India Morning Report: Did investors buy into the Rupee last week, and the Suntory deal

Friday’s  closing rushes on the Rupee trade could be just another chimera as the China miasma refuses to scare foreing investors from China and other shallow EMs renamed MINTs. China also reported an improved Services PMI implying the trade situation could improve for it and its partners including Aussie, USA and India. However, things overall continue to look bleak for global growth as dependent on legs of growth in China and Europe.

Europe has been importing more, however, esp as Germany probably focusees on its own consumption for a small break after a Target imposed halcyon end to 2013. Rates are likely unchanged in Central Bank announcements and Global liquidity reprieve trades, may be ephemeral at best as Yellen returns to post snow recovery prognostications to hopefully continue along the same taper gradient $10 Bln in each policy date.

However, not to be confused by the Global Economy’s internecine interactive brusqueness, the India trade remains a leader for the Global benign trend continuing in Equities and HY debt this year and is likely to turn in better performances on the bourses than any other.

The 4.7% GDP score was not so bad except that it included at its best form, not more than 6% contribution from Services. As expected, Agriculture did not continue an extended rebound from Q2 and thus contributed to an overall disappointment for policy watchers with Governor RGR still on the edge of another couple of rate hikes and CPI close to plateauing out at a high 8% itself

Radico Khaitan is one of the bigger winners as the Equity trade in India opens to new bull scenarios, we choosing to watch after every 100 points as traders fill up the gaps and bears might give up most of their extraordinary gains in the following 6 monthsas they take each plateau of waiting for more investors as an inordinate sign of weakness or overconfidence having nbrought the hcicken count home to roost

Volatility remains at an extended low and the PCR below 1, implies one should batten down the hatches as most price levels on your choice investments would carry very little risk on sold puts . SBI and Maruti also proffer extraordinary choice to traders that need financing and are not selling puts ans positional shorts in both continue to dig for lost Mayan Gold, making it at least a year or 1200 levels before they exit with profittaking trades.

JP Associates may be out of the index but is a great plus trade ( opnly post redenomination of the Nifty) while Adani Enterpricses catches supplementary caucus support from the Adani Port bull trade. GAIL may still not make it to mainstrem positional trades or transition into a defensive but we reccommend buying the stock with IDFC and YES, while ICICI Bank and HDFC Bank individually will carry the Banknifty, PSU shorts making the Index tradea patchy non performing long

Foreign buyers saw $2.2 Bln in gross trading on the NSE itself on Friday. The return of bank investors and trading rooms including StanChart and HSBC to the bull trade on the Rupee, counld confirm secular up trades in Asia even as China gets ready for a currency depreciation battle. However, first order of business would be to observe if equities can keep up with the smaller selling that remains part of the trade in the first half of the week as markets start the series at fresh new highs of 6277.

The Sun Pharma and Hindalco trades should catch fire by the middle of the week in that scenario as mainline picks remain good for the goo but new buyers may not get them at better levels . Bharti , ITC and Bajaj Auto continue to hold strength in the consumer investments story and Services PMI returnign tot he green likely for 2014 means aviation, trade and tourism could critically support the good guys from here. The LIC and ONGC/OIL buys for BHEL and IOC are confirmed but sectoral trades aer non existent on either side. Pharma’s big week returning to substitute IT is the one certainty and not an immediate bulltrade so more consolidation is likely this wek esp if the Pharma trade does not kick in. The inevitable short trade on Hero as it yields ground to a bad February sales data will only land blows till 1850 levels as the news f the recovery should kick in the sector after new excise reduction and recovery in buying from March

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: A tough hand dealt in the Financial Stability Report

Loan
Loan (Photo credit: LendingMemo)

The Interconnectedness of the Indian Banking system, might have become prioritised for a global caveat emptor learnt but the Indian system has much more downside from our desi PSU style profligacy in SME lending as haircuts on even 50% of that stressed portfolio would take the government out for a long walk in the woods. Delving a little more indepth into our favorite subject, most of the stressed portfolios in India Inc’s first stress tests were found to be in Infra, Mining and Cap goods sectors or our core Infrastructure series components and those would anyway need to be treated differently than Ordinary term loans . Such loans constitue 54% of the Stressed assets identified in the FSR.

