

 

No, being quiet is not a bad strategy.

 

Yes, the big roller from the Fed as they leave Jackson Hole is on target and I am trying to figure out why $10 Bln is a good start apart from that everyone knows that number.

 

It is that $12 Bln would be too fast and $20 Bln a virtual unending panic, $8 Bln an equally good vote of confidence and any number below $5 Bln not enough to redact(the literary device for fabricated on paper) the surfeit of liquidity let loose on everyone. But then thats just because we started with $10 Bln. That just means the Fed would be buying $75Bln worth , and that should be a good start for equities to break into a done and bring back confidence in EM economy investments only at the end of one such full cycle of investments which may be as short as 2 months in US markets but for another sell down in bonds(domestically)

 

Held to Maturity classification clears the grounds for banks to carry bonds while double digit rates reign. !0 year yields are still rising in India and policy rates stand at risk of being increased too after the liquidity crisis is hung

 

 

 

India Morning Report: A dark light envelops India Markets as the longest tunnel is in play

The New Sea Link
The New Sea Link (Photo credit: Prashant Menon)

There is a light at the end of the tunnel. After all Sun Pharma has retraced to 425 and Ashwini Gujral is recommending a short on Axis Bank, with the Axis Bank bulls freely shorting probably the naked shorts that make up a new residual market of speculators as PCRs stay in a lower range with FIIs not adding more short hedges.

VIX India is having fun at everyone’s expense getting back at markets for being called bad all over and staying increasingly bad. The Morning has already see the rupee enter the new range box between 64 to 68 and so it is unlikely that it will recover to 62.50 or that this is the last stage of the capitulation move.

But yet the new negative momentum in the indices is looking to close out this move in this week itself with a $100 Bln exit by FIIs on Friday necessitating a grave distance covered on Monday and now on Tuesday the same is likely. That means the indices could well compete with double digit yields targets on 10 year paper and the currency targets ( if any) to hit 5000 by Friday close and provide a respite week next week.

JP Associates and infracos have not started back and private exchanges and therefore promoters linked to that may not yet ever make positive lists again

I am like a kid, hoping the Banknifty cut today means the Reserve Bank has thrown the banks out to the wolves asking them to mark all holdings to market and push out a mandatory minimum to AFS portfolios. But then there are those that still think below 8 yields will be back

Buy Power NBFCs and Bajaj Auto has also finished its last moves. LIC Housing for one other NBFC can probably not move down after it hits 130 levels

Vidyasagar Setu, commonly known as the Second ...
Vidyasagar Setu, commonly known as the Second Hooghly Bridge or Second Howrah Bridge, is a bridge over the Hooghly River in West Bengal, India. It links the cities of Howrah and Kolkata. The bridge is a toll bridge. It is one of the longest bridges of multi Cable-stayed type in India and one of the longest in Asia. (Photo credit: Wikipedia)

India Morning Report: State Bank of India results scare, IIP for June -2.2%, $12.27 Bln Trade Deficit

Taj Mahal, Agra, India. Deutsch: Taj Mahal im ...
Taj Mahal, Agra, India. Deutsch: Taj Mahal im indischen Agra. Español: Vista del Taj Mahal, Agra, India. Français : Le Taj Mahal, à Âgrâ, en Inde. Русский: Мавзолей Тадж-Махал, Агра, Индия. (Photo credit: Wikipedia)

Banks growth constraints from old and new NPAs came to be the most heavily landed blow again with INR 150  Bln in fresh slippages to 2.8% Net NPAs and a 5.5% of Book in Gross NPAs for India’s largest bank as markets at 0.9 PCR look to bottoming out with 5500 Puts still popular and Futures encouragingly becoming short hedge currency again for Institutions.

SBI has managed a NIM of 3.49% this quarter and investments currently denominated in low yielding CP will significantly buffer the margins to end of this fiscal according to the Bank resident’s statement defending current results (ETNOW). Auto Sales of 131k cars and less than 11.5 mln two wheelers as MUV/SUV sales plateau and trend down in the last bulwark crumbling for the 12 months are just part of the degrowth in the economy as a whole as May IIP was revised downward to -2.8% and June IIP came in a -2.2% showing degrowth of -6% in Capital goods and taking the April June quarter to -1.1% , negating any growth from the rate cuts before the rate clamp shutter down business in July , August and probably September

Consumer durables have been double digit negative in both May and June degrowing 10.5% on year in june with non durables up robustly another 5% allowing them to improve inflation. Better news from trade with a lower import bill from less than 3 tonnes in Gold and Silver imports each makes a crawl at lower CAD possible as also more controls return to the Economy after 22 years of reform under Manmohan Singh

Dabur and other FMCG could return to strength given the consumer non durables sales upticks and continuing robust inflation in the categories even as input inflation subsides. a 9.64% CPI does not discourage category leaders HUL and ITC also from continuing to improve realisations even if the Rupee completes its move only beyond 65 levels

ONGC results were bearable though the markets are unforgiving for the iNR 200 Bln quarter as realisations are likely to remain near this quarters $40 a barrel than last year’s $45 levels and the coming investment uptick within the week could see Oilcos picking up the slack after abig fall as well and oil purchases down for the second successive month will stress the trade this month for sure.

English: Manmohan Singh, current prime ministe...
English: Manmohan Singh, current prime minister of India. (Photo credit: Wikipedia)

 

India Morning Report: Banks react well under pressure, buy levels established at 5800

NSE Logo
NSE Logo (Photo credit: Wikipedia)

Banknifty shennanigans did not disturb the market breadth leading to a further decline in volatility and your short strangles are doing well. Shorts on ICICI may not pan out for traders but SBI will bear pain for continuing on bad debt downhill slopes even as the PSU crowd per se led by PNB and the private sector biggies improved their NPA score till FY2012-13 to 3.33% as discussed by PC yesterday. Private sector banks have done well to bring down the cost of Top 10 NPA accounts to less than 40% of the total and the Foreign banks continue to focus on Trade banking as is their success mantra in Asia overall with High NPAs in select accounts

IDFC and LIC Housing as expected did not yield new licenses but one should continue holding these investments as the current cut is unlikely to turn into a run. Unfortunately India Post also has to do a lot to convert its vault of small savings into a bank from the signs.

Banknifty may well not move down below current levels esp if one constructs an index of profitable banks from the current index and neglects SBI, United Bank of India , BoI, Vijaya Bank and a few other borderline red marks in the current BSE and NSE indices. I for one eagerly await new volume in the BSE 100 and even MCX to test options though Nifty remains a key barometer unlikely to lose significance.

India Morning Report: And here is the 5850 test again

ICICI Bank Headquarters
ICICI Bank Headquarters (Photo credit: Wikipedia)

The Nifty lows hit in the week of 22nd July 2012 at around 5100 were a strange time with the upcoming dampening of India’s growth prospects in the fourth estate seen as a future buying opportunity by the Domestic Institutions. That buying then with all the fund flows that have supported the rally since in these 33 weeks could have avoided the loss of opportunity most DIIs faced.

