India Morning Report: Market takes a profit taker’s slice of pie at 6400

English: Juuso Pykälistö (FIN) in his Peugeot ...
English: Juuso Pykälistö (FIN) in his Peugeot 206 WRC during the 2003 Swedish Rally. Français : Juuso Pykälistö (Finlande) à bord de sa Peugeot 206 WRC au cours du Rallye de Suède édition 2003. Polski: Juuso Pykälistö (Finlandia) za kierownicą swojego Peugeota 206 WRC na trasie Rajdu Szwecji w 2003 roku. Português: Juuso Pykälistö (Finlândia) no seu Peugeot 206 WRC durante o Rali da Suécia de 2003. (Photo credit: Wikipedia)

The cake was of course due, it being the market anniversary at 6400, and the sharpness of the cut a reminder of the buyer knowing he was due a big hole when he exited. It is still a relatively recent add back to the Indian market equations, used to absorbing continuing profit taking without such a market wide reaction

Ofcourse, the hint was in the stock selection to the rally to 6400 (achieved) and 6500 (planned) with the markets still believing in Maruti and AllBank , parts of the rally not to move till further into the recovery. Needless to say the profit-taking candle worth a 100 points before 2 pm(250 sensex points), also wiped out any chance of a further downtick as 6200 presents a secular buying opportunity and 6220 is as good as 6180 would bring if there was another day of correction. However, the important thing to note was return of volumes even though it was in breakouts suspect to last the full weight of fundamentals testing strong fundamentally valid scrips. Tech Mahindra, M&M Financial services were up on buying and IDFC and bank candidate LIC Housing were indeed weaker instead of gaining strength yesterday,. Today might see the opposite as Powergrid continues up and to me even IDFC does not look like ready for a correction at 108, let alone 105 which should see buyers crawl back.

Cornered buyers of the rally looking to add Hero, Maruti and the PSU Banks like BOI an others may again cause a flutter once the markets reach 6350. If they decide to take up cudgels , investors and positional traders should move out of harm’s way gong to 6100 Puts, buying out their  6300 position in Puts. Also transaction costs should preclude move outs from 6500 and 6600 Calls especially as the longs have some more to look forward to , allowing them to expire such calls on the hope while buying more ATM calls if they wish to go long. The Rupee was the most hurt from the lack of new picks for the bull run, the breakdown at 64 finding bears waiting in the currency which immediately lost almost half a dollar to open at 62.40 on Friday. Fixed yields remaining at 8.8% instead of riding down to 8.5% probably signify a large shot interest even as the Taper passes by.

The unwinding in Bull Futures seem to be taking place a tick at a time so the new concentration has probably cottoned on to new interest in 6100 series as well as we can confirm after 2 pm. However if you have indeed exited (updated before 11 AM on Friday) Exits may also not reinvest in Defensives like Pharma and IT at current levels though those scrips are maintaining levels

The ICICI TAB campaign will indeed live up to its hype in 3-4 months as Banks come back to lean on retail deposits after cycling thru pressure updating on Salary and Corporate Savings accounts, as a loose ready reckoner for focus, with retail lending probably also going off a cliff in 2-3 months at the inflection in the Economy where Investment has to take over and the consumption uptick will slump hopefully without further rate hikes from the Central Bank Meanwhile with the PMI above 50 in December, Q3 looks like a good number for GDP ( having battled first seven months on negative IIP) and the IIP in January next week will still report for November which should fool no one .

The India Services MI follows on Monday likely to show an uptick as China battles another new slowdown in Export Orders which again is something India has skipped in this month’s report due Monday. We warned you on the Tata Motors trade, December sales underlining the company’s longer term woes and JLR eating up all the Cash flow for its design investments. Bullish trades will again focus on a new spine of infraco and telecom even as Voda pips the public Bharti in the battle for subscribers with a DoCoMo conversion Bharti’s 200 mln base could thus even rejuvenate flagging growth back to number 1 in a few and till then news of a recovery may have slowly trickled in to a mass of ‘hysteria’ buoyed by the coming bull earning reports

Given the continuing bottom up buying approach into the rally as it continues from 6150 levels at worst, this would be the widest base of new fundamental picks identified as winners and more of the traders’ favorites fall by the wayside, making Axis equal to ICICI Bank and HDFC Bank in the coming rallies for example and even Cadila and Glenmark correcting with the rest of the market till the new rush consolidates.