However as the Financial Stability Report remarks, there is a fundamental risk to about 60% of the credit stock in the Banking system collapsing banks even as they have primarily not created a laconic lee side for the Ghat monsoons in interbank lending primarily one supposes thru traded CDLOs and real lending on larger accounts  than derivatives without a defined underlying as in the global case. The risk as highlighted in the FSR come from defaults in lending portfolios of Banks skewed to single corporates apparently among other details one has to study from the disregard of concentration risk by lenders with the 20% to single corporate and 25% i think for group key limits to be tightened and enforced duly.

India on the other hand has to grow the Securitisation pie  from here and where the Central Bank would be trying to control INR 1.7 Tln in repayments due till 2017-18 from the next fiscal onwards (FY15->2014-15) , India would indeed face an uphill task the markets would do well to ensure they have factored in. HDFC Bank too never got that approval for added FII investments even as Axis Bank application was cleared last week(to 62%).

Back to the mundane diary of the Indian markets for the day, Markets trade leaving the upside intact as shallow trades characterise the last trading session to 2014, much like last week’s record low of INR 740 Bln in the full day of equities and derivatives trading on the NSE and BSE and Cash volumes are likely to stay below INR 30 Bln (the last week low was INR 50 Bln) probably. US and European Markets are closed on New Years Day including Fixed income markets (at least in the USA) The other thing to highlight from the watchful Fiscal Stability Report is RBI’s worries on the Growth – Inflation dynamics not working out as WPI continues above 7%  which we led with sometime in November.

Net foreign inflows continue to sweeten the deal for India inc into 2014 with a 1.5% CAD (FSR score 1.7% and a FY14 achievement score target of under 3%) and the Fisc even if the virtual spending shutdown (as in the last 4 years) from January will soon find another yawning gap even if FY 2014 indeed perks up reasonably. Hopes of a stable post election scenario have almost been crossed out in case you did not notice in the New Year’s eve  celebrations and the infra pack, high on investment hopes and leadership from IDFC, and a deleveraging trio incl GMR Infra and JP Associates with the Relinfra people facing their first AAM Party audit

Apparently new year’s eve also sees an uptick in Tata Power and Reliance , which one doubts will last esp as Tata Motors is receiving its recognition only for its minute share of the TESCO-Trent JV like in fact here was such when Starbucks burst onto the subcontinent scene. The Starbucks venture is well-defined however, and the ware tastes well, drawing in big crowds in now 3(Three) cities in India

Redesigned logo used from 2011-present.
Redesigned logo used from 2011-present. (Photo credit: Wikipedia)

What probably did not get highlighted but was tried earlier by RBI, also needs to be monitored for results as Foreign Banks continue to skirt the Living Wills issues at Global HQ and continue to rethink their strategy with regard to entering India. Apparently Gross NPAs will start trickling down as we long suggested but Fitch and a few others are still hoping the PSU disaster will play out to bigger stakes and at a faster rate to make a return virtually impossible ( especially if larger Government injections are requird to keep them floating – KV Kamath). However, I would just depend on the investment recovery and the credit growth performance by Private Banks and probably PNB as Deposits finally outpace credit in the last bi monthly reports on the Banking sector in Calendar 2013 and the ICDR hopefully comes back to respectable levels without Banks having to constrain such new lending in India’s recovery phase

Also don’t take me to be a cynic but Torrent and Lupin’s timed leaks about Pharma’s assault on a generic version opportunity for Cymbalta may be better timed but is still probably a few months away from translating into Dollars and one fervently hope ( and cannot claim to otherwise yet concretise) that the generic provides an opportunity to us more than the cookie cutter $200-500 mln with or without first mover advantage.

India Morning Report: The gradual Taper encourages a rally, India indescribable yet?

English: Skyline of Mumbai from across Back Bay.
English: Skyline of Mumbai from across Back Bay. (Photo credit: Wikipedia)

India seems to be locking itself into a no man’s land as the nations punters join the global hordes celebrating the slow Taper on Bernanke’s going away announcements yesterday. ET Now in the meantime has continued with finding obscure (GRE: obfuscation..) commentators on key event dates. CNBC 18 wins again. The issue we are raising is at a different dimension(d-axis) than the assumed obstinacy to be different or that of even the fundamentals of a recovery being spelled differently this side of the Himalayas.