As the markets fell from 5300 in the first week of July 2012, DIIs were waylaid by the extra correction and instead of buying into positive policy announcements have been net sellers for the period on a daily, weekly and monthly basis in most cases. However, even today 5800 is unlikely to be breached and that itself be a cause forWmarkets to be buoyant again.

The Israeli branch of the "State Bank of ...
The Israeli branch of the “State Bank of India” located in Ramat Gan (Photo credit: Wikipedia)

In the meantime Banknifty is back to 11600 again, opening the day with Houlihan and Lokey’s signing up with Kochar’s Avista a small positive for the sector and the sector tracker(Banknifty is an index)  overshadowed by  disciplinary actions as the punitive sting of wealth acquisition (Cobragate) engendered 20 suspensions in the other Kochar’s ICICI Bank, always the worst offender on discipline and the fastest in Covering CYA, and other disciplinary action promised even as HDFC Bank, Axis, SBI and ICICI Bank prepare for the inquisition in their own banking tradition.

The Banknifty was in fact below 11500 , its new support being 11600 barely two weeks ago and any new test of the sectoral and market indices are unlikely to take markets south. India’s 6% growth being protected keeps India the ultimate defensive in this turbulent environment and the growth story is still out there hidden by old IIP series and mismatched inflation data.

Even if Economic data does not improve its semantics, and network analysts from Ashwini and SS (TV18) continue to search for lower levels to improve volatility, those tracking the fundamentals like Mitesh Thakkar and us, would be backing the bull move to the hilt with buys on M&M, Bajaj Auto and IDFC to start with. The energy sector also looks tractable now with petrol price reductions and Diesel hikes and its preponderence of investible large caps would be a veritable fest for Foreign portfolio investors and our own DIIs again.

The range being capped at 6100 and the RBI Mid term on Tuesday make it unlikely however that more interesting times that await us, indeed start off in this week or next and the improved volatility still no good for lasting F&O bets, writers riding the low volumes as one time trades expire in two weeks now.

COAL INDIA is also just being repriced for the new liquidity hitting the markets today down 5%.  The new Euro periphery bailout to Cyprus and the conditions affecting bank depositors (9.9% /6.75% levy) also means a new low for the Euro and thus for the Euro zone as the new liquidity’s wider impact is broken for the next 2-3 months by the fire fighting

India Morning Report: State Banks, Bread and Coca Cola

First the note on infracos that have unsettled the markets
What markets had initially identified as a resilient strain of Corporate misgovernance in infracos from GMR and Reliance Infra had apparently never been a cured mutation despite consistent action and PR by the companies. Even today when the infra gap is being addressed, because of group leverage showing on the holding companies, GMR, Reliance Infra remain active short candidates especially for those bullish on Kushal Singh’s DLF despite its bad results. Hoever, the short interest looking actively to rerate the markets has probably been snuffed in the bud and will likely lose out in this cycle as the day progresses today.

 

English: Tata Prima Truck by Tata Motors
English: Tata Prima Truck by Tata Motors (Photo credit: Wikipedia)

 

Brokerages re-rate SBI and Tata Motors

 

Expected disappointments from Tata Motors and on expected resilience from the State Bank panning out a lot of uptick has come in for both stocks, At 249, Tata Motors is indeed a good defensive buy and its JLR performance can only improve as it seems to have managed to keep sales volume increasing esp in China where they grew by 50%. JP Morgan and UBS have also upgraded SBI as the bank’s chairman explained on the networks that domestic NIMs are a healthy 3.75% and the international book stable with NIMs of 1.7% , in itself a very good performance given that the State Bank’s International portfolio jurisdictions are not in politically challenged geographies like BOB has.

 

The Sun Pharma and DRL conundrum

 

At this bottom of the Nifty cycle , the other cvonundrum also gets highlighted as growth successes like Sun joust with almost regular failures like DRL and Ranbaxy that have lost the confidence of investors but keep the sector rated as a defensive. Emerging Midcap Stocks including Glenmark, Cadila and even Biocon are thus seen as having capped prospectsmuch like the consumer goods stories like Dabur, Marico and Unilever but most analysts have distinctly berated the laggards and moved the active investments to an aggressive growth cycle so passive investors and DIIs have to follow in due course.

 

And the ascent begins..

 

However, these are but regulation battles at the end of results season in India Inc’s diverse investor and corporate objectives’ joust for relevance and India’s uniqueness as a 5% + growth destination has not been lost to the cycle , the entire move down and the restlessness in the markets likely to be attributed to pre budget jitters in statstically consist4ent studies over the next decade as this inflection point is real and investors relevant to India stories carefully watching even if from the sidelines, checking if the stories fed to them by domestic media and other interfaces about India’s struggles are as unlikely as growth sponsors of the country make it out to be and perhaps convinced by as tately transition in 2014 under a new government that hopefully will be more of the old.

 

Private Banks like ICICI are likely to enjoy today’s mini rally from 5870 levels in rare moment s of perfect correlation with the State Bank and exploratory shorts run out if the OMCs are indeed able to puh thru a round of Oil price hikes on the weekend. Europe has of course scared global prospects for 2013 and that impact has probably run its course by the end of next week fully.  q. GS

 

 

 

India Morning Report: Week opens on a buoyant note

English: AXIS Bank
English: AXIS Bank (Photo credit: Wikipedia)

India Morning Report: Week opens on a buoyant note

Despite the run on BOB due to the herewarned jump in NPAs at BOB  and AllBank, the correction in others tracing the trend in BOB like SBI and Axis Bank are unlikely to fall through and banks like ICICI Bank and Yes Bank are likely to be strong bets for this move in February though the pre Budget rally’s happenstance coud be discounted by the end of this week and the market stuck at below 6100 levels.BOB’s NIMs have fallen on quarter by almost 15 bp though they are still 20 bp better than December 2011 at 3.08% and are likely to be hit by a falling knife as at Allahabad bank even as PNB and SBI walk out in the guise of reduced provisions,

The Solicitor General’s resignation might be a significant blip ont he horizon for India baiters and because such a category is waiting in the wings, the intellectual discussion around the government’s decisions pushing thru new ordinances that led to this falling off are likely to be muted and ignored as India Inc and investors look to firm policy moves in the wake of a wasted 2012 for India when it should have been coming in to prominence for its Economy’s staying qualities and instead was largely ignored despite new FDI invitations in aviation and retail

Banknifty is likely to start a new move from 12600 (12654 at 12 noon today) and probably has at least 10% to offer even as ICICI Bank’s opening gambits helped the bankex and banknifty realign losses from weakness in SBI and BOB post BOB results The bull run in DLF is a red flag though and might sour the uptrend as IDFC is rerated down with no moves on Infra financing in wake of the Fisc, though an untenable assumption, being a driving force in irrational investor minds. Reliance Infra and other Anil group companies however would be at the forefront of the markets vertical climb if it happens anytime this week.

For rivate Banks atleast the turn in the economy signifies the rush for CDR is over.

India Morning Report: Considering the velocity of the move, it is now improbable that the bull run is yet in progress?

Pivot table NSE Banknifty PSUBank index scrips...
Pivot table NSE Banknifty PSUBank index scrips from OJN for 20110609 (Photo credit: OJN2)

 

The 90 point move on the Nifty yesterday, trying to make spectators out of those opting for not such a roller coaster move means that the classic correction/ consolidation prospects have also improved apart from the secondary improbability of conditions improving as no policy execution is likely.

However markets would woot for Goldman Sachs’ revised targets and Moodys’ clean chit for the subcontinent’s Economic goliath “Mumbai dreams” upping growth forecasts to stratospheric ( and they were so “stratospheric” just 8 years ago) levels of above 6% by FY 2015

The Pre Open went along expected lines, traced the line in the sand for bear traps with fastest rising prices from Bharti and HDFC Bank to Axis Bank among others correcting to Monday levels before the Pre open ended with a sigh above 5730 , cutting out shorts from the lifelines to the next few millenia. Decks are cleared for all cash subsidies and other such tools that would ensure no Old India thus gets in the way of New India but I would think the more things change the more they remain the same as young India hardly owns any mints especially if high priced MBAs ( like us) are as few and young couples that are actually growing Bangalore’s per household income and disposable spend levels are actually as relatively poor as they are with MNCs leading local IT companies in correcting compensation to an affordable baseline suitable for fatter expansion of numbers on call from more working class ratios like teeth to tail ratio ( ratio of solders to commanders) and enabling keeping existing customers happy as possibly only viable strategy inputs including at banks and marketing consumer companies hitherto fueled by top management / boardroom expansions.

Of course for the markets that aside is as peripheral to the rally as the Moodys’ report they triggered to a big high yesterday and as peripheral as the bickering in Parliament led by that able woman on how to lose the no confidence vote to be tabled by the opposition in Parliament

Banks esp Axis Bank and HDFC Bank that led yesterday could exchange roles with ICICI Bank and because the fourth member of the trading independence consortium of the banks i..e. SBI or Banknifty (PSU – not a defined sub index) is incapable of leading from the front without crashing through it is unlikely that the Nifty will easily cross over the 6000 line yet again. I wonder what gives when the Nifty finally does it in a few weeks from now.

 

 

The Goldman Sachs Tower - Jersey city, NJ.
The Goldman Sachs Tower – Jersey city, NJ. (Photo credit: Wikipedia)

 

 

India Closing Report (Week Of 12-16 November, 2012) (With Trading Strategies For The Week To Come)

Oil and Natural Gas Corporation

 

The Diwali holiday shortened week proved the dictum that if you flog the same levels for the market long enough the markets need not kneel out of fidgety bear’s interest or tired bulls leaving. However, the markets nearly rerated themselves and shorts ar eopen in the market esp as revised Telecom company targets including winner Bharti may be too much too soon for operation al challenges and negative margins in most markets on wafer thin Operating profits. One does not except writeback profits either except for those like idea who won back the same 9 circles from the previous auction without another penny in cash due to the government from them

 

Banking as expected will start Monday with strict guidelines on what is private and profit making and what is not, BOB and SBI showing they are in no position to compete in the sector even with size and rural reach or international access on their side.(BOB in Africa)

 

The market punters are still markedly divided along the same lines in consumption stocks with those that favor Axis and Jubilant and those who switch ITC, JET, YES and a few others, keeping them all in the not so Mid Cap but not blue chip ranks. The continuing fall in Cairn and GAIL makes that sector as close to Value pick range as it is allowed to get but neither ONGC nor GAIL or CAIRN look like they will be first picks in the coming week the foreign brokerages and morgan stanley having marked a flat range on the market which has obviously found 5620 to be more than fairly undervalued but is still a bit stuck in the mud even before 5800 is ht on the tripwires ( a tripwire is the simplest form of a shock trigger setting a limit beyond which the alerts start ringing)

 

Biocon has made another deal with Bristol Myers for anti diabetic medication while the diabetic market globally is expected to grow to nearly $60 B a year with even Novo Nordisk insulin yet just 25% of the market. Automobiles however do seem to be near the bottom of their range and could start ff the week’s investing bits till infra traders make a mind to take a plunge again IDFC in the lead and private banks like ICICI Bank and HDFC Bank following in.

 

The unexpected rise of Coffee stocks mid week really has set a cat among the pigeons as a 20% rise in those three cannot be easily replaced by any other competing equity or currency investment one thinks. and Tata Global remains a wonderful investment at 175 as Starbucks get s a little faster on the blocks with store openings in 4-6 weeks.

 

 

 

India Morning Report: Markets to follow up another uptick from 5680

Five Rupee Coin
Five Rupee Coin (Photo credit: Dinesh Cyanam)

Markets are not closed today or tomorrow and muhurat trading times should therefore be announced tomorrow. National Spot Exchange had a special session on Dhanteras and the Commodity markets will have a similar one today. Fixed Income markets are flat and SBI had taken the sails out of the Rupee and Equities on Friday. Of course the Rupee market has had other reasons as Asian economies find more Dollar buyers and a rising oil spike confirmed the strength while the AUD, CAD and even the EURO could trend back into confidence this Monday and start the Dollar off on a sleigh ride including the bump on Black Friday and all the way into the Holidays.

The Diageo deal for Sorghum beer or the much closer to heart challenges on the FMCG play of ITC in non tobacco businesses are not likely to stir the market but most houses could be wrong about the latter as the brands are well set up and the Indian market will find a likely bigger window for ITC brands than HUL or even P&G with the connect established. The Indian Hotels deal or the Suzlon Repower disconnects are still mendable but unlikely

DLF and Unitech are unlikely failures this year and will continue in the same vein so they are futile unless the sector jump is more broadbased and as of now similar tagging besets Reliance Infra and GMR Infra. Ne bank licences are likely to see a good move int his rally to 6000 especially as YES BANK and IDFC look to make their mark as blue chips from the Emerging winnwers and they will attract larger investments per se. The HDFC Bank vs ICICI Bank war will be back in  2013 and is likely to impact this rally as the PSE banks become non entities after the SBI non sequitor on performance and the disappointing news on NPAs so eagerly awaited by China detractors and wholly unexpected in India . These are unlikey to flag ‘tail events ‘ in the respective markets in Shanghai/Hongkong and Mumbai/India

The Rupee could be looking to cross to the threshold of 55 but definitely loses steam at the 55 mark and may be prepped there for a rush back to below 54 Gold ETF buying pushed Sunday price to 31600 in Sunday trades in Mumbai

Bank Results Season: India Earnings (The Old and Weak) Will India jettison its Public sector behemoths as instruments of policy [SBI Q2 FY2013]

The deterioration in asset quality though well within control at SBI to 5.15% or INR 491 B does not meet management statements of no more deterioration in asset quality. The written off loans of INR 14.92 B and reducing provisions of INR 18.5 B from INR 22.73 B a quarter ago raise questions of capacity and capaability even as the Central bank has obliged with CRR cuts and the bank continues to manage the loest deposit base in the country ith the status as largest bank int he country borne in measure by share of loan assets and the size of asset book  as well as the market share computations for the sector in both retail and SME/corporate banking

However a future for India Financial Services may need to have a larger NBFC role designed aas per the latest policy documents or otherwise continue privatising bank franchises and allowing new banks with rural and priority mandates make the competition tougher whence sucha weak showing by SBI with only 5% growth in NII below INR 110 B for the quarter makes ita tough pill for the market to swallow. However, the current macroeconomic revival may let other banks pick up the slack and allow investors to ignore this quarter’s SBI records while the markets again take a fact check on how good the India story is.

Net profits for the quarter are INR 36 B ahead of estimates by more than 5% but the stock will drag the Banknifty in the current run with management guidance not being welcome. The year on year groth in profits does meet the benchmark of 30% at a 25% score bu tthat  is on a low base from underperformance after the bad loan cliff ensnared the bank

REstructurd loans are INR 46.94 B or 5% of the loan book roughly Additional slippages are INR 85 B compared to INR 103B last quarter (linked/seq)  but recoveries are also up by nearly 17% at INR 14.3B The loan book has grown to INR 9.56 T

 

Morning Trading Strategies – India September 17-21, 2012

Trust us. it’s not time to sell into the rally yet.

Banks are again the biggest victors of the Reform story. While Telcos will be apparently in with 2G licences without missing a beat including Uninor and Sistema buying Aircel, Bharti would be benefitting more from investments in retail and its IPO getting investors out of the 5 year old Bharti Infratel restructuring

Stay long in Banks and the uptick will be tempered as we go along. Indeed some may again try a Bank of Baroda trade. ICICIBANK and SBI are the best picks going up while HDFCBANK is the one likely to lose the least value

The Rupee is below 54 even in the September series and that is saying a lot apparently as Udayan puts it from INR 28 B in one session. The gain in the Rupee is not capped yet either till December

The infra stocks ill be part of the second coming and will be from among frontline stocks only from IDFC to JPASSOCIAT and maybe GMR and RELINRA

Morning Trading Strategies – India September 10-14, 2012 (Day 2 – Tuesday)

 

State Bank of India Logo
State Bank of India Logo (Photo credit: Wikipedia)

 

No do not do that. though smaller targets that Ashwini Gujral has suggested work, you never know which short won’t work and thats a good investment on the long you are switching. Of course I refer to the markets enticing show of what’s left in India anyway and exiting by the back door for the show is over kind of morning with dear networks taking turns on shorts for day traders. Yes Bank could very well come back to 320 and IDFC has already shown enough to stick to 122 levels than go back to 114 both indicating that the supposed over emphasis on both banking and infrastructure financing is unlikely to go away and REC and PFC are already at encouraging levels for an uother upmove.

 

We do not expect markets to go for the South side vacation day traders are so fervently hoping for.

 

We do not expect markets to go for the South side vacation day traders are so fervently hoping for.

 

ITC is a buy again at 253-257,  More IDFC can be accumulated at cirrent prices, ICICI Bank is a good buy but the stock ill run below 900 on some quick performance concerns regarding expectations on NPA portfolios, and restructurings as well as business segment portfolios the firm operates without any regard for the consistent high NIMs  and quality credit pull to the franchise.  SBI stock similarly awaits a big bang news before a new positive target thus making a good upmove unlikely while big news is unlikely in this quarter or next, banks having stabilised a volatile operating scenario

 

 

 

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

 

Morning Trading Strategies – India July 20, 2012

 

Bharat Heavy Electricals Limited
Bharat Heavy Electricals Limited (Photo credit: Wikipedia)

 

Shock and Awe, what can one say. Markets opened deceptively lower and start from bottom of range on Friday. I think you can pick up a few Calls on the nifty and maybe not the banknifty but then banknifty is the stongest player in the series and next

MARUTI has picked up , may again be available at below 1100 Power stocks are an avoid. There is no definitive course for order backlog ridden and recession driven BHEL for new buys to 250 immediately, but after whipaws of the day it will be available at those same levels again

Today’s alrternate relief sections are sharply corrected even otherwise and TCS and BHARTIAIRTEL make good picks. Buy SBI when you see a nice rounded bottom,. i think 2150 is a good start to accumulate for a positional trade

ICICIBANK may not correct further from 945

A big thumbs down for HERO and DR REDDYs and a big thumbs up for COAL INDIA

 

Tata Research Development and Design Centre
Tata Research Development and Design Centre (Photo credit: Wikipedia)

 

 

 

India Earnings Season: (Bank Results Season) Axis reports NII jump to INR 21.80 B

 

Axis Bank Dream Home Festival 18th & 19th Marc...
Axis Bank Dream Home Festival 18th & 19th March 2012 at Hotel Pride, University Road, ShivajiNagar, Pune 411 005 – 2 (Photo credit: Ravi Karandeekar)

 

Axis tried to drown itself on results to break the jinxed 5200 levels but the results brought in more buying as the Topline jumped the usual 20% + on year and Net profits have held sequentially as well as on June 11. Net Interest Income is up almost 30% at INR 21.8B Net income is up 22% on the year. Gross NPAs are 1,06% , no further improvement but despite the school of hard knocks the bank comes from that is a best in class performance from the bank incl the CAR of 13% and Net NPAs are 0.31%

Net profit beat expectations. Net NPAs are 6 B from 4.73 B in March and was expected. Provisions have grown on a low base and INR 2.59 B is not the end of story and ill rise in future quarters even before Dynamic provisioning is sneaked in

The Loan portfolio is up to INR 1.7 T and that’s creditable 30% growth over June 2011 while retail portfolio has started ticking up its share after the bank’s thrust in cards and unsecured loans to INR40B or 24% of the portfolio. Both ICICIBanka nd orking Capital Experts HDFCBAnk have 50% of their assets in retail.

I am recommending buy before close of market hours today and adding to existing ICICIBANK and HDFCBANK portfolios. SBI may be sold on results as well

 

 

 

Late Morning Trading Strategies: July 11, 2012

English: The photograph is of SBI Mumbai Main ...
English: The photograph is of SBI Mumbai Main Branch building taken after sunset to capture the glorious architecture of the gothic styled building that was built during the Raj. (Photo credit: Wikipedia)

Buy GAIL at 355, IDFC at or below 140, buy ICICIBANK and AXISBANK for at least one more jump

SBI, ITC and HDFCBANK are buys, CIPLA and BAJAJ AUTO are the immediate defensives that will stay positive and up, HEROMOTO may keep the uptrend

IT companies are not going to get anything fromt his depreciation, Only if MindTree could correct to 636 and I could Invest in growth instead.

RCOM is a big buy with CDMA out of licensing costs fallout

Rid yourself of strangles and straddles, volatility is going to be very low and then very high when it moves, If you sell a 5500 call and 5300 put for example you already don’t make even 70 and then it could be out of both of these ranges in a jiffy, if instead you straddle for immediate move out of 5300 with a put ancd call buy or 5400, if you prefer ( hich may hand you better breathing space) the volatility may stay down from 15-16 to even 12 and lower

Morning Trading Strategies – India June 28, 2012

July
July (Photo credit: kurafire)

Expiry Thursday means buying would not have picked up in July series and some are not quasi currency forwards for a change. IDFC Calls at 160 levels for example are cheap and buying should be done today and yesterday. Those avoiding options can sget into July series infrastructure futures in ICICI Bank and IDFC, ICICI Bank looking like a candidate for 900. SBI could run to 2350 similarly and HDFC Bank left alone for the next run after the market corrects from 5350-5400

Yes Bank is likely to see an important correction as HSBC exits Yes and Axis Bank holdings of $500 mln each at 3-5% discount t o market

Auto companies would be great in the july series, Star (Stride Arcolabs) good for purchasing at lower levels if it comes back after usinfg $300 m from sale of Ascent for the $110 FCCB repayment

State Bank of India Logo
State Bank of India Logo (Photo credit: Wikipedia)

HDFC is my all time underdog favorite at this time of fast rising indices and there could be action to start the bear in Sterlite and SESA soon as their VAL load becomes clear ahead of the board meeting hich will still likely approve the actions

All the usual recommendations for this week apply as per sectors recommended especially if you are not day trading within june. kingfisher got shorted already, JP Associates, one feels may get left behind again and BHEL and L&T are buys only till the trend is up

Jubiland and Titaln shorts should also be avoided while the trend is up PSU Banks like BOB and PNB should be very good picks. Many hedgies picking up PSU bank strategies in the last quarter

Morning Trading Strategies – India June 27, 2012

English: Wordmark of Cipla. Trademarked by Cipla.
English: Wordmark of Cipla. Trademarked by Cipla. (Photo credit: Wikipedia)

Currency markets expiry does not usually bring much volatility as the markets inherently trade in forwards and futures. However the dollar is poised to hit 56.50 today as the Rupee’s fortunes take over petty benchmarking to a Dollar index fed by the weakening Euro. The Dollar index is itself down despite the Euro weakening as the Yen follows to higher ground on the back of its new revenue measure on a government running a 200% public debt but required for speculators who thrive on funding trades thru the Strong Yen However forward continue to retain all their premium..

English: Bajaj auto rickshaws in Adama, Ethiopia.
English: Bajaj auto rickshaws in Adama, Ethiopia. (Photo credit: Wikipedia)

In stocks, the benched NBFC sector could help the banks surpass earlier week’s levels on the Banknifty while the index rangebound till 5150 is probably ripe for the adventurous to sell a few June puts, but most should have been done by Monday. A couple of network mentions like Jubilant and Titan ind shorts are great starts. On the long side, REC, PFC, PTC and Powergrid should move at different parts of the day and typically ING Vysya and Indus Ind as well. Bank Nifty gets safe to 10,200. Setting up new July strategies should have been disturbed by the seesaw index moves and so one should probably wait before publishing bullish option picks in the segment esp as July options are overpriced. Futures plays in the Bullish sectors are safe including Healthcare which may get a little cashed out as interest returns to other sectors today. Buy Cipla at today’s lows, stay in Sun Pharma if you are already in and exit Dr Reddy

BAJAJ AUTO  is again a long and HEROMOTOCORP could recover a few in the couple of nifty surges in the day but both will likely start back from 1500 and 1960 again in the near future. Use discretion and exit any upmove after 3% for day trading and those staying in should be ready to stay out July. Fresh buys in MARUTI enjoy the same caveat. Banks are at a new level but may not retrace much more except Axis to 978 levels and SBI to 2110

Prime Focus (RJ), Tata Global (Starbucks, Indian promoters) and a few other Mid Cap picks are around including Mannapuram Finance. Reliance Anil Ambani stocks including Rel Infra and Rel Media will have a move each in this run to 5400 if it happens

English: Generic finasteride 1mg tablets produ...
English: Generic finasteride 1mg tablets produced by Cipla India (Photo credit: Wikipedia)

Infra sector is poised for a take off on its own technical steam as well as good announcements from the PMO / MoF. IDFC and GMR Infra remain prized large cap picks in the sector. GVK Power, IRB and LANCO seem to be marginalised by their Capital structure by now but Global infra financing sector would still have to adjust to a lot of India specific projects’ independent performance strictures and it will not be easy except for Development Finance plays from Japan ( $10 B for DMIC), IFC and even ADB to enter India and thence I atch out for others except IDFC

A very tough pre open, Infra may have bottomed out but it is not going to break out any faster

Budget Impact: Good opportunity to add back banks

English: ICICI Bank - Leeds Branch - Roundhay Road
Image via Wikipedia

Banks slide in face of credit deterioration statement pending from rating agencies and international banking waiting on budget not helped by continuing concerns over fiscal discipline post budget, Mean expectation will likely move to a position that without measures Fisc not 5.1% but 6.1%.

Banks hit hard include PSE banks and SBI on NPA concerns.

However trading momentum on downside can help investors get in as banks remain stars in the coming 8% growth binge once the fisc charter adjusts to the new gap , and no inflation overruns helps us crosss the hump in the first 6 months

Esp HDFC Bank and ICICI Bank among the larger banks and mid cap banks post results for Q1 But downtrend may not be stemmed immediately , buy in small quantities.

The Air india Debt restructuring package – FAIL

English: The Local Head Office of State Bank o...
Image via Wikipedia

The Airline’s debt restructuring package of $ 4.4 bln rides on a INR 74.08 bln preference share issue that will require additional provision under the original RBI dispensation itself. thuis the package is back on the drawing board with SBI Caps the advisor, having earlier announced as being accepted/proposed by the lender(s)

The Investment banker’s proposal required new provisions of INR 96.18 bln for the INR 224.5 bln debt to be restructured and an additional INR 221 bln guaranteed by the government. It also requires conversion of the existing overdrafts to longer term loans of INR 112 bln leaving INR36.5 as Cash credit used ( and not new avl limits)

Want to miss out on your ATM Branding?

A BTMU ATM with a palm scanner (to the right o...
Image via Wikipedia

State Bank of India has nearly 22,000 ATMs and another 5,000 from its associates, ICICI Bank has 7000 ATMs of its own. foreign banks are in fact recognised in many parts of the country by their ATM locations, as the logo and slogan heavy ATM kiosk, though treated by a utility as many creates and builds the bank brand and shows it for reach than the bank.

However, as ATM operations can be more easily run by a third party with the omnipresent Brink’s Aryas money truck delivering cash to each machine, bankers have been rooting for a white label ATM operation like the Tower companies in Telecom, with their own revenues and necessitating elimination of free ATM transactions as once the model has been approved, charging fees and paying for the location become mandatory for the consumer and cheaper for the bank

Apart from communalisation of costs to all banks for location , it will also mean that operators charge lesse r fee on a larger base and thus a committee of the MOF has been recommending the deed as public Sector ATMs including those of larger Indian private banks ICICI, Axis and HDFC total nearly 100,000 and probably these few do not want to be caught spending on the brand anymore.

Are India’s Derivatives Norms sufficient and battle ready?

Bank of America Plaza
Image by Frank Kehren via Flickr

While india’s central bank has been rolling out reforms at a slow pace even without significant market acceptance as desired, from Fixed ?income Derivatives to the current CDS approvals, it has also been concurrently cajoling foreign banks to stop overextending non funded lines and off balance sheet exposure among other actions that are a sure sign of a shallow market on ransom for each Golden Dollar that continues to hold us enthralled because of the asymmetrical flows.

The last in this series of a dissatisfied regulator was a series of penalties imposed on SBI, ICICI Bank and others  for not having any norms for their derivatives desks in place. Shortcomings include a non-existent risk management system, and inability / no desire to conduct due diligence on suitability of these products. 19 banks were penalised and have been served show cause notice.

Thus on top of already scarce demand and skin thin trading in derivatives, we have also had our top line banks being accused of not understanding their products and we do not even see any speculative profits or

English: Kundapur Vaman Kamath (born December ...
Image via Wikipedia

even losses from the alleged transactions as no disclosures were required for the products, probably engaged on an OTC basis and contract documentation never completed in tradition of the big desks at London and New York 10 years ago.

Really, we need to invest in the human resources and the infrastructure to make these thriving businesses for banks before we go looking for retail participation and this depth will not come from one off trades like India’s Olympics medal haul by the Kamaths and the Kochchars.

ICICI Bank under pressure, market likes a turnaround

firstpost.com leads with a weird ‘post’ today showing amchi mumbaikara’s frame (unhinged) of mind. the headline screams, why ICICI Bank blah, photo pic is one of the anti corruption celebration as the government signs 3 anti corruption measures to meet the mountain and I did not read the rest.

Though India has rejected the three (four ) critical sector FDI updates incl Retail, Banking and Insurance (Aviation in a new soup too!) and ICICI Bank is struggling to find its bottom , it is by no means representative of the Indian economy per se esp with such “Blitzy” slash as an opinion befuddling young minds and inviting perennial dissing from market commentators.

What is likely however , and that is why the $4 bln FII flow till now is safely locked up ( after 20 years, another first ) as anyone exiting now for a lower bottom would miss instead an instantaneous splurge which could bring the market back to 5300. Though many would have advised to start accumulating, not many would be brave enough to purchase block trades or fundamentally take a larger position at today’s touchy levels. The 54 we talk about now is that of the rupee on its way down to more stable depths ( we think!) where our IT exports ( merchandise exports having died already in textiles, tea et al) would be saved by the profits from the sold rupee. Unfortunately that also gives fodder to the bears as a Rs 100 exchange rate of the rupee would make your litre of Petrol / Diesel worth Rs 200 per liter / Rs 150 per liter even with a Rs 5 Tln locked in subsidies.

Banks: Indian CDS trading at ‘default’

English: Kundapur Vaman Kamath (born December ...
Image via Wikipedia

ICICI Bank CDS suffered the most in the first few hours of India having approved CDS trading . Though only one insurer wrte CDS on ICICI Bank at a high but manageable 180 basis points a couple of weeks ago, the first few trades have pushed bank CDS’ to a high 471 points for ICICI Bank across the default watermark of 450 basis points. Even SBI trades at finite default probabilities of 361 basis points above that of  France in November trading when it rose from a spread of 200 bp to more than 350 bp.

That means cost of insuring $10 mln of ICICI debt is a $471,000. However in India’s case a CDS rate of below 200 bps would never be possible given its low ratings at BBB- for the sovereign and most of its banks can trade higher than the sovereign benchmark easily. even the soevreign should trade at nearer A rating levels in times of normal liquidity inthe Financial markets

Foreign Banks in India: Looking cheerful again

Citibank Handlowy i wieżowce Stalexportu
Image via Wikipedia

While Global results did temper Indian ambitions at HSBC and StanChart, tidbits confirmed from last month and anew show the magnetic pull of a 7% growth for India as the baseline factor.

1. HSBC is recruiting heavily in India(HT). With 50 branches and a retail operation that is almost profitable, HSBC plans to continue expanding its India footprint to a $1 bln profit by 2013. This 6 months saw it make $394 mln in Corp Advances and $451 mln overall in India, incl Investment Banking and Asset Management, no mean feat and Stuart Davies has a hard time recruiting enough, confusing watchers who probably just left the bank and more..

2. SBI’s results have been noted and HSBC Global has already put out a buy on the stock, raising its target to 2600(ET)

2b. Citibank is restarting its unsecured lending business in the country while HSBC continues to be careful in retail assets given large NPAs(BS) India’s Private Banks hope to restart the competition in the space with Axis Bank going after existing customers and HDFC Bank increasing the share of new customers to 25%

3. Emerging market funds see most outflow again for the third week and Paulson got out of more than 50% of his BofA and Citi holdings in June according to his 13F filings. All hedge funds filed their 13F and see idf we have the right analysis in quick time at advantages.us

4. Of the $3.2 bln leaving Emrg Market Funds $2.9 bln came from Asia ex Japan funds. Also in the first half of August FIIs have sold INR 53 bln in Indian equities Emrg Funds saw outflows of $14 bln  in total in 2011(DNA)

5. StanChart PE is investing a good $250 mln in MSM, 60% owners of Sony, SET MAX and SAB channels. StanChart PE is buyin g stakes of opvt investors including Jackie Shroff, Sudesh Iyer and Rakesh Aggarwal – and infuse fresh capital into the company. (TOI)StanChart profits in India fell 39 %in the first half

6. StanChart Economic Research  in general has committed to using the Dollar forty rule from the looks oof it committing rupee to an appreciation cycle till 2013(Kudos to me-self at the the Banking Intiiative). Equating Dollar to Forty rupees is uplifting, simpler and generally true for all investments spanning till 2014 and more

7. The New Private and Wealth head, Ananth Narayana at Standard Chartered confirmed his faith in the Indian Economy’s restrained performance being in a select band as repeated by many network commentators throughout the day today

8. He and other commentators also mentioned a pause in RBI September 16th policy, quite some noise on that. I would not mind another two rate increases. Been there India. And we will never outperform anything anyway, might as well not stay a lossmaking enterprise

9. ING Vysya raised rates a day after RBI announcement and HDFC Bank upped policy rates by 50 bps today in response to the RBI hike

10. SBI and ICICI Bank also upped rates by 50 basis points today, ICICI Bank’s base rate now a round 10%. While ICICI Bank improved profits year on year, SBI managed to increase margins, with NIMs improving to a never before 3.89% on a Rs 8 tln book

11. Indian Mid Cap Bank, Axis Bank is raising equity & debt from Foreign investors, with IFC chipping in a $100 mln

12. Citi India is ramping up its FICC and equities trading teams in India according to CEO Pankaj Vaish last week(IBN)

The key appointments include those of Rohit Dusad, who joins from JP Morgan as director of origination in credit markets trading; Aditya Bagree, who joins from Nomura as director of credit structuring; and Chintan Shah from Morgan Stanley, who joins as Vice-President for credit trading. In the past three years, Citi has helped raise close to USD 60 billion from capital markets for its Indian clients and advised on nearly USD 25 billion of India-related mergers and acquisitions, the American banking giant said.

13. Indian M&A scene has lit up Asia pacific, with Asia ex Japan reporting a renewed $270 bln in deals year to date (only M&A) out of which India has reported more than 10% at $26.9 bln

14. India’s foreign debt? India owes INR 4.17 tln ($105 bln) of which $66bln is interest. Look at this piece on delusions and economic fallacies

While Global results did temper Indian ambitions at HSBC and StanChart, tidbits confirmed from last month and anew show the magnetic pull of a 7% growth for India as the baseline factor.

 

Bank results Season: An excess provision for a working weekend SBI Q1 2012

Investors are fickle. After a $5 mln PAT performance to welcome the new Chairman Pratip Chaudhuri,

Please visit http://india.advantages.us and nod to the author..

SBI has actually grown to $395 mln quarter on quarter in Net Profits. Consolidated Net profits have even grown to more than $625 mln but the earnings report was pushed to the weekend and most reports and Friday trading did not seem to be expecting this much profit, concentrating on the year on year fall from INR 33 bln to INR25 bln this year this quarter. The 46% drop in focus is a misnomer as Pension Liabilities and Loan Loss provisions policy has already been updated in Q4 2011 and with INR7.5 bln in provisions just for pension liabilities to continue till December 2011, the rest is easily expressed by the Loan Loss provisions SBI never made in the earlier years before the accepting of the modified RBI policy in Q4

Of note however is the increase in bad loans, Gross NPAs rising to 3.52% for the bank a full point ahead of ICICI Bank which is also 33% in Assets with SBI holding a book of INR 7.9 tln in advances, a GROWTH OF INR 1.6 TLN or 70% of ICICI Bank’s Advances. A Bloomberg (Bloom’bg) list puts the public sector behemoth at #69 in the World’s biggest lenders and probably in the Top 10 in Corporate Loans gone bad. Since Calendar 2010 SBI has stepped up its rates 11 times, using its NIM cushion to proportionately reward short term deposits in retail and catch up with Money market yields. Industry wide 45 day deposits are 33% lower yielding at near 4% while the MSR in the inter bank market has moved to 9.25%

Industry expected banks to put up more fee income on the table to catch up with revenue losses but SBI stuck to the tried and tested with a 35% jump in revenues to INR390 bln Net Income for the Quarter nearly $10 bln for a single quarter from INR 300 bln in the year ago quarter. Toplines at most banks dropped or grew modestly. RBI has agreed publicly also that the high interest rate scenario engenders a disproportionately higher risk of bad loans but the interest rate hikes have moe to come as commodities have not settled down yet to being down the inflation to a stable rate

Despite the low Tier I core Capital at 7.6%, the bank has not been able to set up a proposal to encourage the GOI to invest upto its mandated 55% in a rights issue or the bank.. Meanwhile the bank is raising International Capital. SBI’s NIM shot up to 3.89% in Domestic Advances and 3.62% overall from a 3.33% Domestic and 3.16% overall in the preceding March quarter ( almost 106 bps above ICICI Bank) Interest Income on Advances in fact grew 36% but investors are likely to be slow to heed the same on Monday as markets continue their xit spiral, Portfolio investment exiting the country as opportunities run out in the widely acknowledged fairly priced/overvalued market in Asia The growth in Advances was a health 18.73% just above the Industry growth rate of 18% while the PLR increases of 185 bps year on year made up for the extraordinary rise. However QOQ incrreases interest Income also up 12% with Advances growing from March by 2.x% NII is up more than 20% sequentially

Staff xpenses remain the most part of Operating expense increases as a Wage revision is charged continually. The counter cyclical provisions esp for contingencies ( black swan events) are another Rs 550 crores or INR 5.5 bln. Advances to Large Corporates stand at INR 1.15 tln for the bank and the Retail book is INR 1.65 tln SME, Agri and International Advances are a Trillion each too. The Banks NII is up to INR 97 bln or $2,5 bln up from INR 81 bln in the March quarter nearly 25% QoQ from $2 bln

Icici Bank, Festival of South Asia, Toronto
Image by Ian Muttoo via Flickr

Happy Thursdays! Fuel Inflation ticks up

Map shows the coverage of Bharti Airtel (an In...
Image via Wikipedia

With the fuel component moving more than 3.75% to 166.7 from 160 odd in the previous week, the overall inflation ticks remained stubborn, even as Food dipped to 7.6% from 7.8% on high base effect, vegetables scrawning up 4% for the diesel costs, on which more will come. The FAO Food Price Index for India has moved up 39%  year on year to 234 globally Primary Articles moved 11.56% year on year with non food articles up 18% again. With LPG tat 14.6%, Fuel moved to 12.67% (incl power) The June reports come next week probably between 9.3-9.4% after a 9.06% in May

I did not really track that news about redesignation of India’s scrips based on limits of Foreign ownership in the MSCI Indices but it seems we are going to cut our limbs in the indices with residual interest in most bellwether scrips looking like low interest in % terms SBI and CICI will lose weights and Bharti Airtel will be among those whose weights will increase at least 5% Also overall we will be onlly 5.3% in the Emerging markets Index with Taiwan, Korea and China continuing at the top for very wierd reasons in 2 out of 3 cases above

the Mining Bill was a great relief for those following the infrastructure reorms story. 26% of Profits to farmers seems something everyone can be assume to be a stable solution going forward. And of course, sorry the weekend took its time coming, have a nice one.

Building expectations for a rate hike top-off

NEW DELHI/INDIA, 16NOV08 - Klaus Schwab, Execu...
Image via Wikipedia

With the noise for credit growth gladdening the hearts of the stock markets and that of offices in the RBI, Bankers have already announced that further rate hikes in India would likely be counter productive as they suggest for and on behalf of the RBI that the inflation cycle itself has already peaked. Though my economist brain refuses to accept the same(and my daughter is one too!), one can see that the knock to commodities from the IEA ‘s interjection worth 60 mln tonnes and the down tick in China’s manufacturing output has really dealt a death knell to the commodities inflation cycle.

However a retail inflation uptick is more than likely and the rates are not coming down for a long time, increasing the probability that this is merely a delay in further rate hikes of even a 100 bps further down the road. Also the Credit growth thru the NBFC and directly has been increasing RWA assets in Construction and Real Estate. While someone like ICICI Bank with 19.4% CAR may well go oall out for such RWA to soup up margins, the others may not be that lucky esp with SBI continuing 2-3 quarters of delayed provisioning from 2010 For May Real Estate has grown 24% directly and thru NBFCs may have added another half a trillion in credit and 20% more for RWA

SBI avers credit growth

The Israeli branch of the "State Bank of ...
Image via Wikipedia

The 20% target espoused by Managing Director, Krishna Kumar in Prateek Choudhary’s new regime augurs well for the Indian financial Services majors as a whole. Also new regulations on Foreign banks seem to have set them off again rather than bring a Welcome board to their workplace, means the Indian Duo and public monopoly of SBI will thrive in the coming credit tick.

Q2 onwards should be particulary good for credit growth and this pronouncement probably means aw welcome crowd necxt month as Q1 FY 2012 continues with the other mandated restructuring /apportioned NPL charges and the Minimum Stability fund provisions over the 56% limit not made by the bank earlier.

Banking NIMs ( S&P proffers its opinion not rating)

An HDFC Bank Branch in Hyderabad
Image via Wikipedia

Rating agencies globally and in the Barney Frank / Chris Dodd shadow seemed to have become more about running ahead of the curve and putting their own house in order coming out with last weeks warnings on the Big4 in banking and warning and degrading the peripherals and Euro /US Treasuries from Moody’s to Fitch. However judging from the timing, S&P is not in a hurry as in the case of the report on Indian Banking, it is diversifying into knowledge based analysis of its coverage of the Indian Banking super sector.

Key Facts according to the S&P Data

3.08 average NIMs ( presumably weighed down by the 70% PSB bank assets) in 2011 ans 2.92 at its peak in 2007. Also an average of 2.7% NPAs expected in FY2012.

A shadow of doubt on the Data

Before tackling the opinion for its repercussions if any on the banking superstructure, and the sectoral performance, the first thing one needs to point out is that public data on banking balance sheets and the restriction of the universe to active banks with more than INR 20000 crores in assets ( $5 bln ) one would find that the NIMs in India were more in line with those in the US in 2007 at 3.4-3.7%.

Also one can see that NPA definitions are likely to be different with S&P and their release to the media like all things rare and beautiful, are short on words and ignorant of their non standing in the arena. Even borokers have been circulating reports on banking NIMs for 3 weeks now , and someone like me could have reported what they are presenting on demand/per mandate, just from public dat.

Also, not to be a persevering niggle in a deserving foot, S&P are already minor fry outside indices and should not have bothered with a big bang sector when they invite being discredited, seeing as they have also not started being proactive about ratings in the region/ even Emerging Markets as a constituency

The take on the future

What S&P have attempted however, would be more creditable in terms of the effort and more analytical insights for your nd my business are possible only if the methodology is shared on the same. Till then, a margin compression of 50-60 bps for the sector can be easily negated by the global players with a 10% share of assets in the country who have trouble maintaining their margins across their smaller branch base; it can be negated by more than 100 bps compressions in SBI that would continue to maintain extra provisions of $250 mln each quarter; it would be negated on the positive side by those like HDFC Bank, YES and Kotak because of increases in their corporate credit offtake even as YES goes out of the way to ramp up deposit rates ( it is ready to take savings rate to 6% and more in line with bank policy) . S&P thus would be happy to take home the result from just ICICI Bank and none else. PSE banks would either follow SBI’s lead in increasing Money market deposit rates to bring equity and grow Deposits to add to the CDR balance, while traditional bank directors would coninue to balance the arguments with the historically low CD Ratios in the Indian Banking System. Even with a size of $2.5 tln in assets Credit deposit ratio in India has been as low as 30% in the 70s just moving to 60% now ( ET op ed of 09/06/2011)

However the NIM compression has likely been not compensated for credit growth as a growth market like India can still deliver 20% credit growth and take the NIM compression to negligible levels. As this is more rudimentary as a rebuttal, you ar einvited to post me for more suave copy.

Bank Results Season: SBI follows up on provisions

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After OP Bhatt left Pratip Chaudhuri has taken no time in utilising the change-over to mark a new baseline for the bank’s further performance measurement as it remains the star of the Indian Big league. With unending discussions on provisions the bank has raised provisions by more than $275 million or INR 1100 crores to INR 33 bln bringing profits to NEAR ZERO for the quarter. A Sales growth of 19.9% in NII shows that Credit growth tapering off will no longer be compensated by low rate marketing and on retail mortgages also all excess provision requirements have been adhered to to be on the policy makers side. The counter cyclical provision has also been created for India’s “TBTF” effort at INR 2320 crores. Operating profits for the quarter were higher at $1.5 bln or INR 6000 crs.

The bank has high Net NPAs dropping by a few bp to 1.63% Its rights issue has been deferred and a standalone provision exceeds $1 bln despite CAR being a precarious 11.9% and the government continues to look for a way out of commiting $3 bln required to maintain its stake in a rights offer and increase in the bank’s equity

meanwhile upstream energy companies have also been chosen to bear the rising OIL bill increasing their contribution to 39% (proposed)

The bank’s NII is INR 80.6 bln and is likely looking to sustain its margins in the high rate regime, the changeover to a less aggressive marketing and a more compliant spread under P Chaudhuri. The standalone NII is an increase of 20% over yoy Q4 2010

A lot of good results have thus been temporarily ignored as the SBI catch up sinks in. Operating expenses only grew 13.67% year on year. NIMs in fact improved more than 25% from 2.66% to 3.32% for FY 2011 year on year. The Tax paid out will get them write backs as the provisions for pensions are expensed in the subsequent quarters

ON the whole the SBI effort has been an improvement but the bank is now going to start with following the letter of the law to the hilt as the first 3 quarters had already given it good profits and a

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 new chairman is at the helm

The public bank conundrum – PNB’s size as example

SBI and Axis already preferred by PEs and Citi’s latest research, PNB has long been our candidate for a size led market reach explosion in Tier 2 and 3 and now 5 and 6 towns as per RBI diktat as well.

However hard put they may be by a high interest rate scenario and their redoubtable marketing/ interface strategums of leading with first and relatively highest scores in transmission, the ensuing hostilities in the market place have long been smoothed by rent and public avarice for these public sector banks.

Another 20 basis point decline in NIMs underscores PNB’s stated peaking of NIMs in the previous Dec 2010 results. Still the bank has $5.25 bln in Interest Income alomne putting Average Weighted Funds at $136 bln for the year ended March 2011

Also strangely Indian Bank has not folowed into the disaster zone pushed by most banks in the public sector space wih a growth of 22% in NII strangely as they already hold extraordinary NIMs and a pretty small asset base.

Bank Results Season (India Earnings Season) ICICI BANK RESULTS UPDATE

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ICICI BANK RESULTS UPDATE: ICICI Bank followed results from HDFC and YES at the top of the heap with growth in advances at 19% to Rs 2.24 lakh crores or or $50 billion, implying a balance sheet size of between $75 bln and $100 bln getting into place behind State Bank of India’s $350 bln balance sheet . The net Interest Margin is also healthy at 2.7% and a continued quarterly Fee based Income of $375 mln, making a  neat $1.5 bln for the full year in investment banking fees.

ICICI Bank’s Profits have come higher by 45% for the quarter year on year at $360 mln odd ( at our own flat rate of Rs 40 for the Dollar)

Q4 NII is Rs 25.2 bln and full year profits have gone up to Rs 51.5 bln and Rs 61 bln on a consolidated basis incl the impact of a lost car loan pool sold off on RBI directions Domestic credit grew by a large 35% for the year. PCR has stayed above even 75% to 76% and non perfroming loans are down to 0.94% releasing Rs 32.8 bln in profits

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