GAIL could be a great add to the defensives as well and should help if you are finally ready to rid yourself of the HCL Tech and All Bank, with me being a little uninformed on Idea and the new defensive volume breakouts TechM, M&M Financial(hopefully the information risk is not going to be staple for the market)

YES Bank and IDFC remain the continuing meme from the 2011 rallies while new fundamental picks could be bolstered by the gold bankers Muthoot and Manappuram mid-caps even as Gold does slide down in 2014 with Oil as a continuous shrinkage from the Fed bites the Gold and Oil trade. I’d still bet on LIC Hsg and Shriram

Hero’s December ‘comeback’ could be another harbinger for the goo pickup in rural trade as Bajaj Auto again underlines that Hero is the loser from the Honda sale with Honda having caught up to 300k in December at 60% of the Hero figure.

Zee could sill be a good pick in this term and Adani Ent and Adani Ports could be good shorts even as their fundamentals improve on a tiny, not just small base. Infy has tracked buyers after diping below 3500 but there isn not mor than 3-5% on the upside

India Morning Report: Another US FDA bird hit, US GDP caught with high inventories, Markets broadening base

World map showing GDP real growth rates for 20...
World map showing GDP real growth rates for 2010. CIA world factbook estimateshttps://www.cia.gov/library/publications/the-world-factbook/rankorder/2003rank.html as of Januay 2011. (Photo credit: Wikipedia)

 

Jubilant Life got another US FDA warning taking it closer to the brink though the numbers in the same year (two) may not suggest deepening of in its case a contract manufacturing problem and the plant is located in the USA

 

In the meantime a flat market keeps its promises to the India VIX after a big ‘corrective’ rally yesterday bringing the bull trend forth to another dead in the water lay up at 6250. The US GDP report yesterday was the second successive sub 2% score with inventories taking it to 2.4% in September(for June 2013)  with a 0.4% contribution and 3.6% in December estimates counting 1.8% from inventories in the September quarter. More on the US markets impact ahead of the all important Jobs report at advantages.us

 

Asia and US trends will be the next to break correlation with the India equities, that have corrected most other vulnerabilities with continuing inflows and a 100% vote on chances of a recovery from here. Rate hikes also are behind insular shield for this market as are even coalition credentials despite the markets correlating this BJP win with a bullish market’s highest scores. 6000 levels offer almost single digit index PE within the year and Energy and Metals are ready to support a bigger sustained rally momentum while Bank Nifty seems to be discriminating between the riht banks and the wrong banks without the markets showing strains of very few good stocks as FMCG and Pharma also continue to have backers and brownfield FDI regulations have been recently firmed up while Pfizer and Wyeth merger in India puts more domestic competition on the cards. The first good sized shorts on HCL have appeared even as the Rupee remains ranged at 61-62 levels unnerved by the non story of steps for a fiscal deficit bridge, which from Reagan’s days seems to be again left to the market performance to cover, all expenses being important and budget cuts or clampdowns signs of ceding to another government

 

CLSA remains on the losing side with a seat on the fence and to us a tell-tale indicator is preferring Hero over Bajaj in these market conditions, most such investors and commentators that still prefer the Hero stock preferring to see themselves as waiting it out

 

Powergrid remains open for a great investment opportunity for retail. Just Dial ‘s great success will definitely rejuvenate stories like Prestige, Jubilant (Dominos’ India being its second largest market globally beating the UK) , Talwalkars and even Prestige which remained in most buy lists during the period when Jubliant was still seen as over valued

 

The Power NBFCs remain another isle of prosperity in the compromise between various market factions (opinions, nothing sinister) and with Bank lending revival meaning better traction for NBFCs and banks with distribution power, the banking and financial services sector may offer investors willing to jump in without waiting for decisions like New Bank Licences or overtly waylaid by the habitual topping up of PSU coffers by the government admittedly on time despite H2 pressures on the Expenditure side as it revises its divestment targets upward. India’s GDP reports had good signs with Electricity and GAs picking up 8% in Q2

 

PFC, REC, ITC, Bharti, IDFC and LIC (Housing) remain thus the favorite weekly and positional trade picks.  As mentioned sometimes earlier, Traders on the networks (Network analysts) have cornered on trader specfic plays that seem to be any good company will do kind of trades powered by ‘old hands’ but we do not have expectations from trades in USL, TVS, ttk , Wipro, L&T or BHEL at these levels. We would also prefer SBI get derated before it damages market expectations in sweeping strokes with its abysmal performance bells ahead in the next two quarters or even more. Adani is back in play with all the Adani stocks including ADANIENT, Adani Power and other

 

JP associates is a little silent as has become customary after the first lead of any new trend rally since 2008 but infracos look like getting back in the game hopefully enough for leveraged promoters to exit at fair value else the same can truly damage the markets later. I am not sure if trades in Siemens and HDFC (not the bank) are ready to dial in but Tech Mahindra would be a conviction SELL and i would not touch KPIT and Persistent but they seem to be ready for a big swing up

 

Oil prices will follow Gold’s euphoric comeback into the upper sphere where it starts hurting the Indi story soon, but may again remain weak because of the overall commodities cycle as Europe leads the way down and the Chinese recovery may yet again be short-lived without export markets, which also caps Indian exports in Copper Silver and non-agri commodities.

