India Morning Report: A sudden change of heart(afternoon) as Banknifty breach closes up

English: Logo of Bharti
English: Logo of Bharti (Photo credit: Wikipedia)

It wasn’t a wren and martin breach however as the morning saw weak NPA stories slitting from private banks in the Banknifty components, but as that grouped SBI and performing PSBs such as PNB with the weak quality ethic portfolios the breach rather filled up and the traders move on the Nifty south frrom 5950 itself has been closed by the afternoon before morning FTSE and European trades took business elsewhere in the global 24 hour timeline for today’s markets.

Trade data showed exports up to $27 Bln, a nice growth dividend , though a one off in the year  also leads to shoring of sentiment as the weak India story tries to grip old India pockets in Financial centers like London, themselves struggling to make a mark in what started a s  a benign year of recovery.

EMs are back in portfolios and Services Indices n India and US are under pressure from spending cuts with Euro still hot in afternoon trades as the October FOMC passes by tonight with a mandate for Yellen. SBI got a shot in the arm after the duress long exected in the stock, as the SBI GM in place and a likely future Chairperson, Arundati Bhattacharya explained the process of shoring up quality  in detail and IT investors and other traditional India trades tried to ngulf the bank’s weak asset quality in a single south trade on all government owned banks

One still wonders if changing norms to release Government Bills and long dated bonds from controls will work for India wih such strong anti-measures from the  “India Bull” community

Also on the credits is the way Bharti managed the press bytes and the non devolvement of the story around a crushed Walmart in the run up of a Modi inspired changeover at India’s helm in the 2014 General Elections

India’s growth charts currently continue at a flat minimum under 4% and the same was confirmed by IMF in yesterday’s report leading to the morning clouds as Rupee slipped back to 62.5 levels. Since then the Deposit story is back with NRI swas and more and the Rupee is back at 61.7 levels before infy results later this week

India’s exports at $26.8 Bln were nearly $2 Bln ahead of the staid $5 Bln average rate we hit early in 2012-13 wih the plunging  bottom of the growth story and were fist signs of growth in exports let alon import substitution after the currency went thru serial pangs of double digit depreciation from 47 levels

Bharti will easily survive the retail FDI wind-down while it remainsan important ndia focus brand to own as does ITC. Yes Bank and HDFC Bank also remain great picks with a lot f investing capacity for foreigners and IDFC is catching fire again to fill any gas from “lack of confidence” in India’s branded consumption stories like Bharti, ITC or Bajaj Auto

 

India Morning Report: IDFC on way to become a financial conglomerate

IDFC Project Equity
IDFC Project Equity (Photo credit: Wikipedia)

 

If its the currency dragging equity confidence down despite the healthy capacity in the market, wel land good. If the hit is however on the asset quality situation of the banks, it would be a quicker reversal tomorrow as ICICI Bank publicises its bigger Power plant accounts (Dabhol-II) Walmart leaving India, is probably most of the impact.

IDFC already is, one of the most far reaching shadow banking institutions especially since it caught one of those fund houses in 2005 and has been actively floating new funds and operating advances thru its infra NBFC as well as PE funds and others.

 

However, the treatment of NOFHC can be proprietary and thus the only risk to their getting a Banking License as it gets into an endless loop of what can be done without the regulator cutting off the air supply. Their objectives and disparate infra rules have to be kept independent and if the company is looking for flexibility there or some sort of understanding instead as Indian houses tend to treat discussions with the regulator, it may not turn out rosy for their ambitions of a license. Its an independent NOFHC subsidiary of the other non financial services business and Financial services business has to be outside the purview of the NOFHC so it will probably be under the independent NOFHC in the most pliable case but the funding requirements at 51% f the NOFHC equity as it owns probably more than the INR 200 crores of the bank is the deciding parameter of the bank.Tthe NOFHC allows promoters with public holdings to create a tightly controlled subsidiary with RBI denominated investors including 51% from such promoters, but the independent banking compliant structure has far other important functions than just that and may not be dispensed with.

 

There is more than enough of that, with the Dept of Post also turning out to be almost operationally untenable to do the deed and get a banking license within the parameters.

 

IDFC however is one of the best candidates already operating independent projects without mixing up and unnecessarily skewing up exposures. I would proffer LIC Housing too, esp if we actually want enterprises that have the understanding to withstand and grow in the faster growing non metropolitan India. As Foreign Banks have shown earlier, regulatory standoffs are costly for the banking model, and the sooner we get off that hobby horse the better.

 

The index is faltering again and the reason is really not easy to understand esp as the Put Call Ratio is just over 1 as of Friday closing, and really not that weak that everything be unwound. Markets are anyway unlikely to go below 5800 levels for more than a nary second, and the Rupee being weaker is a pretty range bound move. The MCX saga at the commodity exchange with its e series has still to unfold perhaps

 

Infra projects being cleared faster, its still happening as we speak and is unlikely to create any CAD resecting Dollars till the May ’14 General Elections

 

 

English: Kedarnath range behind the Kedarnath ...
English: Kedarnath range behind the Kedarnath temple early morning. (Photo credit: Wikipedia)

 

 

 

India Morning Report: The Capital Goods chimera fools no one

Markets settled in to a subdued Friday even as the now almost regular double feature jump in Capital Goods sub indices in the IIP caused IIP to flare up to a 2.6% closelt following June’s 1.8% growth. Though the jump in Core industries reported last week too signifes a likely higher mark for GDP than the June bottom, the jump in IIP itself needs to be ignored with care as the Capital Goods number in the positive is now habitually likely followed by an equally sharpp negative in the August series when it is reported next month or at least before the October festivities mask production growth, if any For those interested, such volatile jumps are a regular in the Durables orders data series in the US and the component of Aircraft orders for example is thus repored separately rather diligently than a black box number up 5% once and -5% the next month almost without reason

Industry investments are not back and thus markets have given in to high PCRs (Put Call Ratios) retreating to 5800 levels in the Friday Morning trade. .Another consumption major McDonalds and on assumes the continuing saga of Walmart signify strained battle lines between Global majors and those who know India at the helm, all in the name of corruption and many other equally obvious slogans India panders to in the global arena ( Without being best at any) Connaught Plaza, seemingly owns not many restaurants and McDonalds obviously as always wants to be unfair while buying out reality partners an moving to another hase of growth,. The valuation battle will be difficult to disengage for any private company but a $100 mln ballpark looks more  feasible than the company sponsored $10 or $300 mln valuations and it is going to be a long battle. Walmart too is apparently not driven by valuation in its current revisit of the decision to Invest in India, at stake the Best Price business with $500 mln turnover and a prospective equity buy in Easy Day which will allow Walmart to become a household name in India

The Rupee is not getting any sponsors this week beyond the 64 mark, but with indices nearer 5750 or 5800 n Monday, it might be another bullish week of te Indian Rupee making up to the benchmark EM currency moves which are more than 10% smaller than India’s 25% move since May 21 in the absence of any buying or sustained investment into the Indian Economy

India’s Mid Cap IT like KIT and MindTree could probably use his time to gainfully grow in size but Enterprise space growth is definitely overdone for them and bigwig Indian outsourcing. IBM is exiting India CRM (Voice) centres too but in a misguided bid to grow portfolio profitability without a synergistic picture as is the Elephant’s wont.

Power NBFCs started the week well an may well help the banks lead Indian equities into the 6300+ zone as the dismal days are following a very standard script and business could be booming before you know it without improving the Savings rate at an all time low of 30% currently

BTW, the PMO mentioned most PSEs (94%) have hit the Capex targets for the June quarter and Government expenditure, well targeted could keep us generating that sub 4% peg of growth on which Private sector investment may build. It’s a long weekend though and Oil could also be at a much lower level on Monday

 

Pre Closing Trading Strategies September 24-28, 2012 – Wednesday 3 Pm

 

Markets have decided to inch upwards is a clear prognosis and as of now even the new resurgent Dollar’s trade on the rupee to 53.52 seems barely able to survive new shorts and likely fresh shorts in Rupee are warranted now or after 1 more 1.5 more upticks before 54 levels depending on the resurgence of the post expiry buying that ensures the trade remains up than a month long correction to enable fresh institutional buying at local MFs and LICs

However banks seem to be quite decisive having dived 60 points to 11350 on the Banknifty and fresh buying in HDFCBANK and IcICIBANK is out by a week so more uptick will be in Axisbank led revivl stories of Canara Syndicate and the ilk like Union Bank and CBI which unfortunately is not really looking likely even now leaving Axis Bank a lone horse again to repair the points damage and ride in the first week to come Ye s at 375 and ICICI bank at 1065 may not see fresh buying now but like ITC corrections are unlikely to be deep even if you accumulate in the same levels before the upswing resumes.

 

As mentioned earlier however the rest of 2012 is unlikely to see hard data backing a recovery and is only more policy speak peppered with off market and on market deals with Etihad, USL, Ikea and Walmart among others.

 

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