Meanwhile what is looking risky even as Asia applauds the thinking behind the taper, that India’s currency markets try the haywire trade still hoping for an aftermath in the Rupee as the Rupee opens to 62.30 levels. Equities will start the day at 6250 levels and while others posit a rannge of 6200-6350 , the day might yet spring a surprise or two before noon trades. Anyway equities are back above 6200 and GMR is back among large bidders even as they exit Istanbul. Also, NSEL promoters in J Shah and Financial Technologies have been duly censured and MCX would soon be owned buy another consortium of Indian Institutions. Taper could have been abslutely a non news in the Indian currency markets too and the open quotes are a sign that shallow trading costs a lot in adverse selection prmiums to the currency’s bid ask spread.

HDFC Bank’s application for  increasing FII limits to 49% pends with Axis Bank’s application for a relaxation in a similar ceiling and both will be leading bullish plays today.  Assuming that currency markets just wanted to explore the possibility of a significant negative impact of global liquidity being withdrawn , India’s preeminence as a investing destination in the new post crisis world stands. The $34 Bln in FCNR deposits aart, because the Infrastructure situation in the country is unlikely to improve from current vies of coalition governments even for the BJP, the risk remains that India investments will remain confined to a NDF market in currency , smalleer Indiab Bull boutiques with no presence otherwise and at best at 50% of the pace China specific and China sympathetic investments in South East Asia. Singapore and Korea too are not looking for more than a flagship investment or two to artner with India in ther growth run. However, none of that impacts the fundamentals of India Inc and the rally we have outlined since August is rel and given US and European Banks and institutions will increasingly be constrained in the coming months given other investment and Capital constraints, or the recalcitrant DIIs recognising any new levels, Real investors have to sustain this rally, neither retail nor from OECD institutions.

The Yen also got a boost from the Taper trade, while India and other trade partners have increased trade with China in the last few months over its traditional partners as both Industry growth charters in China including European imports and Resource exports from Australia and Brazil have been sidelined in the build up to lower trade surpluses and higher retail growth expanding not just Landrover but also our franchises from Cotton and Agri exports and a new market for Management and Consulting Services in China and South East Asia.

The Taper past ( it will last till September 2014) and India starting on a recovery path, markets have to recognise the Depth in India as speculators continue to keep coming back to old favorites that were not more than tangentially aligned to the new Global equations like the frog that sips back everytime he succeeds in taking a new step or two to get out of the well

11 AM Update: (I agree with SS on CNBC 18 again), One should just wait out the falling knives and start buying towards the close of day today after 1400 hrs instead of the rush to sell 6200 calls or especially Axis and ICICI Bank Calls which are well worth buying (ATM) 

Fixed Income markets contrary to expectations of the 8.75% yield on the Ten year bond losing again because of Fiscal impacts in the last quarter of the year, may in fact move back behind 8.5% lines as Spending cuts materialise to balance out the missing $$$ in Rvenues and Disinvestment charges ( which may still come out on top) However equity indices will depend on only inflows into the select basket of scrips including Bharti and ITC in FMCG and IDFC , ICICI Bank, HDFC Bank and YES Bank, or other midcap selections outside earlier.  The Power NBFC trading range for example is a very wonderful opportunity for those willing to wait and watch on India.

Indian Pharma seems to be retaining market interest as $200 mm molecules have more than a dozen opportunities every year in a 2012-2016 period even after the first few Big patents have come and gone as more than 30 $ 5 bln patents expire. Teva’s first few generic applications being rejected upholding current patents in the USA may also not stop them from coming out on the winning side in revenues on the vast US market opportunity, while  Indian domestic business is still less than $10 Bln and probably can grow 5-6 times from here.

Banknifty has a bottom at 11200 so today’s snap southward may not hold after 1400 hours in closing trades before the last session of the week tomorrow. Gold swipes big losses in today’s trade as the Global liquidity shrinkage impacts runaway trades in Precious metals led by Gold and one assumes even Crude and Real Estate markets at least outside the USA. However, even limited trading volumes for importers, ne does not expect India investors allowing anyone here a win with significant short trades in the metal. International prices of Gold may well breach the $1000 per pound mark. They are currently trading at $1200 post taper announcements.

 

Bank Policy Wednesday: India stands PAT on rates in December

Even as RBI shows concern about the retail inflation, it has probably factored in the welfare sustenance supply chain requirement that has necessitated a higher tick of Food inflation likely to last till 2015. Even though the jump in core inflation to 2.66% has reached worrying levels, the RGR regime has played it on the level, standing by the current Bank rate at 7.75% . As banks have already moved off the higher MSF lending or the last quarter, banks would anyway be unaffected by the lack of change but the markets can seriously take the impending rally’s mechanics from here .

The FOMC reports later in the India day, closer to midnight when they can , we agree, start with an early taper. However, The Fed meeting is likely to also be a sendoff for Ben Bernanke and so any such major policy announcements may be skipped for Janet Yellen to attend to in February, April or even June 2014 and as the Fed has managed so adroitly, the Taper would not mean tightening. Though the Dollar remains weak, the Taper is unlikely to still avoid the Dollar strengthening into a vise like grip on the US own Economy.

On India’s Policy announcement, the 7.5% mark would have been even better but as noticed concerns on Food and Primary inflation are real and may spill over to Core inflation unless kept in check. The RBI Governor notes that Vegetable prices that jumed 99% in the Friday WPI report may fall sharply.

Yesterday’s Review noted, in the overall scenario

In India, the pick-up in real GDP growth in Q2 of 2013-14, albeit modest, was driven largely by robust growth of agricultural activity, supported by an improvement in net exports. However, the weakness in industrial activity persisting into Q3, still lacklustre lead indicators of services and subdued domestic consumption demand suggest continuing headwinds to growth. Tightening government spending in Q4 to meet budget projections will add to these headwinds. In this context, the revival of stalled investment, especially in the projects cleared by the Cabinet Committee on Investment, will be critical.

Banks have garnered $34 Billion from FCNR Deposits and India’s FX reserves have jumped at a $5 Bln every week from $277 Bln odd at the end of November and now at $291 Bln. RBI continues to flag the negative output gap and even a slowdown in Services

Also factored into the December decision is the virtual shutdown in Spending by the Government from January as revenues remain not so robust, which would strain interbank liquidity (LV?CNBC18)

It is good that RBI has returned to not being overtly reactive to the inflationary economy and GDP in March could have a larger chunk of the good news premium Indian data has been lacking since the year began.

India Morning Report: TESCO gets in the door, Another rally on the brink and a few kinks in the Bank Armor

Whatever be the State of the Bank Champions, Banknifty has bottomed out at 11,200 effectively esp with HDFC Bank hollowing out the tube on a 2% cut in MSCI weight to just above 5%. Coming back to the fundamentals then, it’s a beautiful morning when Banks and lendees have to get into line for a little justice being served. Though ET very adroitly , slipped out of mentioning any of the technical line items by the NPA sub-Comm at RBI Headquarters, the NPA guidelines will go a long way towards getting the banks to wake up to a new, faster era where they cannot use just proximity to the promoter as cause for underwriting. Specific colour coding of the timeline to NPA forces a beautiful transparency onto the banking system.

Currently Banks are prone to getting CDR notices around the 90-day deadline when the loan assets sour into NPA and the current accounts with more than an INR 100 Lac overdraft exist in such plenty that they are not duly raised as line items fraught with default risk for the bank. RBI draft guidelines also propose red flagging the Promoters and Directors of such businesses that are prone to turn purple in 90 days from the first Default so they are not wont to hop from enterprise to enterprise or engage lending officers into such a scheme that encourages adverse selection.

Au Bon Pain logo.
Au Bon Pain logo. (Photo credit: Wikipedia)

ET actually would be one such enterprise forever on the brink that has to prove its Financials and its intentions and has limited its own borrowing capacity but that may not be interfering with editorial ethics and it is not unlikely however that the same will be one of the discussions in this CDR friendly patch of Indian Banking’s jump across Futures and Fortunes from the casual officiousness of the nineties to the brisk professionalism with Corporate , SME and Retail borrowers in the 21 st Century post a global crisis

A last rate hike is coming and the rest can be entered in the post policy announcement today, in a few minutes as markets last without any cash trading in the first hour and some.

The IOC divestment is good news even as Markets drive the stock down to possibly the lowest realisaations from the stake sale. The Trizivir approval is coming through for Lupin while  the same USFDA has akso approved Lupin and four others including Sun and DRL for Cymbalta($5-6 Bln per year) generics in the US domestic market (anti depressants ) Sun’s SPARC lost a generic application (LV/CNBC18)

Auchan
Auchan (Photo credit: Wikipedia)

IDFC and ICICI Bank as mentioned yesterday have righted the price trend amidships. If you are looking  at other rate sensiives suriving the coing high interest regime and leading thus this India recovery, apart from ITC whose core business showcases highly inelastic high demand for its products any consumer staple business especially in Foods is an equally good proxy as Food inflation will continue strongly thriu 2014 whether rate hike or not and GDP growth restrictions continue to bracket very few non performers except the NPA ridden PSU Banks. NPAs in the system rightly would correctly jump to 16% of the assets in the high rate scenario

And yeah, I belong to the minority that likes the sharp reaction from India to US trapping of Devyani Khobragade. Even PPP does not cover half the gap between Service costs in the US and in India

TESCO right timed its entry apparently in JV with Trent. The London based retailer is a welcome substitute for Walmart in a touchy state -Center source of friction in an iportant policy hot pocket. TESCO lands in Maharashtra and Karnataka with its first two Large Format stores ( though thyey are really bigger than the Auchan Hypermarket format) Other non stock market related news for retail came from the otherwise listed Spencers’ owners RP-Sanjiv Goenka who are taking Bangalore’s own Au Bon Pain national. They are the first Master Franchise looking to own all the coming India ‘stores’ of the Coffee/Sandwich chain (QSR). Apparently national footprint for Au bon Pain entails more 1800 sft investments whereas they have rationalised on size in home district of Bangalore except for the flagship restaurant on MG Road

The Bank Policy Date goes by without a change in rates as the RBI advises against an over reaction to the good news while they wait for data

India Morning Report: Markets catch the flu , ‘one sneeze games’ continue

Rstps2
Rstps2 (Photo credit: Wikipedia)

A single stroke move at  the start of the week followed by one barely hanging Tuesday and the markets are a volatile potpourri. Despite the pre ponderence of institutions, markets have come out of 2010’s downturn having decided to be a one shot vaccine for India’s Economy woes every morning, tanking a 100 nifty points today to 6250 levels on the every thought of having to continue at the new range without a hope of an immediate rise to the promised lands at 6500

As Dominic Barton reminds us this morning, India is not on the priority lists of investors at the moment, anda scary thought to encounter in one’s portfolio despite inflows of $5 Billion since September.

Vegetables in a market in Singapore's Little I...
Vegetables in a market in Singapore’s Little India district. (Photo credit: Wikipedia)

NTPC could well have started the way down an its bounceback probably is just an aberrant move. However give the broader markets would be at an index of 6250 before 11 AM, it is easier to plan for an index going up again tomorrow and traders would be wont to get their choice picks in banks with the Nifty at 11,750 on the Banknifty.

One hears of some news on Bharti but the stock is continuing a slow rally from its 300 lows to 340 levels probably unaffected (LV/18). Coal India also continues down after the new CERC guidelines.

Rumors of an apolitical volte face by the party in power with Nandan Nilekani following on Manmohan Singh’s tenure as PM and a Shashi Tharoor and few other young ministers, seem to be “TOI’ like incendiary flames on the post election fires.  IT recedes as a defensive in rare down trades and shorts on HCL are probably the best way to cash in.  Breakout innovtions apart, undoable extensions on the startup model like being attempted by Just Dial in enabling services are proven time and again to bleed out such fragile new businesses. Energy rice raionalisation continues with easy increases for LG distributors to match the new cost structures.

English: Railway network connectivity map of t...
English: Railway network connectivity map of the populated regions of India. The Indian Railways is the world’s fourth largest railway network spread over 64,000 kms and transport 30 million passengers a day. (Photo credit: Wikipedia)

Most investors would accumulate ICICI Bank and Axis on shorts made today and shorts would probably exit at current levels. YES Bank remains an investment bet but policy is around the corner on Thursday next.

The Fitch warning on fiscal indiscipline is unfounded while the US sartups ranking updates IITs as a Top 10 force in the coming Economic rankings of the world. The Dollar Rupee however looks to be on the run to 61.50 and not 62 levels since Monday’s single Candle move up.

11 AM update: Exports have receded back to under $25 Bln and the deficit is a heartening $9.23 Bln with imports under $34 Bln, Rupee catching the worm before the 2-m/5pm RBI update for the reference rate, OIL bill fully paid and UCO (The Iran Bank) coffers full, Sajid and Ruchir fighting hard , taking turns to stick to their recessionary discipline induced by Bombay duck speculators in their circles waiting for the taper to break the straw on the Camel’s back.

Invisibles were a humongous $116 Bln as Samiran points out, only $20 Bln – $40 Bln from foreign inflows on a full year basis and Defence Imports aded to the trade deficit just $15 Bln, leading to a CAD score likely under $45 Bln. Oil is confirmed as having a lower tick in the second half of the year too. Non Oil data has dropped below $21 Bln from above $22-23 Bln in the prior months, an unhealthy increase)

Hopefully Stanchart traders have changed their call in time in the Q3 parts and there is liquidity following the bullish rupee trade outside notoriously trend lagging wealth bank forecasts(Julius Baer/Chris Wood week ago) trying for a share of the NDF trading volumes

Equities are in the meantime marking probably the time in FY15 when Gold and Silver imports at $1 bln in November , come back to pre curb levels

India Morning Report: A little late and not better for it

Definition of Sub-Saharan Africa, according to...
Definition of Sub-Saharan Africa, according to the United Nations institutions (Photo credit: Wikipedia)

The Rupee reaction petered the rally at its 6200 floor well before the November series was out and so things do not look well for the downward pressure building in, on the news of the “cosmetic taper”(Marc Faber) deciding to take the markets for a ride across Asia. It is mostly as ET reported, because of the perceived lack of quality stocks and globally because Dollar bond yields need to rise regardless.

Yields at 9.12% do not really threaten the India story but signify a sell down which given India’s small base in FX, Currency and even commodity markets where a single import continues to equate the Indian equation to the underdeveloped Economies of Sub Saharan Africa if only in market perceptions. Moody’s and S&P mandate for India apart, this as we mentioned last week is just one or two players and hot money choosing a quicksilver trade and the Rupee as a target for such trade does not necessarily mean another big cut in India markets. Trade should pick up around 6100 levels only and the Rupee should not move to any risky levels above 64.

Gold investors will remain in surfeit in this stage in the Global markets and that need not be correlated as strongly with Growth as other crises jumps in buying.  Lack of Indian Investment demand for commodities an lack of demand at the pump in Oil in the US has still meant good overseas investment demand for Oil and Gold given the new lows

October data for Imports in this Fiscal at $280 Bln is down 4% and Trade deficit is still high at $90 Bln. The NRO/NRE Deposit swaps have apparently collected enough for a number around $20 Bln to balance this trade deficit as estimates for the CAD have been already brought down to $60 Bln. The October deficit is however just $8.8 Bln and Exports a healthy $27.7 Bln, the MOM increase in deficit probably immaterial.

The Sensex started the day 135 points down at open and is currently trading nearly flat from Friday’s big cut on Nifty and Sensex. Also, the Tata Motors trade on the positive, post results trned out to be a dud bag as we said . Shorts on the market can however pitch in, shorting the Index though IDFC, YES and ICICI Bank are quite done in independent scrips and Pharma being defensives are also on the secular buying list apart from being good India portfolio picks. IT sells will roll back in this leg as they benefit from the “India, Sell” tags

However, one still feels the /Indian yield curve and growth story were back without threat of inflation and the rate hike affected in October and to be repeated now in December to 8% on the Repo rate is the mindless exercise which is triggering this spiraling of yields and only strengthen the rating agency view keeping India stable near junk than giving its due and correcting the rating’ own regional imbalances and prejudicial biases, still favoring an untenable proposition like Brazil or Russia and a market failure like Turkey over a stable story like India.

Is India really fairly marked for a NBFC only kind of play with the coming high interest rate scenario?

 

India Morning Report: 6220, then, true bottom, market move up please.

Namma Metro
Namma Metro (Photo credit: ashwin kumar)

More impressive than Horn OK Please, but then two wheeler riders deserve beter(sic?!) or not, National Highways are safer for Trucks and Four Wheelers and so no, this headline is not about the mow down of two wheelers or by two /three wheelers in the urban meltdown. The 1000 odd rich families in the People’s Republic are treated with such disdain twice as vitriolic as attributed to the rowdies on Indian roads and they are definitely equally cognizant of the traffic rules as the four wheelers. As I write S&P seems to have marked India’s rating to stable.

More often than not, these urban snarls on the way to work have lately been marked by spots of new construction hanging because of bankrupt cities and states or other EPA/non EPA but documentation relation bottlenecks the construction crew is pretty used to. The BMRTC however, continues to break the mould in setting the benchmark for delayed and inept project handling, while the Bangalore Metro remains the only pristine mass transport crew in the world, after 15 months for nothing else but the 3.5 km distance it covers in totality to the CBD.

A “Dadi Balsara” inspiration that could work for the city and other Indian cities, is to break Bangalore into 3 different urban entities, not a loose conglomerate /federation of municipal divisions/organisations like in Delhi but cities with passports , if required, to travel in between. Singapore has managed very well with the urban transport problem and along with the Scandinavian cities that started it, London and Singapore remain great examples of how to create and grow a city infrastucture and plan urban Transport

But then, I am in the 9 to 5 mold like most Indian 18-40s and more or less wait for work to come to me because that is the smart thing to do.

English: COMPULSORY SOUND HORN sign
English: COMPULSORY SOUND HORN sign (Photo credit: Wikipedia)

Markets are dull, lifeless and the nose is pointing up as 6220 held and will declaim into the biggest rally yet as Earnings season successes have put the GDP growth residual to the crisis into a proper perspective, India becoming one of the most undervalued domains and like US equities, the depth of the market gets its own sponsors while Currency and Fixed Income woes almost strike a t will, the lull taking again a single seller to push a sharp toll on the incumbents, the currency lopping a wide ball to 63 and yields kissing 9% . The RE60 quadricycle will be good for the Indian soul and perhaps sponsors like Prince RJ will even push for it to displace the 800 (in the minds). Bajaj Auto, suffered a setback despite  adding export numbers in October as markets remain uneducated about its portfolio and expectations are at variance spurred by the single line item hope of the return of Hero in this Festive season. Three wheeler sales are strong again and M&M is making a comeback in the Global Auto sector citizenry where they have made a unique impact ( not from 60s history but here and now)

Those who watched it will be carrying it home as Rajeev Gowda handed the BJP and CNN IBN an apt rejoinder on the Poll /Survey action initiated by the CEC ahead of state and General elections. Results season is over not just in the USA but here as well. The remaining PSU banks and Dhanalakshmi Bank and Dena Bank report over the weekend. Next week sees more MNC Pharma results and Sun and Stride Arco labs  report big earnings quarters, Sun Pharma closing on the 14th. Both Cipla and Sun Pharma report on the 13th and Sun could wait for 14th morning before appearing on the networks as Stride Arcolabs reports. Tata Global (Starbucks) reports with the Reliance pack on Tuesday/Wednesday

RBI guidelines on Foreign banks entering thru the WOS structure plug in the statutory gaps  but cannot more than show their good faith and welcoming arms for Foreign banks who are already staring at cutting themselves out of more regulatory capital holes cropping up to bear the expense of global expansion hitherto unfathomable in an industry used to being welcomed on the strength of an opaque global HQ without farming Capital to such “territories” Even as the regulations are required and Indian Bank sector will expand and mature with a growing debt franchise , India has already been bracketed into an “exotic” category with the likes of Brazil for its reliance on traditional lending products in the credit basket and the split from shadow banking ties or one still believes even the lack of depth in wholesale funding. Also none see India as a pioneer for having always kept the inter bank market to a minimum as global banks fight the war with regulators for drying up the inter bank market. Credit continues to contract in Europe at near double digit levels, the single most factor affecting banks even as they stabilise the new era of growth and the best in class retain double-digit RoEs.

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