 

Cipla and Lupin would be good trades on the long side.

 

Futures and Options continue to see volatility trades in straddles ( Buy Put and Call on the same strikes ) but the Nifty seems to be giving strangles ( not Vol sells traditionally but profitable in a flat market) an equal premium so those not in the inner ring or actively monitoring terminals should  wait for better levels in the Banknifty series before jumping or sell Puts at 6100-6200 levels on the Nifty

 

 

 

India Morning Report: The mechanics of T-2 trading, USFDA, GMP withdrawal

In the spirit of all that is wrong with overseas monitoring of drug manufacturers and the known woes of overseas drug manufacturers quality plans, Wednesday started with a bang for Wockhardt as the GMP certification was withdrawn by European agencies last week and USFDA followed up with an Import Alert. Apart from hurting an export rich sector of the much tarnished Indian Economy, it remains an isolated play in the day’s trading.

However despite ranging puts and increasing percentage of the next series participation in Options etc now appearing towards the end of the series, the waning decisiveness of the Nifty may continue into December as markets deign to rally intraday and close above 6100 as Monday forecasted an easy reach for the same. Slow and sluggish markets despite the strong rate recovery action in the bond markets in the illusion of changing from old benchmark to the new has kept shorts in business. Markets are on wait before pushing the Banknifty in the last two sessions back to 11k levels. The Banknifty levels are definitely encouraging for a rollover induced good beginnings to the historically over priced next series (December in this case)

However back to things that can be read as making sense and are a watermark for the next events in India’s robust Financial markets, seldom confused with the Fragile Five before the preponderence of retail investor targeting left only Institutional actors in play over emphasising index trades as the only safe flows.

The December series again will continue the experimentation with sectors trying to avoid known good plays in Energy and Metals as brokers and agents seem to have set a high benchmark of participation while trying a little of this and that and that will impact rollovers as Index options go out of play and passive funds remain shortlisted on a very high ground with ITC, Bharti, IDFC and Banks like ICICI Bank, HDFC Bank and YES alongwith Axis Bank and LIC Housing Fin.

Traders are also unlikely to let LIC Hsg off without it reaching below 200 levels so buying should be attempted only around 197 levels and if 196 breaks then 192-4 levels. REC, PFC and PTC have also made investor lists only though they execute perfect range trades between 188-221 for REC and corresponding levels in other scrips. Cipla and Sun Pharma remain good scrapbook material for traders too and trading will return to the banks if robust flows are to be had in the markets while FMCG, Pharma and Energy and Metals present strong sectoral opportunities.

Despite the new midcap entrant Just Dial and Jyothi Labs where prices are robust if not trading volumes, Midcaps remain a Notice to stay away from India with the inability of research to overcome stop and start news flow and sensitivity to just one factor in most individual midcaps that keeps money from following the opportunity

However the mechanics of the T-2 trade, remain to find the level at which to screech into the next series optimum levels or in more mature months with broader flows optimum entry levels which usually allow shorts a large window to stand in, but once they are caught playing with fire, there would be no stopping this market having just woken up to an Indian recovery around the corner. Investment flows looking to be the harbinger however is a cruel fallacy esp as it lets investors on to the Capex companies like L&T and BHEL which in line with Global conditions are nowhere near their recovery with flagging order books and delayed execution.

Remember Modi is only one of the shortlisted candidates in the POTY sweepstakes at Time Magazine (Person of the Year). Investment positions should continue to be advised strongly in IDFC, ITC and the selected Banks you trade. Also Tech MAhindra may be an easy exit from MSCI too after an easy entry this week, within the next 6 months and markets wshould note missing fundamentals in pushing volumes into any such specific counter as it brngs a laser focus on to the players, used to making a mover out of a Satyam or a Rolta. Most money flows have safety in following Corporate Governance reports and big contract losses do not help as the commodity marke flexibility does not spill over to equities or even Real estate any longer.

Lupin, Cadila and Glenmark continue to get quick drug approvals and also make the cut for bigger investments

Up ↑

%d bloggers like this: