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 Morning Report: Markets digest a rate hike and the new Maruti equation

India Auto ExpoYou heard it in 2009, Suzuki may go it alone:

The 7th Maruti Suzuki plant in Gujarat adding capacities to its 1.75 mln cars from Gurgaon and Manesar which has already seen union troubles in the North, will actually belong to Suzuki in a new Wholly owned subsidiary and as royalty terms have not changed the new production available from Gujarat in 2015 will improve MSIL’s margins. MSIL already is the dominant component of Suzuki’s global sales. The markets are however punishing Maruti for the loss of faith , the automaker springing the surprise from its ranks mid afternoon yesterday. Today’s morning quotes will be 20% lower and likely fall a further 5% tomorrow though 1200 is improbable. A Suzuki coming into India alone means it may be planning exiting its Maruti investment except for its commitments to successive Indian governments over the years. Maruti trade is being closed within this series as speculators likely get ready for a short trade in the new series after having been farmed in the construction sector. The Gujarat plant will supply only to Maruti production

Biocon is back in Volume breakouts from the switchout in cash

Rate Hike

Markets will likely digest the rate hike given good liquidity, as mentioned in Bank Policy Tuesday yesterday however the 8.5% and lower yields will now wait till end 2014 and at least one quarter of good growth with strong positive investments. The higher rate environment may not translate into higher retail rates and credit expansion may also not be threatened, but was it required? Yields did move separately from Currency markets before policy and thus Policy rate hikes squeezed the exchange rate back to 62.50 levels

Airtel again, Idea bhi

Airtel is definitely back in the mix, changes at the top likely positive even for Manoj Kohli who finally moves to the new businesses invested from the Telecom win for the Mittals over the years. Idea’s ARPU gains despite revenue per minute dying means both Idea and RCOM are also likely to see long trades and Bharti remains the back bone of he market as IT and Pharma break down. Tomorrow would probably be ITC again and the day after that Bharti

Bharti PAT is up 20% on quarter and ARPUs to 195 frm 192 spectrum auctions stamp their market print on Feb 03 and Feb04(post announcements). Africa ARPUs are up 10c to $5.80 or INR 360.

Sell 6100 Puts

If you are finally tired of shorting the market and Ashwini baiting from your camp you may join in too but ahead of expiry, 6100 uts are likely to look tempting and markets will close 6100 with such a huge magnitude of newsflow  getting hope trades shucked off by early market moves last week and shorts on DLF , Unitech and HDIL would likely be the biggest winners of the series. The days trading would likely see a similar mood sneaking into 6200 uts , which however is a function of the other market forces discussed with a 40 point increase in NIFTY being par and leaves tthe markets at 6160 and markets may not want to control further BEAR GREED till todays close whence the 6200 trade still rewards that additional risk

Banks are a big buy

10,600 seems to have done it for the Banknifty and investors are likely to stay glued to ICICI and HDFC Bank on the rise. Axis Bank fell 3% yesterday at the fag end of the correction ( on markets breakdown post Maruti announcements) ICICI Bank reports with India Starbucks (Tata Global) . Starbucks ma also prefer a new 100% investment in India after 25 stores have opened with Tatas.

After ICICI Bank’s clean sweep today, tomorrow will see earnings from Hero sandwiched by Bank of India and SBT and after the Adani and IDFC reports on Friday we close out earnings season with a fairly robust performance, near 20% profit growth still standard fare for the biggies.

Other Results

REC, M&M and Cox & Kings report on the 14th of Feb, ILFS Transpo, Page (and Lovable?) and Finolex Cable on 12th and Bombay Dyeing on the 13th. Lovable is doing well in the trade prioritiising for the New FMCG adds in 2010 IPOs

India Morning Report: Markets reach the 6300 mark, will it hold as the new bottom?

Knowledge market BW
Knowledge market BW (Photo credit: Wikipedia)

Eventually, 6300 may also hold as the bottom of the range and so armed with this knowledge market rangers on the Bull side may ordain the mark sooner this week and next but for now markets will trade it bullishly on Monday.  Pre Open saw a shard of pricing out in Bank of India again, sinking to a bottomless pit quote 30% down, bu tas of now the PSU banks remain the biggest risk on the downside ( esp if they catch our fancy as the markets go up, they would underline the lack of options in such a wide market with 3000 active quotes on NSE alone.

Deposits were finally ahead of loans in the report of week ended December 13, growing at 17% (INR 75 Tln) with Bank lending at 15%(INR 57 Tln). Non Food Credit stock is INR 56 Tln, making up most of the growth stock in lending (INR 320 bln out of INR 360 Bln)

As we mentioned at the cusp of the rally, infracos and IT remain sectors in which stocks have to be decided for the winners and losers , both right now moving in single file, IT moving together with a losing rupee and infra moving up together on good hope for policy day, like this week. However, IDFC for example has a much more bullish trade accumulation appealing to at least three class of investors including the passive institutionals and the active hedge traders in small infra hopes.

Traders continue to hope for the non obvious trades in each of their not so blue chip large trades which technically may no longer belong to the Midcap story either including Cairns, GMDC/NMDC, Hexaware/HCL Tech. Barclays did up the growth forecast of India Inc ahead of results season, but more on the lines of MSA’s war cry for an automatic upgrade to 6-7% growth for India Inc with positive Investment flows, because the deed is done, which sadly has still to unfold surprises with statistics belying the temporariness of this recovery without the requisite investment flows except the Net Exports as we wipe out the Current Deficit and markets cornered the shorts out again in December.

I could buy a few puts on HCL Tech just to wind them up and carry home some profits on the announcements as results start pouring in. That would be really the closest to a sure winner this quarter as the Ruee digs its heels in at 61-62 levels. Infy shorts will not bait the stock till 3600 probably and if you are bullish, the up move is unlikely at thse levels despite the oevrall atmosphere of continuing good news in the sector, and that will not extend the winning rallies of Mid Caps and Product companies like KPIT, Hexaware and Persistent either.

Glenmark and GAIL seem good additions for stock watching in 2014 to our already brilliant portfolio led by IDFC and YES Bank. Mining and Metals as also L&T are likely bad trades to start. Pharma remains the best sector for bulls in both Domestic and Exports stories despite the NPPA pricing policy implementation, a higher double digit CAGR growth assured in the domestic market, I’d say. Banks despite giving up the gains early on Monday, look like making up for the sobriety shown this quarter in 2014 too but stock selection has becom critically differentiating strategy between the sub par equals as well as the Private sector leaderboard.

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.

 

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: What a 7000 index(Nifty) means for India Inc!

Gold Bar and Investment Jewelry
Gold Bar and Investment Jewelry (Photo credit: epSos.de)

As Neelkanth Misra mentions very credibly on TV18 and CNN IBN, coalitions v. stable governments were never a questions for India Inc and as we have avered since 2007 on these forums, India has been a story run despite politicos in power , as much by the burueaucratic mandate of the time as the populist opinion of what the market economy will and can do.

The latter of course is more uneasy on the shoulders of a government but as a democracy we are habituated to arguing out our investment and business decisions deciding the underlying philosophy for example, the extent of WTO requirements or the Tax regime in the current milieu which are longstanding items awaiting a market verdict even if a fractured government or a single largest party wants to decide. That also means the young ones are communal / secular agnostic probably.

A schematic map of the Indian Railway network
A schematic map of the Indian Railway network (Photo credit: Wikipedia)

The 6800 mark if it comes in this rally may be just a market verdict and a bubble rally to boot without investment spending kicking in, but the same levels would be underpricing Indian markets in 12 months when investments are underway a s corporate earnings have shown. I think that weight is enough for one day’s business. To Neelkanths(Credit Suisse)  credit too, if Powergrid indeed commissions in TN and Andhra, the Indian GDP based on contribution from just that Southern grid will shoot for the skies

Meanwhile another journo got the better of my market specialist verdict,catching that the more leveraged the trade, the better its performance. By the end of the first flush of 5% increases in banks and all other stocks, one was able to catch HDIL and realty not doing well as also Stride Arcolabs hitting the lower circuits, (down 10% at 10 am)

Rupee finally appreciates this morning to 61.50 targets and Gold investors have been satisfied by the BJP’s coming , growing the metal to 32k levels in these few trades.

Delhi’s 67% turnout is another India investment indicator that has hit the scenes and well, in defence of the incumbent which delivered at the State level, Delhi-ites might still see a AAP – Cong coalition post counts as BJP  is a pariah even for the Anti corruption front that has probably garnered the 20% of the vote that educated Indians had stayed in vacillation , having to vote for politicians ( not just a half joke, probably i would go all the way on this one)

The Nifty rally is strong, Banknifty leading again, and as Banknifty is a well traded index ( or one mis spell may say trading index) it will likely return after a big rise to same 11,000-11500 leves for a new rush of bullish trades as this rally lasts the mile. PNB leads with ICICI Bank on the Private sector side and bulls seem to be cornered in YES Bank for the same election reasons, otherwise I do not see any capped upside in YES Bank either. Axis, ICICI Bank and PNB are all good for a 10% jump from today’s 9.20  levels itself(or 9 am when 6400 was tagged on the index in the pre open)  but if other PSU cranks, muddy the Banknifty at higher levels instead with a sharp irrational step up, they might see lower targets around 1150 for ICICI and still atleast 650 for PNB

Even a vote or BJP might be just a part of India’s reform behemoth, having carried India thru fiscal and industrial reforms more in hope than in action in the first flush of growth from 1998-2007. India is very different from other EMs and even China with an autocratic government despite attempts by even passive investors to blur the differences. Witness the Apple China Mobile deal (rumored) and the comparitive with an Airtel – Apple deal in terms of what volumes mean for Apple.

Investment cycle will also remain weak under the new government for some time but as we mentioned any 7000 level on the Nifty 50 will be a value play within 12 -18 months of these levels signed into this rally by the markets L&T is a slow elephant but the Power sector would showcase a great score, REC may have topped off  and Powergrid ready to carry the rush with PFC, PTC and others and as the requirement of the sector more Financing power and utilitiy pricing power (12% /16% CERC pacts) or mega power signings

On the global front the Euro has started moving up in vain obstinacy as contraction and deflation strikes in tandem in the Euro 17 and the overall 27 nations that encompass the European effort, double signing into the deflation and the Yuan has taken over from Euro in all important trade finance contracts, making the competition between HSBC(volumes), Deutsche Bank(!dealmaking!) and StanChart(price) that make up the Asia carveout

Professional Disclaimers and Opinion/Fact checks: We agree with only 8 of the Goldman Sachs dozen ond one o of five featured Credit Suisse picks in this rally as published in November and December 2013(today on tv18 for Credit Suisse references). 

The Rashtrapati Bhawan which is the residence ...
The Rashtrapati Bhawan which is the residence of the President Of India. (Photo credit: Wikipedia)

 

India Morning Report: A GDP score of 4.8%, financial services up, tourism fading?, The Jet Etihad minority opinion(onion?)

Monsoon Clouds
Monsoon Clouds (Photo credit: Intrepid wanderer)

The GDP report was an easy one with Industrial production no longer  a riddle but  a low 2% still below potential as manufacturing remains muted. Services sector GDP could have been above 7% led by the revival in Banking and Financial Services and hence lending, however it was not just Hospitality sector, which is going thru a low in line with a Global slowdown, but also in Community and Personal & Social services that the GDP for the sector and thence the overall report was muted. Mining and Agriculture have recovered though expectations were probably higher in market watchers. Gold price for example have not really fallen from $1240 levels, supporting their way of a Hindu rate of growth/recovery like old days and furrowing my eyebrows while assessing if the recovery has indeed begun can actually remain muted after the 6 months markets are willing to wait

While utilities also jumped back , both Financial services and Utilities (Elect. & Gas) coming back to near double digit scores for Q2 FY14, the Community services cut could point to further pressure from Government spending coming down. The HSBC PMI for November has returned to a positive 51 ( 10.30 AM update)

Budgets for NREGA and other Welfare schemes have been cut with a reduction of INR 100 Bln in the rural development ministry and INR 50 Bln in the Ministry for  Human Capital but the current Fiscal Deficit target of INR 5.45 Trillion (Rupees Lakh Crores) has already been spent to 84% of the target in the Fiscal period from April to October, leaving the last four months exceptionally painful, even as public spending is up to nearly 30% more than the Planning Commission contributions in the budget or INR 600 Bln with the October deficit itself at INR 300 Bln.

While India’s Capex companies look outside India for elusive new orders, (L&T/BHEL) welfare spending will now taper off if deficit is to be reined in even as Electoral spending profligate and wilful, takes over for political equations that remain murky and public spats making the BJP/JD/Congress campaign closest to spaghetti /cesspools more recently associated with Banana republics/Southern partners in Euro(pe)

 However, with other reasons seen as impacting Banking profits the well timed thrust for Banking stocks is weaker this morning and the 6350 target itself may remain an elusive slow mountain but shorts also have time to mull and wait. A word of caution that might have filtered through earlier from us, the sector substitutes chosen , except for Crompton Greaves /Greaves Cotton ( just maybe!) remain almost as wild an imagination as 20 years ago when FII franchises and brokerages had  a hard time keeping the India story transparent or represented in Listed stocks

Markets might consider moving back after the news is traded to 6250 levels (GDP at 4.8%) further expectations of an even better Agri GDP cannot be relied upon but the India investment story rekindled in the post June rally is safe and thriving though on lower volumes till January and may not even engender a big jump back in the Rupee from 62 levels, waiting for the Q3 / December earnings season after Bonuses have been announced /distributed in MNC India

A jump trade in Private Banks incl ICICI Bank and YES Bank is probable in the afternoon, the other option being stronger infracos and we sill do not think Dabur and Marico can replace ITC and Bharti though HUL is on the other side of the trend as an almost defensive again with core inflation in control from the GDP arguments above and pricing power in retail extending to domestic pharma as well before the quintessential control from Government pushes its way in. Wonderfully, the Diesel decontrol is moving on nicely without a break as Diesel prices close up to 60 levels and the Oil ill discussions for this fiscal are probably over leaving the Energy companies in cahoots with the Metals on the strongly bullish stocks led by Tata Steel. Tata Motors and Maruti attempts to breakthrough last week, will be the genesis of the immediate correction(in consonance with Mitesh Thakkar , ETNOW)

The Jaswant Thada mausoleum in Jodhpur, Rajast...
The Jaswant Thada mausoleum in Jodhpur, Rajasthan, India in the early morning. (Photo credit: Wikipedia)

Idea may also benefit from the weaker spectrum prices as the government strengthens its revenue shortfalls with the Powergrid mega FPO going online tomorrow.

USD remains weaker, making bears at UBS and CLSA a worried lot ( if they have actually ut any money into biting the Rupee on their pessimistic prognostications) and Crude at its lowest has fully enjoyed the Rupee weakness, turning to 6000 at similar levels when it battled 4500 a quarter ago. So who is going to the first dozen to really move into rural, assuming the first three slots are HDFC Banks and the Automobile Finance companies that started in 2009? Yields may dip below 8.5% to the final top of this rally before stabilising around Governor’s further refinment of the maintenance policy for FY14 and FY15 as recovery is awaited

CCI okays Jet Etihad Deal

A lovely informed review of the Jet Etihad deal, on our favorite The Firm (CNBC) and other forums shows the combinations Commish, Anurag Goyal left in the lurch as the CCI went to great lengths to ignore trouble brewing from the deal. After the deal, Jet keeps 50% of share in flights from Delhi to Abu Dhabi and 55% from Mumbai while its dropping of Dubai means big trouble in the sector flying from Kochi/Trivandrum to Dubai where it had a 69% share. The Majority opinion assumes a 2 hour reach criteria to assume a single market across Abu Dhabi , Dubai and Sharjah, showing th limitations of  20 years of hyper growth having left in official mindsets especially as such ‘arcane’ topics are probably not as interesting a conversation in Delhi and Mumbai despite the attempt a t modernity

Road to the Monsoon
Road to the Monsoon (Photo credit: Karthick Makka)

India Morning Report: Nifty switches up range to 6100-6300, Is 6200 on the horizon

Anjum Bharti - 05
Anjum Bharti – 05 (Photo credit: Adarsh Upadhyay)

 

The Aside of the day comes from Network Analyst picks, with Sandeep Wagle who is seldom wrong on the trend change running with his bearish bet till 5950 which he had to exit. His buy picks have come in sleepers like USL and Kotak, both of which we think will not deliver much this year.

 

USL sell off of Whyte & Mackay while being a cash boon to the debt on the Balance sheet, is still a sentimental stab in the heart for that scotch brand could well have created that elusive broader market for top of the line alcoholic beverages in a market addicted to imports at usurius prices, showing in profits in the F&B  in the Hotels segment

 

Meanwhile, Compatriot Mitesh Thakkar has been better endowed switching Sandeep’s non run scoring cap ex giant hope L&T with BHEL and I think also his TVS Motor was better switched with ”

 

Philip Capital (USL defender but long term buy on the stock, not short or intermediate) also had good FMCG picks and though Starbucks has opened in Bangalore, one thinks the same Longer term view is true for their FMCG picks including Tata Global Beverages and Dabur. Ashburton, despite the India specific commentary seems to be an index based fund across EMs and India

 

Sun Pharma is back in the bull basket of traders with an announced buyback being the post election surprise and the Bank Nifty has settled in at 11k marks probably gathering shorts, thrown out of Nifty in a big lurch on Monday. The Cairn buyback is bigger news but with outstanding results still away, one may not get the bang for the trading buck there

 

Markets have hit back as of yesterday and the new 10-yr bond trading has immediately rushed yields back to 8.7% in the morning, Rupee revitalised to 62.3 by 10 am, showing the potential untouched as markets took the yields of an expired bond so seriously, it was probably to the extent of a ‘not funny’ slur on the extent India deserves to be labeled a Fragile Five member ahead of Institutions making fun of the Tapering business on networks. US yields will rise and the Taper will not happen so soon, all that has happened in between is that Janet Yellen has been confirmed and she does not think a $5 Tln balance sheet can say Taper is a bad idea. The Rupee propably making this entire year pre taper more a challenge test (agnipariksha style)

 

NREGA will be a nice hit to Election pandering ‘in-throne’ incumbent as BJP struggles with a cause and high turnouts could indeed be another factor for Congress to weakly hold on to in making a comeback election happen. The media dissing of Congress can still hardly be ignored despite the survey technology of the wipe being more than 3 Fridays old

 

NREGA wages will be increased based on recommendations of a committee led by India’s Chief Statistician Pranab Sen

 

Yes Bank was bit by the regional bug in a sudden switcheroo by the markets on the Banknifty, trading still at 350 as it seems to have showed its Punjab hand in picking up the Title Sponsorship for the Indian Hockey League. However, they would still be a national brand, as would be Field Hockey as Zed comes back to bowl the Pakis out on South African soil. My generation is probably not the best to assess cricketing talents of the new look South African, Aussie and English teams either as they all look uniformly weak in the deluge of fresh faces, making West Indian whitewash by India a mystery incomprehensible. Also, Yes Bank may have not given such a signal to the markets or such picked by them, this being an erudite observation only to my eyes as I equate the game with a certain neighbour of Delhi in the north nor Yes staying bak with the media team push of the game sponsorship.

 

The Energy trade seems to have finally hit GAIL and the other LNG stocks as Oil stocks enjoyed a big relief rally on Monday and one last month

 

Big is back in reckoning in banks with ICICI Bank showing more uside. I would also recommend to continue trading upp in ITC, IDFC and Bharti. Bharti is singled out today leaving Bajaj Auto breathless only for the day as Bharti gets out an ECB card from its PR team before the final date of the Spectrum auctions, where they have certainly won themselves a near value for money tag in the relicensing forced on the huge Indian market and avoided a lot of unnecessary expenditure if the CAG report had indeed come out on the winning side.

 

Meanwhile Lehar follows Cyclone Helen on the Eastern coast but the Seemandhra and Telangana GDPs are pretty much safe, except for the large scale destruction of seafaring life and human villages near the coast .

 

The Sugar trade is a lost cause, the volatile commentary not helping the midcap stocks with limited contribution to India’s humanitarian and Western Export which hold the key to riches and a better CAD till 2019 when the next General Elections com around and China would have found a new normal it has ‘founded’ last two-three years

 

 

 

India Morning Report: It’s Conferencing time again, do India advisors need the Brain Buzz

View of Hilton Towers Mumbai
View of Hilton Towers Mumbai (Photo credit: Swami Stream)

The Kent RO India Economic Conclave(ET//ETNOW), probably reminds other Indiaphiles of the Autoclaves and Indian barbecues as the Delhi Winters approach. Indian (Mughlai) Barbies of course last all year and the take off on that name is rather steeply silly, but not as silly as those Modi’fying Indian polity or still relying on Bankrupt European franchises not just in India but even in US where European Banks try to claim the upcycle again just for having reached the bottom of the valuation pile in investor opinion.

It signals that people are listening to more than the seldom heard refrain earlier that US Bonds are headed for the 4% mark on the 10-year Treasuries, Goldman Sachs having updated their opinion and with US equities starting from record 16000 levels finally after 5 years other equity assets around the globe are also finding favour. India must be enthused because even without the Enclaves or any agro encomium (at the new WTO round in the ‘hood), India weights will remain ahead of European bank investments, HY Bonds in the US that continue to come back however will be something EMs and India cannot compete against.

I-Banks stocks are a good pick if your portfolio does not have overseas diversification yet, with Investing in fashion and rising by the EM watermark rate of 30% growth at least in the first 6 months. Again, these flows including US high yield and specific picks in Global equities do not compete with India flows, while Asia credit remains at its most constrained sufficiently tempting even without European QE to keep the arbitrage for Asian treasuries and an umbrella from Domestic Interest rates is always readily available, not threatening the CAD in any of these South Asian / ASEAN SE economies that seem to bring more relief to Chinese investors and pro reform governments. The winners however in the I Banks are HSBC and Goldman Sachs and other stronger names, and one should be careful to whom one listens and sets the morning alarm with.

FIPB approvals have come in for Singapore Airlines – Tata Air joint venture and Religare which will invest as holding company from the island state.

Another quick silly update: The linkages of urban and even rural India to radio as a media have again spiked into something tasty and a medicine to nail the hubris, without having to drink and drive, even as new year celebraions come around the bend in Lutyens’ Delhi and elsewhere. Home is where the heart is, they say, esp when the RJ is handing out your favorite Mall freebies and movie Tickets with Muscle and oomph.

A small slide in from Gold to near 31k marks just on the news of 40% investment demand of last year returning. Gold season is tough for Financial discipline. UCO Baank results? give them a pass and stay with BOI and PNB, and you must get short on SBI to save the India Fund you have been planning. Buy IDFC, trade YES Bank and ITC because you have already bought and no there are no retail investors to count in the Indian markets the residuall INR 50 Bln turnover of the class probably counting professionals in the trade, since the first 95 circulars from SEBI cut out sub brokers and MLM chains from Indian Financial Markets. QFIs have still not taken much to directly investing in India and apparently there is still something to be done about it..

Modi? Bad experiment!

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Hotel room, Hyatt Regency Delhi
Hotel room, Hyatt Regency Delhi (Photo credit: John The Geologist)

India Morning Report: The “growth-inflation dynamic” is getting flustered by the rates

English: The Classic view of Saving & Investment.
English: The Classic view of Saving & Investment. (Photo credit: Wikipedia)

While the equity markets are back from 6000 levels making up for those missing trading days last week, starting the week at 6150 levels, an ongoing investor conference revealed the likely India bull among banks getting the short trade for not being able to lend in Europe. CLSA Chris Woods asserting that the challenged growth inflation dynamic has not stopped inflows into the country. Similar assertions from Barclays in the morning, who quite track to our Top dozen picks as revealed in the last two-three months (previous trades though in very similar scrips are NOT ACTIVE) underline the fatality of Indian policy as presented to the new generation by Foreign investors coming to India at the bottom of the global cycle.

As we have written before India could well find a way like the Phillips cuve in Keynesian Economics to survive n the high interest Economy, but those waiting for a revival or reveling in China’s continuing misery would have realised by now that India having chosen to jump rates in October is now intractably going to ride up the spiral killing off any motivation for investment growth from the bank rates while the rate differential continues to press on the ECB borrowings and increaase pressure on the deficit. One way we still think, out of this spiral was to learn the importance of holding rates and a HOLD at 7.50% would have done the trick. India’s diagramming in the investment /Savings trade are rather inelastic on loan fund supplies or demand in the main stem however and so growth will go on.

However, in the meantime, WPI has hit 7% and so there will be more rate hikes not impacting the residual growth GDP. Rest of Asia struggles as well with Israel cutting its GDP scored in September to 2% and the Oil economies or Africa the only refuge for high growth dependent Capital businesses. India with or without the Modi-nomists has done precious little to ramp on to the unaided infrastructure growth and is barely getting back to fiscal discipline with ratings still stuck in the 80s mode regardless of reform. The etihad $450 mln + investment in Jet including the 24% stake has taken agan crucial time off the managements available turnaround strip an India Inc is also running out of time stuck at 5% growth levels, now probably locked in till June 2014 without an escape hatch

JP Associates is a prime example of price negotiations being a sordid affair in India, Manoj Gaur doing well to hold on to deals on its Cement plants and others despite the markets probably looking for an even better price on the sale. The rresults showed again continuing growth without improvement in the CEment business. Monssoons good impact on grain and thus any residual impact on lowering inflation is again a sordid wait seeing as it is unlikely to stop the farmers or traders from spiraling up our food prices for the time being. CNBC 18 did a good focus spot on Pharma stocks in the morning, and they are doing well in this cycle, including Cipla and Lupin, the still funding trade stocks and IPCA it seems has rerated to 17-18 PER multiples. I hope they have a new drug or corporate news on the horizon. Again on inflation FinMin so can’t do anything about imroving supply lines for agri in this nation

ITC is finally back up again from 310 levels itself and is a good trade. IDFC is done till the election frenzy despite the Fin Min noise for infracos which unfortunately are still running their family businesses on the margin trade of their own stock. Network commentators have underestimated performance potential in Yes Bank and overestimated it in State Bank. The Maruti trade though is back as the Yen spirals down(up) into the hundreds again for a likely couple of months, taking care of the whole quarter

Automobile expors are doing well again so JAnuary will be quite a celebration of the tough times with Consumer Staples (Non discretionary, food and other FMCG) able to avoid pressures to reduce margins and not pass on input costs.

Last but not the leas, we are not issuing more Buys on Tata Steel but it remains a Biggie on the Buy lists and those deciding to take profits with the Domestic institutions at 380-90 levels will likely be deprived of the real cream on the cone.

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: No, yesterday’s mid-day rush was not enough!!

Welcome to ICICI bank Page
Welcome to ICICI bank Page (Photo credit: denharsh)

Of course, ITC and ICICI Bank will be reporting during the afternoon as well and the market closing is unlikely to be weak enough to discourage a big move possibility next week and overnight positions are unlikely except the refreshed long straddles (short put 5700 –  short call 6300-6500) and exits from 6100 shorts built up mid-week again. J Associates may see flash floods in light of the F1 race weekend but Bharti, ITC and Bajaj Auto will lead the way through to close.

Banks may be in pressure again but only because of the legacy of NPAs in BOB which built up an entire portfolio of NPAs / instead of trade receivable in a bid to export Indian Banking Capital and lending in the last two decades and PNB lone cannot stem the tide. Also the unfortunate positive attention on SBI though under a new chairperson is unlikely to escape keen valuation specific traders for more than a few trades.

The ICICI results may thus see a complex short-term trade unfolding which will beat down PSU earning expectations and correct the recent run up in undesireds except perhaps in the big-ticket PSU Banks like BOI and Canara. Taking the examples of the bottom rung from good old ET(yesterday’s op-ed pages), Corporation Bank, Indian Bank, Union Bank and that other are unlikely to get picked up soon either even as they trade down to less thna half their book values as they tot up more of the impressive 2 Tln NPA in the PSU Banks

SBI’s steady stream of recoveries at INR 4 Bln this quarter is no small feat too and is no small measure contributing to the revival of the stock after Chaudhuri’s exit.

Blackrock and JP Morgan ( with a new Middle East Fixed Income Index) are leading fund managers as Europeans garner more cash from Emerging Markets in their Wealth Management saves and EEM continues to bring good tidings with a big rush in midday trades, again signalling a big push to break down the 6220 limits faced by the traders. Tech M has in the meantime done it again, extending more bad blood to investors as it loses a big renewal from BT to little known Virtusa

Powergrid results enthused the markets and would be a big draw for Foreign investors with more than 80% of its top line Net Interest income translating to profits consistently and the NII now crossing INR 40 Bln close to a quarterly $1 Bln target. Also the Power NBFCs have been fairly active in QIP debt and are a known international entity.

US Banks in the meantime walked out of one frying pan into another as the closure on some mortgage settlements was followed by an “unfavorable award” by the Fed demanding higher thn expected liquidity reserves. The ensuing collateral shortfall and rush for short-term liquidity ( of more than $200 Bln) may hopefully not impact Emerging Market portfolios as BankAm has completed most of its domestic restructuring and government intervention preventing international expansion ( with frequent non US asset sales) ebbing down

Kotak’s results yesterday were less than spectacular with deposits still less thn INR 100 Bln and NII of INR 10.24 Bln on Loan assets of INR 512 Bln ood yields ( NIMs of 4.8%) but hardly any expansion commensurate to its size, and YES Bank already more than caught up except for perhaps a few more wealth clients with Kotak (UHNI)

Fixed income yields are back to 8.6% at the close of the week ahead of the Bank Policy announcement on Wednesday. We do not think a rate hike is on the cards and are long on YES Bank as the MSF will anyway further come down by 50 bp. If instead the repo rate is indeed 7.75% and MSF thus stuck at 8.75%, then the Rupee’s refusal to complete any upward movement would have been vindicated and it may further move back to 63 levels . As of now a move to 60 still looks like on the cards for the Rupee to be vindicated as the stronger Asian currencies as the CAD shows into the good books again and PSU banks complete a two step Capital bonanza with more Capital post the retail fest from the government at the end of the quarter

The markets should close above 6150 in anticipation of the next week’s move or unwinding should hit quickly to more than a uarter of the outstanding in F&O markets. More likely it will as 6200 positions in shrt calls again go to cheaper OTM  6300s in the straddles

Also, I did forget, Will India welcome another to the Kingdom of Fries as “Burger King” heads to twon with the North India franchise of McDonalds already down to underestimating market demand for the McDonalds’ menu

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: Markets wait for fuzzy logic to come back as banks get ticked off

The Rupee has continued its climb but equities have taken a break even as Rupee survives end of the month selling for import payment obligations in a benign environment Oil heading below $103 (US Crude)

Bharti Airtel Lanka
Bharti Airtel Lanka (Photo credit: Wikipedia)

FDI Dollars will likely boost debt markets soon, the positive sentiment from that and the promise of removing extraordinary liquidity measures letting the markets 5 basis points off the 10-year bond yield to 8.73% . BofA ML in the mean time agreed that there was no doing anything in India till 2014 came and went so the rally is at a loss still from  a disgruntled bull frustration at this rush for beyond 6000.

Goldman Sachs put India in the same basket as Turkey and Brazil, rather on the heels of the City beating Manchester United and showing Goldman Sachs burnt in putting too many eggs in this basket too. However, we go agree on the Fragile three from Goldman Sachs which will really get stricken not just because of dollar dependence but because of domestic alchemic leadership that continues to drive a fiscal big bang attempt in those two domains as well as someone like South Africa. The Fragile Five however esp India do not exist as those with deep domestic markets cannot be clubbed with Emerging Markets

India’s Dollar dependence is much a factor of the Oil price, so that can’t happen without Syria, Iran and israel. No, India cannot choose to come out of the growth plateau overnight by dissing inaction and is not  sign of weak politics, just more federal than the smaller EMs can afford. Our deep markets still offer much more than even China in most asset classes and Financial market reform is not a steeplechase to be run, or a small sprint but a consistent marathon. Neither is the consumer credit habit overdone in India or hitting the falling Domestic savings except that real income has ben stagnant even negative as non agri GDP data shows us in 2013 ( a 0ve 0.5% growh in since April this year, i.e. Q1)

Reforms did break India’s markets stride yesterday again, as the SEBI panel freeeing Govt Bond investments frm quantitative restrictions has to merely posit the same to RBI at this juncture. RBI in the meantime is busy bringing down growth era economics by C Rangarajan and others who took his place after he remitted office for higher advisory office. The edgy action on 0 percent loans and the continuing waterboarding by banks on using MSF and overnight liquidity instead of interbank markets have got RBI in a fi x of its own and that has definitely been scuttlebutt fodder for the equities.

Those following the soliloquy of Ashwini Gujral however may do well to note that I think neither Maruti is making it higher in this week nor traders or investors are going to wean off Bharti Airtel in this series. Volatility is on a thin leash as October still rushes to 50 point premiums over the current Nifty levels even as barely three days before expiry premium in the current series has been completely blunted off by the trading blades used to bigger prizes in an Indian rally constructed/deconsructed at will

Markets could well bottom out especially if action is indeed seen in the infra sector and more is not thrown banking’s way allowing the sector to recover last week’s trading levels. Inflows from the NRI binge for example have been waned to Deposits apart from the continuing rush on Dollar payments home to the tune of $1 Bln from just three publi banks. SBI in fact is looking at its first woman Chairman in a few months

ITC and YES Bank, along with AXIS on hedgie trader desks, remain in limelight with incoming investors and most wait for a resurgence in Financials to confirm India’s superiority as an Asian investment destination though China remains bigger an d better after another shocking half year of underperformance 5600 does look like a tradeabl market bottom for India, surviving these levels in such economic doldrums

 

India Morning Report: No Taper and Nifty on to 6100 levels

A rather unexpected reticence by the Fed, allowed Global markets to uncoil their expectations of a taper and the Indian Rupee opened at its best price of INR 61.5 today barely hours after the announcement. the shorts on banks disappeared overnight as did the opportunity in depreciation lit IT with the Banknifty finally moving 650 od d points to above 11000 today and the 7% increase in ICICI Bank to 14% in Yes Bank possibly still allowing steam in the rally to 6300+ levels and a long awaited rally in the banks with the liquidity measures likely to go away. (what if there’s no taper?)

Apart from the bigger damage to shorts on Banks, the rally has caught most by surprise and thus some may wait out for lower levels to start again, but stopping market enthusiasm at 6080 levels itself is likly to fail with the momentum of the event generated uncoiling allowing immediate 6300 levels. Also the taper remains on the horizon for the US Fed as it tries to tackle the question from a new structural cap to growth in the US and the  Rupee may be allowed to break below  to erase the damage since May

F1 Australia Grand Prix - Thursday
F1 Australia Grand Prix – Thursday (Photo credit: Wikipedia)

Indian yields are back to 8.16% levels. ITC and  Bharti have continued investor fueled upmoves at 350 levels, while Sun Pharma and ONGC and the Energy companies rebound to 2010 levels. Investors also found the chances to get back into Hero Honda and Maruti, both of which may easily by rejected later for Bajaj Auto in the Auto/Two wheeler sector

The Rupee might close a little lower but above 62 till 4pm and in RBI trades after.

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: Thursday’s bounce engenders positive weekly closing

Foreign currency reserves and gold minus exter...
Foreign currency reserves and gold minus external debt, based on 2010 data from CIA Factbook. (Photo credit: Wikipedia)

Long targets have returned to traders even though no net position longs would be carried home at close as en early end to the bear festival on Thursday engendered a great change in mood across the three markets in Bonds and Government Debt, Currency and Equities. To remember despite  the targets for a 10000 Banknifty and a 5400 Nifty uts ale in some quarters you should not take the change in sentiment to heart too early and endanger your precious capital as markets may take less than the 4 remaining sessions to send the Nifty and Bifty(Banknifty) options south on Calls and gaining more than 300% on Puts in the spirit of Open interest remaining strongly on the short end despite the offing of short positions yesterday. Sorry about sounding pessimistic as the bounce could be meant for serious investors but such blah is unlikely to save the India oriented investors in such traps as created by this early bounce back rush by the shorts themselves.

Sorry Mitesh and best of luck to those winning daily contests on predominantly long positions on the weekly close as indices at 5400 are not overvalued but the currency run is not complete and with the propensity of correlation binding all the different markets to be true for a market yielding negative returns one must suspect shorts to outweigh longs in the market and stay away. Banks are unlikely to have serious impediments to loan volumes at higher rates Credit growth reported for the first week of August returning to above 15%, a supremum for most markets above the size of $1-2 Bln per month in new credit  Also banks are not going to be paying for the rising yields for time to come int he interests of financial stability keeping their share of GDP intact India’s FX reserves are in the bottom fold globally but a s a global Gold home market, it may continue a bounceback on days when Gold s indeed favored over withdrawal of global liquidity by OECD Central Banks with BOE Governor and BoJ unlikely to favor tightening despite the chance to follow the US into a change in stance after 5 years.

Equit y indices moving t 4700 lus will again erode value from the perfunctory jumped prices in IT s their Export oriented Metals and Pharma sectors get entrenched in investor psyche and Banks, Metals and eve Bajaj Auto, Bharti and ITC are likely to hold investor interest. Which makes it rosy peach for investments in IDFC and YES Bank while ICICI Bank may continue to list among the few advances ona daily basis making i easy for Bulls to survive the remaining stressed days till september series exits though 4700 levels could be accelerated to reach by mid September itself given the easy moves down in the Rupee by more than  a Rupee each day to the Dollar

 

India Morning Report: A backward state card for Nomura, A Gross Margin push for Tata Steel

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

 

In what is probably the best cause of us investment bankers in this lackluster market for a lackluster Economy, Nomura Securities, took the sitting bull by the horns in an almost sleepy downgrade of Indianomics come Wednesday as markets opened to 57000 levels, positive inner rumblings in the Bank nifty and a new move in a new OTM opportunity in Infosys.

 

Almost seems like it was 2007 or 2008 once again depending on where you were and yes we are at the fag end of the India opportunity cycle where we have rid ourselves of all our lofty notions of infrastructure or credit growth and consumption is finally about to break down as job prospects are also at an all time low. capex however is not constrained as a lot of quality companies are growing their cash pile, not a shot in the dark but wrought on by the end of the downturn for many investment intensive businesses seen in this cycle and the Services sector dipping which has been the last port of call for the blues has been known to bounce back much better. For otherwise achieving Nomura’s new 5.5% target is going to be even more difficult. Bihar’s leaning to the uPA may provide stable government as well as a new cause for double digit economic improvements in the next edition of India Inc as we reach another anniversary of our independence.

 

Tata steel’s quarterly results are an even better segue way to India’s latest Morning trades. Th EBITDA has infact hit double digits and even after the corrections on the 90% profit improvement this quarter a 30% return on Domestic production of Steel in EBITDA is really creditable as the margins have indeed been saved on the year. You do see robustness returning to the sector as a whole with both Hindalco and Tata Steel not just surviving the sharp negative eigenvalues for the metals sector globally but showing that India can survive as the biggest players left in the huge resource industries which could otherwise be surmised to be left to India as the unwilling last man holding the Bowl in Steel and later in Shale, our last foreign forays.

 

Gold duties will have a desired effect as controls deliver immediate results to Indian policymakers in the amorphous International borders and that is perhaps an uncomfortable reminder to us to  even consider a return to strong controls and slip out of the “liberalised” reforms on offer from on of the two largest nation states out there.  we just have to keep Gold imports to 50 tonnes over each of the remaining 8 months to make the new Finance Ministers’ targets for the metal at 800 MT this year. Recovery in Global steel is likely to continue and Tata Steel is a very good investment with continuing margin safety in India, more capacities and better $50 EBITDA realisations in Europe as well, an unexpected Bonanza.

 

The coming move in Infosys will sign off on the creamy 10% extra in profits to it exporters after having absorbed inane inefficiencies and market volatility in the first round of depreciation of 10% in June as the rupee gets ready for another ride from 61.5 levels to 65 near the oil purchase date for India’s importers this month

 

Unfortunately after the great start at 895 for ICICi, 1150 for Axis and 313 for YES Bank, the secttoral index has again retreated to near 10k levels waiting for the inevitable jump but foregoing the move for today till another robust oportunity presents itself for a material move.

 

 

 

India Morning Report: The weekend cometh, markets head north for the final relief rally for the week..

Detailed map of Indian national highways.
Detailed map of Indian national highways. (Photo credit: Wikipedia)

Almost like a movie building the relativity of negativity into the eigenvalues, the markets will duly uncoil in the week’s last trading session to entice investors back. Idea’s 50% PAT growth performance on 8% year/tyear growth is probably the best for the industry which makes it Idea’s seventh or eigth such hurrah ina rush order for the street. Data s now pobably double digit revenues after another 100% jump in subscribers. Infra and FT saga continue with the National Spot exchange and the IRB kind of market leverage habits of promoters showing up the small companies into veritable oblivion in 2-3 sessions indian QIPs may watch out as short term debt issuances from Indonesia failed putting markets on hold for the continuing Dollar armageddon even as dollar weakens at home in light of better growth prospects

Jubilant results won’t be so do not bother but some media houses may be back this quarter and the next as advertising revenues will likely imrove after the rush of sports events in India in the last couple depressed some revenues, ( and some other reasons, private to experts in that business sector)

IOC is down 50% from its peak in May when Banks were still in our cross hairs ( we were and are taking India up with the banks, if you sill want to snipe instead into our homes) The December 2012 closing values of IOC far too depressed and ata time markets had not recovered value in that sector, were still near 260 and today’s prices are a quarter down from there even as hikes went through in time.

Powergrid and REC are back and we will continue to use them both in the same breath and thus not in the same pair trade, which would be with “xxxx” IDFC, PFC, PTC are also all headed north but may still have hardly 55 on the downside before markets delink them from bankrupt, over leveraged infra mid-caps as earlier.

This may be your PIMCO year in India even as Al Erian recovers his Bond Fund equanimity with some including me still defining a double digit interest rate scenario in India as not improbable. PIMCO, if you recall lost two years of the crisis betting on interest rates steaming out of their ears when they were taken out by good fixed income demand for bonds in 2010 as I remember. But the Pittsburgh Pirates and PIMCO are since doing well.

Bajaj Auto correction on drop in monthly sales portends of more naysayers testing the automaker for continued sales performance above 300k in motorcycles as the peers give up sales on the auto sector’s trouble with slackened demand and an eye on primary sales inventories remaining too high at this time precluding that Vendor strategy. 6 new discovers are launched from July to December and B A is avoiding invoicing the old Discover for lower numbers this month)

Motor cycles were 280k in July 1, 295k in July 2012 and total , with exports also breaking stride equally, 320k this month

YES Bank and HDFC Bank have started recovering value, and HDFC Bank may well trace the market’s upside trips switching off during correction for a great single stock accumulation strategy for those wealth makers not interested by available SIP and STPs in Funds

 

India Morning Report: The Apple does not fall too far from the tree

India for old times’ sakes again proves IMF, Brady bonds and Latin American Economists wrong, going it alone with currency curbs as more visible Asian and even Turkish economies also try to get back the democracy equations into their control matrices and China parrumpums down the road of domestic consumption. Net effect for India, at least in Brazil they can afford three years of Bread and two years of rice for about four bus fares and /or a ticket to  World Cup Match from the new popular stands at spanking new stadiums. The G3 have each other to fund but India first has the poor to feed and then the loans to make to urban dwellers for auto, house and pretty much everything on EMI except the kindle which unlike the Blackberry will actually never take up with Indians

However, the new interest rate regime is not done with just upended 10% short rates in the overnights and the kingdom will get more expensive even as credit growth comes back and markets give into a little bear now and then to mull over the water in the wine that is their domestic production and consumption, waiting for investment to come into the Economy.

English: Logo of ITC Limited
English: Logo of ITC Limited (Photo credit: Wikipedia)

The higher rates as we discussed once earlier in 2008, could actually keep the domestic economy chirruping too, but then it is not going to be that long lasting because even if repo rates start going up because there is no growth and private credit growth slows down much from its barely 20% levels we would not get to long term rates beyond 9-10% to the eighties when these were a habitual 15-20% across shor 3 year and long 10 year maturities and are still the norm for consumer credit outside auto and home loans, currently apparently giving another cause for markets to expect higher rates for corporates and even banks Or maybe the EU still has what we want despite being a dying market (PMIS actually crossed 50 on the upside this month but markets are shrinking not growing) and like the EU and the 1% jumped British we might adopt 50% tax rates to get the right liquidity for the right causes. We would still not be a banana republic.

Back in the markets these above are probably not even water cooler/vending machine or m&m talk as results look like as we said, india maintaining those few precious growth stories that make it a well run, academically productive, encouraging for services, lean mean welfare fed growth machine.

I for one, liked ITC results though markets will ignore for another week its INR 20 Bln FMCG sales growing at 18% much like it earlier chose to ignore paperboards and agri business growth which also continue to be drivers at ITC while its asset management business (hotels) continue to be stable at INR 5 Bln and the bread and butter tobacco sales have just underperformed growing by 13% instead of the expected 18%++ More than one business school campus in India is looking at a gift horse in the mouth this year venturing into 400= batches at Ahmedabad, Calcutta and now Bangalore and Kozhikode too but then thats just the suspense kiling everyone.

Coke, Apple, Starbucks have already reported their June quarter performance globally and they will continue to vaunt(flaunt) their India investments in the hope of rightly placed analysts and commentators to catch the drift of their global potential and the flows that have decided to come to India at the “fag end of the recovery” ( at the begin of it in India) and will stay the course.

Yes Bank, Indusind ( esp with retail growth) and Kotak will survive the high rate environment and force growth pretty much par for the course and as we said it is foolhardy to expect ICICI Bank to fall from 940 levels but the likes of PNB could still be the weak chink till the trading equation metabolises the right values for a bigger rally cup. Jet may be as good a s gone from India but its FDI plan which will never see Indian inflows is probably the last gate allowed by Indians in the promise of the world they live on electronic channels and the internet broadband and should not pass muster with regulators allowing real FDI proposals to burnish the brand into local populations and etihad can stay the course in the knowledge that it alongwith khazana (Malaysia0 and Maxis, inched in through the small gap in India’s regulatory armor till here

As of now the Rupee is maintaining 58 levels and the indices have moved up after slipping to 5900 ina directionless market but we are infact recommending bullish trades but not for a quick buck in this market, still precluding any money for the bears/ shorts at these levels as mos stock levels reflect deep values available to buyers. Remember, there is no new outsourcing business coming from the developed world. Thats all there is to share.

Bank Results season (India Earnings) : Yes Bank starts back from 390 levels despite overnight straits

Yes Bank covered a lot of ground after publishing results yesterday, as the Net Interest Income jumped 2 in 5 on year or net profits increased more than 10% sequentially on INR 0.94 Bln in Investment gains on bonds /debt . The NII of INR 65.9 Bln was sufficiently larger by our benchmarks as the bank remains one of the few posting robust gains in Fee Income and advisory income including retail charges as at bigger brother HDFC Bank, the lines have gone relatively stale on such income in the Indian scenario.

Other Income was INR 44.2 Bln looking to equal contributions from NII going ahead as is the wont of this income stream in robust bank models. While private banks set quite a standard for robust corporate governance without due transparency in such old habits in Indian Banking a s a consolidated other income figure unexplained, the reforms in banking would still have covered more ground than it is internationally. the higher interest savings led CASA increase to 20% at the bank is still miles away from reaching an entrenched player status but that is just a n indicator of this bank’s potential to grow faster and stronger than the ICICI Banks and the HDFC Banks.

Retail assets remain a priority  at the bank with total book still ahead of other “midcaps” as Kotak and indusind dependent on corporate treasuries ( variously wholesale deposits/short funding linked to the usurius 10% = call rates pushed by RBI’s interim policy) with assets of INR 612 Bln

The yields, cost of funds a dynamic provision coverage shared by the bank(click here) continue to reflect the continuing profitability of the bank’s model and its relative closeness to NBFC models in vogue, currently trying to reprocess themselves as banks but the existing players will settle up much higher in any status ranking of the candidates yet remaining a respectful outsider in loan syndicates and loan melas

 

India Earnings Season: Bank Results scared by the Rate/fx tuple (HDFC Bank Q1 FY 2014)

HDFC Bank 

HDFC Bank seems to have flashed a pretty good 26% NII on the wires for INR 44.4 Bln from loan spreads that remained a natty 4.6% in the quarter. The Loan book and Deposits have grown over and under 20% respectively to a book of INR 3 Tln each. The NII seems to be up 3% from the linked quarter in March. the bank’s NIM reporting was bumed up by new rules for apportioning of usual expenses employee pension liabilities and some commissions. Last quarter’s Fee income at iNR 1 Bln is likely static as profits came in at INR18.4 Bln adding to INR 18.8 Bln in April

The markets however do not seem to be rejoicing as the insurance FDI question is moot for the player with Standard Life and IPO plans both not firm for the bank. Yet, the markets continued sppoked by banks fixed income portfolios letting blood at the 100 bp move in yields from the 1 yr forward to 10 yr and at least at 8% + and rate cuts batted out of sight even before the FX scare by the Central Bank rushing into four such 25 bp cuts factored in barely 5 meets since March 2013

Recast loans are almost non extent as in Q1’s figure of INR 3 Bln and Non performing loans are as low as 0.3% of the book at less than INR  Bln from the wires

 

YES Bank on the wire?

YES Bank reports next week on Wednesday  and has been singled out for this rate move’s aftershock while

Indusind, when is it a good enough scale as competitor

Indusind reported a huge 50% jump in Net Interest Income at first glance from its new off take in retail lending finally trickling in . NII hit INR 6.80 Bln for the upstart and operating expenses moved up 5% over March at INR 5.08 Bln. Fee and Other Income was up 30% or nearly INR 1 Bln at INR 4.71Bln , Income before Tax rising 45% to INR 5 Bln over last year. Indusind has also brought down net NPAs to 0.2% and the gross NPAs at 1% of its rapidly growing INR 500 Bln book itself up 60% i the last 5 quarters. The ROA of the bank at 1.83% will be counted a s low for its still rudimentary book Bank reported NIMs of 3.72% on its retail book

India Morning Report: Markets steady, India facing uphill task

Bajaj
Bajaj (Photo credit: Chandra Marsono)

 

The Indices opened barely in the red after a dull week of Economic data . Trade deficit reported under a $10 Bln for June as Gold imports were blocked out but Inflation on CPI climbed back to 10% in a precursor to fuel inflation expected now to climb back from a barely settled in period of less than 6 months as the drop in Oil is destroyed by the 12% depreciation in the currency. The depleted Forex reserves are already a qustion for the Rupee and the negative IIP for the month is unfortunately unlikely to give confidence in the comeback. Consumption being defeated, one is not sure of the reasons for continuing retail inflation with foo inflation at 12% leading the charge currently.

 

IIP showed a more than 10% contraction in durables Production index and negative growth year/year for non durables as well. WPI for June has also come in below 5% again And while monetary policy will be challenged by the prospects of inflation and depreciation , consumption is actually flling making infation an easy target to even prospects of deflation in terms of sentiment continuing negative in the economy. Investment is yet to come back to the Economy has become a challeneg desite a Forward FDI policy esp for Defence and Telecom on the cards.

 

Auto Sales are down almost 10% on year at 139000 cars and 55 lower for two whelers and though markets continue to treat Bajaj and Hero equally one can see performance for Hero worsening in the war with erstwhile partner Honda in the market and Bajaj has maintained euanimity in shares and market segments nonetheless.

 

Unfortunately apart from the results of this quarter one also does not see further uptick in Exports immediately. Banks despite the low 13.7% growth in Credit for the month of May/June remain fairly healthy in the selected layer as we have pointed out here and Bank  Nifty remains a great pick at 11600 levels markets keeping value priced in line with the economic sentiment

 

Last week, the India Morning Report could not be posted and the same may not be available from Tuesday or Wednesday till the end of the market week on Friday when the trade data and CPI was posted. For JP Morgan and Wells Fargo results refer to advantages.us. Indian Banks report this week and we will be covering Indusind’s results of last week later with YES Bank performance

 

 

 

India Morning Report: India regains investment preference in Asia, builds on 5900

English: This picture has been taken at the Sa...
English: This picture has been taken at the Satya Bharti School. It shows the education system and children’s life at the school. (Photo credit: Wikipedia)

Markets had a choppy week early on in India but with selling having refused to resume and Asian markets keeping a comeback worked into the numbers meant the Dollar indices poised to jump at 83 going into the next week. In thus phase however Dollar may again lose the tight negative correlation to Asian equities especially again in India which has managed to climb down the volatility beanstalk while steadily gaining 50 points yesterday and another 50 points at open today.

Many out of favour scrips from Metals to the yet to be prioritised realty are now at their technical support levels meaning they will mostly support positive moves ad may even lead one out of 5 days in the positive next week. .The jobs report in the US morning will of course propel the Dollar but the likelihood of that momentum taking down Asian markets has receded with the yen keeping counsel near 100 and Asian automakers not seeing tariff barriers in the US traded away

Oil prices are unlikely to continue north despite demand led reductions in inventory in the US as refineries remain underfed and the Egypt tensions are resolved
Banks are poised comfortably at 11250 levels and the Banknifty straddle has worked wonders in localising discounting for bad debt PSUs to SBI and BOB among the still expected to perform members of the Index . Thus further PSU bank attrition of business and bad debt spirals will unlikely stop the rally from taking root in banks next week and ths leading the Indian Nifty 50 back to 6000 levels albeit for a trading largesse. Pharma sector picks like cipla and Lupin continue to have much to offer and trading down in Sun Pharma may ot have large index effects ( expected as exports are succeeding at competition) iT scrips are much in a bind of low profitability even as immigration reform fades away and 12% in Rupee depreciation fails to make earnings forecasts positive ahead of next week.
Bajaj Auto, IDFC and Powergrid could be good picks at current levels though RBI signals have already discounted PSU applicants for bank licenses including PFC. PTC is also dong well without a banking license to its name and REC may trade to lower 190 levels but is likely a good pick at these levels all on their standalone performance and undiluted by the market added momentum in June for Banking preference. YES Bank is a great pick at these levels and supernary promoter interests are unlikely to be material to the bank’s professional management as is the prospect of 100% FDI in leading lights in the sector. Telcos will probably get 100% FDI approval sooner than later and Aviation’s experience with Jet Etihad is likely to remain positive and accretive to value ton the whole. Lupin’s pipeline of 100= drugs continues to underline the block profits in generics witha low barrier definition of blockbusters and no big stories in the us market nonetheless and similarily with Cadilla, Orchid and Stride Arcolabs.
More importantly consumption winners heading for no man’s land ( Trading at lifetime highs seen mathematically breaking new ground with positive momentum trading) with ITC, United Spirits and eve HUL and Bharti likely to head off the “no investment” led dull prospects at India in story, expected still to be worth much more 6 months down the line. While HUL has shown already that shorts were wrong, once results expectations are correctly warded off by Telco promoters sunil mittal and co, Bharti may also be seen in the light of its quasi global brand and investment expectations and thus gain from reducing debt on new investment rules in fDI and in required infrastructure debt accounting

The Rupee thus is free to depreciate but in a small range around the 60 mark.

 

India Morning report: Oil signals treated as critical sell levels for the Rupee (This week in Asia on advantages.us)

English: Graph showing Indian rupee and U.S. d...
English: Graph showing Indian rupee and U.S. dollar exchange rate from January, 1990. 日本語: 1990年1月からのインド・ルピーとアメリカドルの為替レートのグラフ。 (Photo credit: Wikipedia)

An old adage for the market, it is now a repeated phenomena in the global markets for India to retain the dubious double distinction of heralding global commodity lows and be cornered by the slightest sentiment building in Oil. The day thus is a weak barometer but may soon gain ‘tumbling’ significance for global currency markets as the Rupee will be decimated to even beyond 65 levels if Oil rally does gain strength.

However as it is unlikely to happen for now, long investors may not be able to leave Indian shores before it eventually does, giving the upper hand to hot money flows as opportunities run out with the Yen at 99 and Euro also not facing new substitute demand, yields going up from global lows in various central bank auctions in Europe throughout June bringing short term rates to near above 0.5% and even closer to the 1% mark from momentum extrapolation(as will likely show)

The Indian Rupee has been closely pinned down earlier in 2009 and lack of buyers remain its “new” worry in global trade share increases as Yuan manages a smaller volatile range despite an equally suspect recovery path due to a paradigm change from South east, Coast Only development to a more homogeneous spread as legitimised by a 5 year plan.

Back to matters at hand PSUs like BOB will probably lead the bank indices down even as most new banks will make likely a good sector lending structure possible in the higher spending towns and villages of India that have kept Rural CPI apace at double digits till now. Muthoot’s Bank may indeed be a new kind of entrepreneurial venture in banking as long as they meet RBI conditions and manage not just the minimum net worth cap but raise the bar for fellow new anks to the desired but not contingent levels of INR 2500 crores of $400mln and even INR 10000 crores or $1.6 bln whnce an opportunity the size of India may be deemed fit. This size of course may not be ready on day 1 but should nonetheless be planned to those levels with capitaal lines tied as was behind the uccess of private insurance in its infancy in 2000s

100% telecom FDI for India thus might mean in an indirect way, better days for Oil consumers even as demand returns to the US market after a good 6-8 weeks in yesterday’s reported data and are critical for the market to retain 5750 levels on equity indices. ITC and Bharti remain on the up and up in block deals for FIIs or even program trading where such volume is amenable. Yes Bank might see another block of additions by FIIs as it exits a RBI ban on foreign investments and has quite some potential before reaching the allowed 75% levels currently in the sector HDFC/Bank prognostications for a 100% FDI in the sector linking its scrip fortunes to the same may see thus a longer gestation period till the new government is in place in 2014 and indeed starts picking up the courage to forget its pre electoral hang ups with FDI if any

 

India Morning Report: July series catches with investors, Investors coming back?

Large moves in ONGC and Coal india restarted the bull fuelling of the markets, traders assiduously avoiding the to be rally heroes and leaving value on the table in YES Bank, IDFC and other banking applicants while taking the recently hammered value picks in the indices back with defined pairs available to sophisticated and wealth investors and shorts avoiding the markets.

It allowed frustrated “no go” traders like Angel broking who tried a short pick on IDFC yesterday to leave unnoticed while long cash equity futures seem to be a prelude to another rally in the bank nifty. Of course 5800 could still be a level to short the index for the pronouncements of today for coal India and gas prices could still not translate into concrete action in the election year but that looks increasingly remote.

The turnaround is here in process but there is unlikely to be immediate jump in economic data except that future months could see better traction from investors with sticky inflows from the last take on the markets seen in the June expiry above 5700 around 2:30 pm

Gas prices are set to rise in 2014 to market linked levels starting at around $8.4 mmbtu according to the new policy. Bajaj auto has recovered smarty in 2 sharp moves of 2.5% and is still agood nvestment and trade at 1880.  iCICI Bank similarily has a good value at 1050 levels

 

 

 

India Morning Report: On your marks, the rally is set to gooooo..

5850 levels would of course cede thru the week as correlation is reestablished and an agreement around the RBI call yesterday seems to have been on target to set the H2 rally in motion. Institutional investors have been selling the index futures hitherto a transparent look ahead hedge initiated for the select longs that have been holding the market above successive water marks since August 2012. Index futures selling aside, the Rupee move should also stop here at 58.50 or above that back at 57.90 whence long buying in scrips thought to be carrying their sectors and the indices are in fact treated to further quality buying

Godrej Nature's Basket
Godrej Nature’s Basket (Photo credit: vm2827)

However in concrete terms shorts on Godrej are a great idea as are longs on ICICI Bank and M&M. The side tag wars of Godrej and M&M in scrip selection if any for both promoters based from ‘amchi mumbai’ are non existent primarily because fo the inconsequential daily volume of 304k in Godrej Industries and thus for your institutional desk it is a single trade scrip, one position ruling its trend and thus will be a short beyond 20 levels too if one wants. M&M and USL similarily lead the remaining value in the market as some smart promoter moves, especially the M&M deal with a foreign promoter scaling up its auto ancilliary units in a single consolidated operation. USL is as good as a iDFC but as the network pick presented (Dimensions?) it is in a strongly invested position. M&M is also important because consumption will also come back in the second half once the recovery is in play.

Banknifty drift is transcendental and unlikely to impact the prospects of private banks leading the rally.  SS had a great pick in Dena Bank and PNB is also a great long. Air Asia and Jet Airways take off on new India inc rides that are definitely more significant than mere exploration with Ramadorai in the chair at Tony Fernandes’ Air Asia and SEBI following up rigorously on the 51% Naresh Goyal controlled Jet and the “???” Indian controlled FDI by Air Asia in almost an established Malaysian treason habit in India investments

The sudden jump in Gold imports still does not mean good redeeming news for Titan or the slip on the CAD but is probably a last hurrah of the clampdown/controls. Jubilant’s correction looks like could continue another 20% down after the move back from 1300 to 960 in pre-open today one also feels that shorts on REC or Jet are misplaced at these levels of 200 and 460 respectively. Buys on ITC and Bharti Airtel are likely t o hold for longer term though minor corrections from these levels as for YES Bank have to be watched for, including any newsy disruptions to them. FDI increases in Banking and other sectors ( though not Media or Legal sectors) are looking likely but within 2014 H1 after government formation is cleared and not in going away policy presents which would e intemperate for the coalition at this point and more importantly for India Inc.

India Morning Report: 5750 is here and it’s Friday

The week will close out thus with FIIs exiting some equities occasioned by DIIs entering the market finally buying 3 days into this Friday and likely to end the day near INR 25Bln in buying ( ` 2500 Crores) for the week

Mid term traders would do well to avoid exploratory tips like SS bidding out BOB into a new spin after it hit 630 yesterday which is unlikely as Markets respond strongly to the week’s closing glad to go home with no outstanding positions and no Rupee trades left. As shorts exit the Rupee ( if they were still on after the GOI move mid week) there may be even more bullishness to close the week. EM bonds as of now do not equate to India and with DIIs also buying, any resumed buying will mean quicker move up in volatility providing keen traders new choices in scrips going up not down

Jet Airways and the sharply corrected YES Bank would be my picks to start and if none of the two work for you, switch to ICICI and IDFC or ITC and bharti as each of these twoples are likely to work together on different sentiment days on the upside not unlike Axis and Bajaj Auto or Axis Bank and Idea two weeks now. F&O straddles at 5650  were a great pick or strangles at 5600 (sell puts) and 5800 ( sell calls) but should be ripe in today’s open , vol having moved into the 2s.  The safer ones going by the network pick recommended at 55/59 should let it sink till expiry and pocket the 44-50 they might have turned in in the setup yesterday

Europe and US should not have much of a move left  to close out the week.

 

 

India Morning Report: Bank shine again yields to Yes Bank and ICICI Bank, IDFC and quality promoters in

It gives you the feeling of “every thing is right with the world again”. It is not deja vu. It is the latest round of banking licences and yesterday’s guidelines with a lot of fine print was given the green signal by the government,. The reason it is why everything is alright with the world again? A corny one as i fettered in between remunerative careers and higher education can see the trees off the woods. The trees claiming India’s recovery has broken down. And the trees are too close for comfort. This 2012-13 boost of liquidity in the markets is on the bink of withdrawal, India despite being a sticky destination , likely to e among the first to lose money once the Fed ntention is firmed up because of its ow weightage among the Asian markets. Others have different barriers to High frequency trading and other Hedge fund and global bank strategies also and asia is likely left with root long term investing stock by Q1 2014. The long term trading caital stock however favors India continuingly and the new banks with 10 year promoter track record and financial businesses consoidated under a single NOHFC may shorten the wait and watch period by having established promoters spend 18 onths after aprovl to get into the thick of things and thus sustain investment interest from the get go. Yes Bank and ICICI Bank remain more transparent exapls of a growing banking business which have more or less stuck by the new regime and along with HDFC Bank and HDFC represent the growing size of Indian resurgence as global participation by the big banks is negated by the requirements of new Capital for india ringfencing it as it must in line with other non US/European operations for the same banks

 

BofA ML’s revision of India’s GDP growth to 6% and 6.8% in fy14 and 15 will likely pass away unnoticed as RBI already has pared forecasts of FY14 to 5.7% and no autos are not turning around in june or september quarters. Especially of concern is the continuing accumulation of volatile interest around Hero moto as just OTM options at 1700 strike have barey pared premium to 40 despite the stock’s hitting 1670 at closing yesterday and that is what sets off the infinite loop of disinterested traders willing to exit India markets again and again, which on must guard. however able the stock may be in terms of blocking out shorts, the markets have no other mechanism to furrow out that excess premium in the 1700 strike and that ungainly thought is what makes it a tiring build for India Inc. One must recognise that waiting fast and furious for the auto sales to come back is not the deal and “another massive upsurge” is not just around the corner.

 

Yes Bank
Yes Bank (Photo credit: Wikipedia)

 

Unfortunately while such corners of FNO interest fail to hit other bellwethers like ITC, certain speculative favorites that have repeatedly created a phantom Bombay Club of Tier 2 Indian promoters continue to get to block entire trading series in whichever front month is appied in this case the June series. Bajaj Auto has shown better resilience in performance and similarily there are others like the banks and candidates mmentioned above that  an sustain higher series interest Changes in preference to Diesel ad other such changes in the structure of the markets may not allow customers to respond to falling oil prices and a market still not accepting ford and chevy produce or even japanese cars except toyota after a short honeymoon with hyundai in the last two decades unable to afford quick model changes while xports may pick up for all players incl nissan. VW’s probably happy enogh playing at the premium end making this large consumer market a “niche” structurally

 

Deal canvas was also extremely pretty in India with Axiata getting a play in Idea as Idea looks to divest the Tower business to its partner. Birla’s interest in a bank is also sustained despite the refusal of RBI to allow JVs with other promoters for a bank NoFHC. Sun TV results make it extremely likely that the DTH/TV software sectors finally rise in scale to cater to the highly lucratve fast growing market in India but they ar einstead likely to scurry around for a bank which RBI can handle . Bajaj finserv and Bajaj Finance are perhas close to a NOFHC structure already and can jump right in with the branch structure of the Fincos as with M&M. REC and LICHFL may likely not be allowed by RBI. In Deals, nyse Euronext has exited MCX as well. Concerns around Orchid’s 2010 sale to Hospira in Chennai may dissipate allowing it to pursue the other unit sales in due course. PFC is in the meantime picking up stakes in NCC for some infra projects in power and highways which must help NCC. LB holdings and WIpro are others in what seems to be the new gold rush circa 2013-14,th one day//week/month when all deal announcements almost com close to complete the years takings for the banks as the recovery is well close to drying up. Axis bank seems to have lost the deal truck to SCB and even Citi this year in India as even HSBC is not getting its share of deal cash in the medium sized QIP rush and a flurry of infra debt reduction. S&P/McGraw Hill’s interest in crisil to 75% is heartening to note but one though unwillingly must raise the specter of a going private transaction for the increasingly clouded suture view of the global rating agency

 

The Rupee is yet not done its move down likely to 57 and beyond though most of the move has played out.

 

 

 

India Morning Report: Cheerful markets for FDI inflows, Pensive memories of a growth phase of IT industry

Jet Airways IFE
Jet Airways IFE (Photo credit: Wikipedia)

 

If IT were a mere product than employment for millions, it would be seen to be in its mature post growth phase ready to be phased out by a new product or business. That is not a valid hypothesis, and perhaps not a valid criticism but yet a good attempt at slang , street smart catch up with the good times. Even as HCL Tech follows Wipro as Wipro opens the week headed to more than 10% lower at open, HCLTech will likely lead them back once they reach a sub 300 level here. As long as we are on the out tray, ( out of fashion vs being the ‘in’ of the last two decades) one might also reserve judgment on the golden M&Ms, Mannapuram Finance and Muthoot, both actually having been thru worse in the last two weeks but that we’ll underwrite as being on the up and up from here, calling not just a bottom but an active clawback, though one might rule out active recovery in these till results season stars are over and infact the same can be ruled out in most of the midcap.

 

On individual scrip recommendations apart from commending the HCL Tech short by Mitesh Thakkar and exhorting my readers to go forth and make profit on HCLT.NS corrections, to join the stream and strengthen it for bigger payouts I would just add one bit of caution against non recommendations by Ashwini Gujral on the Jet Airways story. Anyone who thinks Jet will remain in this channel and not reach 550 again is flawed or limited by their prior analysis of a different fundamental and as Technical chart Guru Ashwini G. will just exit this limited (non) trade idea of his once the scrip beats prior targets and resistances and Jet Airways per se remains one of the strongest MidCap non Blue chip picks in the Indian markets on par with pharma midcap plays which realty speculators and chart gazers run easier with because of studied volatility and proclivity to oscillate in SHM around the mean traded price almost at beck and call.

 

Similarily Mr Sukhani’s view on banks and the nifty are always a little tentative at ‘U’ turn moments and one should not discount them in a hurry nor excessively mind them while looking at even positional trade except when one expects to run in for an intra day bet or two. Bank of Baroda may not grow faster, higher and stronger in a hurry but Banks per se have been out of favor unnecessarily for long part of the 2013 trade and as they remain half the market cap and two thirds of the liquid market one would venture its the easiest pick to grow with if one chooses YES Bank at this time, headed to unknown heights on its stock price.

 

The April series has seen a 14% decline in IT till Friday and the index is safe for 5600 puts sold positions to build further as booking profits on sold puts of last two weeks is likely happening in the first session (before noon) as we speak. The Land Acquisition reform Bills are to be keenly watched before the market tires of this brief comeuppance yet to be characterised as a rally while Fixed yields weather down to 7.75% in grudging admiration of the Rupee’s performance, inflows and the fiscal accounts. If the yields had indeed been leading the trend basis the conomic forebearance of India inc and the improving data, they would have fallen to closer to 7.25% even by now and thus one sees a lot of strength available to equities if the results and statistics can keep the faith making a mid week tentativeness a good point to start a big positive institutional trade even as HMT restructuring is approved and coal supply agreements signed. Coal India’s divestment plan is still threatened and complicated by the LRB (Land Rehabilitation Bill) being on the table in parliament and the Food Security Bill precariously close to being threatened by a cornered but fragmented opposition

 

 

 

India Morning Report: Infosys shows a lack of forebearance in a sack sack play

English: By Nikhil Kulkarni
English: By Nikhil Kulkarni (Photo credit: Wikipedia)

 

As expected, Infosys rerated the recovery rally with a 15% cut on open pushing thru a 1% increase in US and overall Dollar revenues and beat in Net profit based on other income offered as bait to speculators while the stock possibly returns to its #6 position in Nifty stocks based on Market Cap.

 

The market rally is intact though with a PCR at 0.93 hardly near enough after a smart move from 0.80 in less than a week. Axis Bank though is unlikely to be used by speculators to fill the coffers of the empty Nifty and a Bank Nifty run highly probably for a 1000 points after Indusind Bank reports on Monday.

 

Those looking for a 5650 cap for the Nifty may have been superceded in Nifty targets but for these results but with the PCR provisioning the momentum for earnings outperformers, once you factor out the movement of infosys alone fromthe index values it would still proceed to 5750 levels (ex infy, mail me if you are willing to do the exercise?) The Power NBFCs and the outstanding picks like ITC and IDFC are expected to outperform in business as well not unlike YES Bank and thus are likely to be chosen with ICICI Bank and HDFC Bank as bedrocks of India and Asia portfolios.

 

Critically though, India’s successes with damage control on key attributes of low low information sharing gets a boost with Infosys almost deciding to scupper guidance and India’s data engines will have to work on broader strokes for a long long time to come. Banking, Credit, Economic guidance or otherwise the India forebearance model is equally predicated on old Colonial forms of information blackouts in the public domain and the bedroom entrepreneurs of the country like it that way more than the failure of Bombay Club would have you believe. Granular data is in fact available on more counts in India than attention is given in the press but policy mechanisms and successes of ‘no crisis no new score’ strategies globally in any sphere ensure that the India dream lives along higher interest rates and a hindu rate of growth.

 

The US budget exercise on the other hand , in larger control of global Economic vicissitudes is underway despite the gridlock and with a barely $500 bln for Defence in the Budget proposal and $47.8 billion for State Department ( earlier read as the War Budget) while being part of the larger 2.5 to 1 cuts to revenue based $4 Tln spending cuts managed to increase focus to Asia. That unfortunately means large increase in Iraq, Afghanistan and Pakistan in turn showing the large gap in US understanding of Asia bigger than the wholesome ozone hole created by European Capital flows. The rest is too technical to imagine and should probably be appearing in bit and pieces in future India reports or economic discussion at advantages.us

 

JP Morgan reports when the sun comes up in the US later today probably cementing the big rally banks had in the quarter despite the changes in the mortgages refinance volumes. Derivatives clearing impact starts appearing in global banks in 2014 only as the war for granular bank regulation enters a predetermined longish rollback phase.

 

Contraction in Singapore this quarter (based on Advance GDP), followed by negative IIPs in Malaysia and Mexico are likely to cascade into 2014 after the rosy start post Christmas was wiped out in the vast Asian predilection for property growth as the be all and end all of the ‘organised economy’

 

Infosys destroys brand equity with 8 pawn gambit? Or Infosys lives dangerously?

 

Guidance is actually available in dollar terms rather transparently and infosys has again made a play for Brand infosys by pushing a too muted a guidance in a bid to allow it wiggle space in the client boardrooms and ask for high value business and try and keep its uniqueness intact.

 

Infosys has chosen margin impact in the current quarter in onsite wage increases folloing on increasing White male employment in the US and Europe geographies earlier.

 

Others in Indian IT have long given up, NASSCOM being under new management with MindTree CEO KK Natarajan taking over at its helm , and CTS and HCL looking for volume on negative margins. TCS is unlikely to follow transparency in similar terms when it mixes it up for the fourth estate and the investors next week and try to capitalise on what looks like a sub 20% margin for everyone else except TCS as infy is already down to an op profit of N 26Bln or 23% EBIT and HCL and probably Wipro are sure they don’t really want to push it beyond 15%, settling t a vastly improved 17% in the first case.

 

 

 

India Morning Report: Sorry Bears and Cartels, Bulls are still hiding in the Indian woodwork

Yes Bank
Yes Bank (Photo credit: Wikipedia)

 

Network analysts sitting on lower support levels and betting short on most new blue chips having seen the infracos slide, are in for another shocker as the march series looks to inch closer to 5600 on expiry day before closing out comfortably ahead of August 2012 levels. Both Sukhani continue on the second month of watchful short betting SS targetting YES Bank further from today while Bharti and some others responded in kind to the lack of interest to back the market interest to significant lower levels but the buls seem to have won on real strength of fund inflows for the time being. Markets will correct but not by much in April and while the upside was capped to 5850 levels by the weakness that just means the lowside is still as high as 5550 even for safe investors and 5500 puts should be real rich making sells for bullish investors. (We personally are not conflicted by any position here)

 

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

 

BRICS Development Bank aside, which we look to fund the Indian Infrastructure gap in due course, India inc starts off results season in a week and its profitability scores that already improved on identified sectoral leaders in Q3, are the ones that will be identified with the successful India story and not the politicking as enough stability and forward looking governance is guaranteed by incumbent ministers if not the party flags.

 

The Rupee keeps most of its strength in the new series and the may series may give pointers on the new range for the currency as Fixed income yields cross back into the 8+ range having lost the rate cut and pushed the bank to the reverse repo rate on the corrridor

 

Given the strength of equities and currency going in, profitability concerns of consumption and auto plays should be watched closely for bear victories even as IT forecasts and IT results will remain damp and not affect sentiment. Healthcare could lead stocks nose down but not up even if it maintains good profitability and revenue growth and any weakness in bank performance including Q1 FY14 forecasts will be a deal breaker.

 

Infra debt funds have indeed taken off and execution perofrmance of projects still hanging will come intpo play on the bourses also in Q3 FY14, QIP fund raising shifting out from infra and bank fund raising to NBFC or Capital expansion plays across manufacturing and services businesses with CDS holding sub 200 levels , a great performance for an isolated Asian performer.

 

 

India Morning Report: 6000 is broken, FIIs are not buying, 5950 will hold

Asia
Asia (Photo credit: slagheap)

 

Oh no, FII investing in Asia scrips again

 

And this time India story is still alive and well. Firstly however, out apologies that there was no India Report yesterday and the day before and while Asia was hot, most commentators would be wont to assume that it was just the Yen running to 94 levels here and the markets having broken down in India, Apple having broken down in the US listing, and Einhorn having broken down just on the news of having lost a sure Cash hoard to the company after a new preferred issue was scotched forever by the management even as Einhorn’s holdings grow. But that just hopefully shows that Apple has enough managers to not lose it to cash hungry private investors like David Einhorn who are mostly coming out on heavy losses in 2010, 2011 or 2012 or more than two of these three years on deals from Greenlight and other PE investors like Sears’ famous Bruce Berkowitz, now safer in Financial scrips

 

Though banks have not found a stable foothold in 2013 globally, the profit measures outperformance in large diversified India is hard to miss. At current levels Banknifty is just about done preparing a good takeoff f for a sustain rally from 12400 to past 13500 levels into new skies. Leading them would be YES Bank and ICICI Bank, loners like SBI, Axis, HDFC Banka nd kotak on different legs and ably supported by independent almost movesof Indusind and ING, PNB and perhaps, one more PSU bank which has cross the tithe to move up.

 

BOB and AllBank are on watch as they report long lost NPAs and a fast deteriorating balance sheet seems to have been expected by the markets but despite estimates of quantum of such bad loans and disappeared market segments ( in the case of BOB, like Africa ) are treated as fresh carrion for short vultures deprived of a good meal in the ne levels despite DII pressured into selling faster and bigger at every leg of this rally. However, DIIs would soon be forced to buy as Domestic inflows make a comeback, probably earlier than the comeback in GDP if wholesale investors or Corporates have their way. Liquid funds being limited now in Bank treasuries and in the shadow banking system, the degrowth in Deposits as rates come down is likely to be cited as a  non fungible risk in ongoing trading reports and keep markets cautious as the bull run builds up from this level and skips the pre budget rally as lack of time forces markets out and short interest is just about exited at flat levels here below 595. Markets are flat again for another week or month even

 

 

 

 

 

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: Why not a 50 bp cut now, and is Glenmark the new blue chip

Does Rao have room to cut rates

 

Yesterday’s hawkish review ahead of today’s policy meeting and announcement was very clear about the CAD reaching 5.3% with another reduction in the Central Bank’s conservative GDP pronouncement. However, inflationary pressures have ebbed and since the Central Bank realises the importance of doing away with the spectre of a recession, now hinging on a rate cut with Credit growth stuck at a low 15% despite the gap from Deposits that grew 11% in the week ending Dec 28.

 

That it does, also means that the rate could well be a good 50 bps, accelerating the dissemination of liquidity and growth from financial easing in the Economy and allowing RBI another breather to study inflation in detail over the period till June when the next rate cut would become due. one wonders though if like bank desks have forecast, India can actuall live to the top of this Economic cycle with only 100 basis points in cuts or even 150 bp till March 2014

 

Axis Bank Mega QIP garners $2 bln

 

Axis being the speculators’ pick for arbitrage and weightage balancing on both Nifty and Banknifty,    the effects of its improving fundamanetals with a large $1-1.5 bln Capital infusion are going to be important momentum providers to the Nifty and as it fortuitously looks like it will not result in Cats and Dogs moving up with both Educomp and Jubilant foods lying low ( the latter having lost its coin purely on speculative traders’ dime), it would mean longer term Capital taking over some of the remaining float at Axis Bank and others in thelarger Mid Cap categories like Yes Bank ( who have changing ownership on the FII ‘float’ as a downside risk after having Rabobank exit)

 

Glenmark Pharmaceuticals
Glenmark Pharmaceuticals (Photo credit: Wikipedia)

 

Glenmark reports Q3 results on high expectations – ‘Enriching shareholders’

 

The deep pipeline at Glenmark with 46 ANDAs to go in the US market and 82 products already authorised its growth at double the industry rate fof 12% in the first nine months of 2012 ill only be exceeded by itself again in this quarter and lead to probably a count in the Top 10 pharma companies and even the Top 5 in the foreseeable future.

 

A healthy 25% of the portfolio seems to be domestic market driven and unlike other market observers we do not believe such 35% growth as it achieved in India in Q2 is likely to be beaten by others in the Industry depending on new compulsory licensing and expensive generics for the Indian market as portals for explosive growth

 

The domestic market remains likely to reward Diabetes solutions and normal OTC and low value prescription medicine manufacturers with volumes and growth from the current pathetic $2.5 B mark in 2011-12 

 

Glenmark pharm in the meantime is prescribed for having broken the barriers with consistent 20% Topline and 30% Net profit growth parameters.

 

 

 

India Morning Report: The Budget(ed) Roadshows, the royalties and the burden of the beast

That beast dropping the burden into the nether world could well be market participants once the RBI Governor reaches the comfort zone of “Sorry, no cuts” later this week before Bank Policy Tuesday strikes markets 2 days prior to expiry. FIIs brought in almost $3 Bln to Indian equities in January and while money flows to bonds had picked up again after being usurped by equities the lack of a rate cut could well force some selling into the 8% yield mark in Indian Bonds.

Meanwhile FinMin denizens with P Chidambaram have started on roadshows that sell new reforms including the ever awaited GST rollout by FY2015 end and the raising of ceiling on Corporate bond investments further to $25 bln. Nonetheless, This market could see Nifty topp(l)ing before 6150 as a disappointment is near certain and the clamour to get back into HUL this morning is now a merry part of the same rerating saga as ITC and Bharti nurse there recent high levels and HUL is still the lowest royalty paying established MNC out there with more than a $1 bln in  Consumer staples sales in a quarter. ITC’s brand portfolio is surely chugging along as nicely as well. Almost as much as the bigger soaaps and detergents portfolio of HUL.

English: India's Minister of Finance Palaniapp...
English: India’s Minister of Finance Palaniappan Chidambaram is the special guest at a plenary session titled Risks to India’s Economy in a Post-Crisis World held at the World Economic Forum’s India Economic Summit 2008 in New Delhi, 16-18 November 2008. (Photo credit: Wikipedia)

India’s consumer consumption jump story could still be just around the corner further along in 2013 before the next Festive season rerates expectations of the secular growth trajectory for India and how China is indeed different.

China and Japan’s markets may not see the expected rush in equities again and it is back to the smaller markets and some of that rerating might again positively influence Indian inflows because of the same reasons. I am intrigued therefore , (as an analyst and a commentator albeit because I have had a punting background) by the consolidation in ICICI Bank as well as YES Bank and IDFC. Not just (a) alone but all of (a), (b) and (c)  could be headed for new levels for consolidation which are more than three times their current high ‘stratospheric’ pricing as their valuations not only underestimate India’s potential but these scrips flag the best examples of trailblazers in India Inc which can ramp up on volumes, new business and secular growth almost effortlessly for the investor as we head for a comfortable 2-3 years from the bottom of the cycle

Of course the related depth of research sitting alone might produce limited results immediately as most is internet only kind of info but one is certainly confident after seeing the fate of erstwhile trailblazers like Kotak and HDFC Bank (incl HDFC) which have been forced to stay down with excuses of sterling quality after they could not catch the earlist kindled growth in any of the last 4-5 cycles they have been a part of. They would probably choose inorganic progress from here to get back into the saddle in the meanwhile as Energy and Pharma also need to prove their mettle as sectors and Aviation and consumption are the only mavericks worth backing right now.

 

India Morning Report: A flurry of good results in Week 2 but markets wait more Budget news for FY 2014

Even as Novak Djokovic made it thru another Marathon qualifying round with Warinka this year in the Aussie Open, markets wait nary a move on results from the likes of Hindustan Unilever and Kotak Mahindra Bank even as leading lights from both the non-discretionary staples sector and banking have already been awarded in market terms to Yes Bank ( and HDFC Bank & Indusind Bank) as well as ITC.

 

While Bharti and ICICI Bank follow in the wake of these results that come in today, after the Auto (2-wheelers) war of market which Bajaj Auto scored over Hero motocorp, it is but a residual interest from major institutions that brokerages wait on stocks matured and still having signifact float as well as share of their respective product markets. In more simple terms, no one is really interested in HUL anymore or even Kotak except for their most hardened followers.

 

Kotak Securities logo
Kotak Securities logo (Photo credit: Wikipedia)

 

Even ICICI Bank may be called matured in similar terms but  closer look reveals that stock to be more response and volatility hungry than these annabes that have managed to be the lead stories of India Inc for a long time. Yet, they still produce growth and in case they are truly able to break thru

 

 

the barriers that stop all indian consumer and growth stories to $1 bln a brand, they both might yet throw a good surprise.

 

Change in regulations on road highways allowing projects to proceed are a good sign for those waiting for the infrastructure juggernaut. Also great were stories of Spicejet’s success in growing realisations more than 30% to INR 4400 per passenger and operating profits up nearly 40% this quarter even as investors wait for Emirates and Etihad to finalise their India deal, the Dreamliner stand down having also meant better revenues for global airlines and to a limited extent those stranded by Air India in India. Jet Airways continues to show good competitive spirit with Spicejet and with the market yet not tapped much more than the surface , even Koingfisher’s dud mismanagemnt continues to be ignored in hope of FDI.

 

China’s dynamics are changing slowly but its revival is no t history. The current lull in commodity prices was however expected as it has happened in other cycles that China really does not need to start buying metals cottons and even its other Export industry raw materials like for Silicon Cells (Photo voltaic) at higher prices and so the commodities are going thru a natural correction.

 

The Fixed income markets have apparently overshot the 7.9% mark, making the 7.9% mark a support on the way back but a rate cut of 50 bps or 25 bps apart the market might yet come back to above 8% as RBI does not have many choices when Policy is announced on Jan 29.

 

Duties on Platinum and Gold apart ( from 4% to 6%) the precious metals remain dull and Silver a good trade from 58000 to 64000 and from 63000 to 58000 whene evr you get the time and the patience

 

Novak Djokovic during the 2008 Tennis Masters ...
Novak Djokovic during the 2008 Tennis Masters Cup final against Nikolay Davydenko (Photo credit: Wikipedia)

 

 

 

India Morning Report: Standing on a vertical ride at closing..

NSE Logo
NSE Logo (Photo credit: Wikipedia)

Does not leave much to imagination or prescience after the Nifty travelled the Vertical Flights of Fantasy to 5950 levels before closing gong struck at the NSE terminals and the soon to be public BSE that the markets are a settled lot in the morning and a final big correction is being ramped up in commentary to a big killa round hopefully over 6100 levels .

That means the Nifty and the exchange has another big weekly move  and probably not immediately next week though looking at the eagerness with which the House of Elders vote on FDI brought to profit taking it is obvious the wait and consolidation has been a long one even for FIIs or as some mention, most of the floating stock is yet gone.

In true indian market fashion I can duly see without undue overanalysis that it leaves opportunities like Jet Airways and Orchid Pharma ( as it negotiates with late lenders like IDBI Bank) for a grand capital appreciation burst. it also shows that markets have matured to the virtual exclusion of retail players though US markets can still claim to over90% retail invested in equities , but one guesses thru discretionary and non discretionary forms of institutional and hedgie managers.

As mentioned yesterday, globally alpha is back in vogue meaning India is likely to remain in currency and the market has thus that upside led by players like YES Bank and other private banks wwith double digit growwth left in this rally for them and other blue chips for the mass of your portfolio to settle down with.

Ramesh Damani looks to be in good form as always making the next level of case for a big correction for indian / DII buyers after the likes of Ashwini and SS failed to get markets to see any worthwhile correction in the meantime but it is probably time to see some institutional buyers move or rather churn their portfolios to the new limelight , even though they might feel like still holding on to Indian Pharma and even dabble in fiscally imprudent PSE banks on their indian panel’s whims.

Stride Arcolab continues its run it missed last week as Maruti and Baja Auto stay with Biocon to catch more idle profits on the take.

 

Bank Results Season (India Earnings) : Earnings surprise: ICICI Bank processes a few more growth triggers for Q2 2013

icici bank
icici bank (Photo credit: Wikipedia)

Net Profits have grown to a never before INR 19.60 B or $376.92M for the bank as Net Interest Income climbed to INR 33.71 B or $648.27 M with Treasury income of INR 1.72B helped other income to INR17.91 B  all growing at more than 30% over the year ago quarter. Q1 2013 growth was a little subdued in the middle of the near contraction in the Indian Economy on year but still a sequential improvement on March quarter to INR18.15B. The current Q2 2013 is therefore a sequential gain of 7.33% and even with a near 20% rate of growth in credit CAR including Tier II has inched up to less than 19% Deccan Chronicle ‘s INR 5B exposure was added to bad debt taking Net NPas up sharply to 0.78% from 0.71% in Q2

The bank is looking at bringing $1B in NII itself every quarter in less than 2 years and with Fee Income of INR 179 B year to date is likely going to manage a superior profitability with good NIMs on a loan book closing on to INR 3 Tln

The bank added a INR 5 B media industry account as NPA and i s otherwise unperturbed by the current sector massacre from bad loan provisioning PNB also proved results today and was able to grow credit and deposits by more than 17% on year Though public sector PNB has lost grip on profits, its cost of deposits at less than 7% might be a hearty target for a bank such as ICICI Bank not shy of wholesale deposits.

ICICI Bank has met competitive pressures from Private banks to grow its Deposits to INR 2.9 Tln which means total assets are over INR 3.3 Tln earning NIMs of 3% Savings rewards and social banking go a long way in improving its brand with retail depositors. Savings deposits have grown to INR 810B and 70% of that is retail (Chanda Kochar answers in analyst meet) Advances are INR 2.75 Tln, credit growing at 18%, retail at 14% (mortgages 14% and Cars 27%) with International starting regrowing credit portfolio at 6%

Kotak Bank in the meantime has grown CASA to a respectable 27% and YES Bank also ~20% with a 6/7% interest rate peg for retail depositors. NIMs are smaller at the smaller banks like Kotak and YES

 

 

India Morning Report: Rebuilding the India Inc dream

The first quarter of profits after 5 quarters growing bottomline by 15% on the index companies a good base price for Gold and a palatable range of Oil prices sounds promising and data enticing enough for one to reconsider the possibility of India growing at its normal clip instead of a sub 6% growth in a not so distant future.

The 110 odd infrastructure projects including low and hgh value road projects and prestigious and commercially groundbreaking ports, gridco and other Infrastructure projects are likely in final stages of a policy intervention currently with the Cabinet. Though they come at the end of a barrage of policy action still awaiting execution and KFA failure is more the current corporate branding influence for India Inc, the execution of these projects could enable by itself a INR 1.1 T in GDP accruals from construction and a likely 10% jump on the nominal and not the real effective GDP at 2004 prices or whichever base year is current.

Banking credit is steady and growing at 15% and if indeed investors still bet on a rate cut at the end of October, then in all probability the only possibility is of an unanticipated market failure and so the markets will have to rise to the occasion without moping much more at 5650. A fall from 5650 to loer level is again only faintly probable after dull days stretch out at least one day after the current series expiry thus the market pre expiry unwittingly again offers great buying opportunities in the otherwise scarce and right valued large cap universe back with good earnings from ITC,IDFC and ICICI BANK to YES BANK, ORCHID and even STRIDE ARCOLAB which has solved the FCCB issues and FX issues in the quarter with realised Net profit hit but not detrimentally to the company’s prospects. Sun Pharma’s issues in the US market also add to the current opportunity for buying and current levels of scerips like HDFCBANK and again ICICIBANK will likely in fact become a bottom for the coming rally which may bide its time till policy announcements including Bank Policy Tuesday are over this month and some of next.(ICICI Bank is up 3% since writing)

 

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

 

 

 

Morning Trading Strategies – India July 30, 2012

 

ICICI BANK And IDFC start trending down when the exodus becomes clear in the coming weeks esp after the GDP data.  TILL THEN ICICI BANK may actually reach never before highs with ITC ITC results up 20% were an eye opener after they showed up plateauing on consumer brand sales in Q4 data Consumer brands do show continuing losses (minor) but traction shows capability to tap the 10X higher unorganised market in Atta, Oil and readymade foods.

Regardless of HDFC’s 20% higher profits the Consolidated income of INR12.75B, the markets remain topped off and likely candidates while the rupee wants to correct to the Dollar to 54 levels before trying a jump, leaving markets pushing for an upside.

However, my earnings capacity and the trade in the Rupee Dollar have been hit adversely as I get targeted in the ring to sort out their confusion on the irection of how to get out of a dollar positive trade because of the weak markets.

Marti’s scores in Q2 were bad but more than results actions in Manesar and its swift rebirth in Gujarata this time are going to have positive ticks on the price sooner than later. BIOCON and healthcare upside has definitely been ;lost excep t for one shadow snook with the telco stocks. The IT jump is illusory but if you hold them, it is good for you

Someone did say PSU bank shorts, but if you try CBI or even UBI they may be climbing back today.

Snatch and Jerk (Intraday) therefore offers few available opportunities left on the shelf. 

No need to add positions now when you can get them cheap later BOB and PNB should infact come back into the green and rise sooner than later. Indusind is not a good pick. Yes Bank holds.

 

Morning Trading Strategies – India July 12, 2012

Sell INFY in the morning even if you get high 2380 levels as the cut would go deep

Buy BIOCON and buy the banks esp stay in your holdings in HDFCBANK. Auto shorts are unlikely to give too much in returns, Healthcare and Consumer stocks should be buy on dips. CIPLA my stay up and SUNPHARMA shorts work for the street though keep a tight stop loss on the same.

Buy a few Nifty Puts at open regardless of any strength you see, do not buy Banknifty puts and if you are tempted to sell a few puts to lock in the banknifty levels it could actually work but then it is temptation

Hopefully by 10 AM you have started biting Nifty Calls

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

The India IIP Report (February 2012)

Capital Goods production came at 10.6% , Electricity came at 8% but Composite IIP came at 4.1% up from less than 2% in January(1.14%) with Manufacturing at 4% overall. IIP is still at the lower end of the possible range. Janiary was revised down from 6.8% on sugar production data

Capital Goods and Electricity are back to highs after a -2.6% and 3.2% data scores for January 2012 Markets largely ignored the volatile data as Fenb and March GDP is already assumed to be further lower than December 2011. Consumer and durables data show great contraction 9available as inference)

Meanwhile the INR 40 bln infusion inoto Air India is hardly likely to suffice for the megalith which has run down its entire equity

 

Foreign Banks in India: DBS grows its #3 market to $4.7 bln

DBS Bank Ltd logo
Image via Wikipedia

Foreign Banks in India: DBS grows its #3 market to $4.7 bln

DBS assets in India grew to INR 237 bln according to results discussed by CEO Piyush Gupta and reported in ET. The bank is hoping that subsidiarisation nod from the RBI will come with better branch infrastrcture hopes for the bank. ING Vysya and Indusind bank would compare in size with DBS with INR 335 bln in assets

The bank has 12 branches in India. DBS has a 10% Temasek holding. It has 39 branches in Indonesia and 15 in China (wikipedia)

Piyush Gupta operates from Taipei ahile DBS counts Singapore and Hongkong as its largest markets.

India and Singapore operate in each others territory thru the Comprehensive Economic Cooperation Agreement including GIC and Temasek holdings in India and tenets on free transfer of information between the two nations including banking wealth questions

Related articles

Bank results season : ICICI Bank begets the vote of confidence, PNB grows NPAs (india.advantages.us)
India Earnings Season: ING Vysya Bank uses the gap, Indusind builds on its early momentum (india.advantages.us)
Bank results season : ICICI Bank begets the vote of confidence, PNB grows NPAs (awardz.wordpress.com)
Bank Results season: Here’s the new pedigree of bankers (Yes Bank Q3 2012) (india.advantages.us)
FDI momentum for India’s growth (awardz.wordpress.com)

Happy Thursdays! Inflation pulls ways and means advances

As Yes Bank signs on to a 600 bps savings bank deposit rate, and food inflation ticks down from 15 to 11%, the refusal of yields to predicate a proposition in the double digits forsooths that the RBI will stop around here if and when inflation trends down. It seems to me that more of the banking sectors participation is at work here in controlling the rise in interest rates. Incessant lobbying apart, the rising IIP and refusal of inflation to tick down below September’s 9.7% could very well still mean a systemic redefinition of interest rate basis in India like in So Africa.

Instead of defining new zeros in overnight and short term rates treasury liquidity like in the US and UK, the new BRICS entrant has simply defined a higher systemic basis by accepting highe3-5% inflation than the US and UK and EZ targets of 2% at the maximum

Some results from biggies Kotak and Dr reddy also make this New Year holiday in India a good segueway to great market speak on the festival of lights.

Kotak outscored by 20% for a new run rate of $800 mln for the 12 months while Dr Reddy returned to its earlier $2 bln run rate with 9.6 bln and 22.5 bln in revenues respectively. Kotak will be with the biggies in keeping SB interest rates down but market sees a lot of benefit for them in the new regime as PSUs are outpriced for the time being and tackle quality issues

Inflation in vegetables remains at 25% but we are in favor of good growth for the hinterland in MSP raises now 2800 for Chana and Masur and increase again in rice and wheat. Also Hamilton must give hope to Ferdnand also to come up in the ranks as the Buddh provides a chance to speed things up on the F1 circuit

India Earnings Season: YES! delivers

The penciled results of Yes Bank in the wires finally managed to escape me as I started scratching aroudn for today’s Defense summits and the $4 bln C17 procurment from the US instead of the F-35 Lightning IIs that the USAF is making for itself..but it seems the networks are otherwise busy for the moment, Mr Kapur to appear sometime in the late afternoon as usual for the results commentary.

Profits are up 40% at $54 mln and Net Interest Income at $88.5 mln The Basel I Capital Adequacy at a tired 16% showing a lot of uptake in Credit to come can be easily absorbed even with a steeper incline of RWA. No data yet on Fee income and growth in Deposits etc yet but we are on the prowl..

(MindTree is celebrating quite a pop after its accidents of the last few quarters with a $92.53 mln revenue quarter, IT services and BFSI each growin gin double digits quarter on quarter..nah! we won’t eread too much into it..in fact without YES and Opto, we would not carry any others , even PE , without a $1 bln bang in the quarter – largeky because of the no. of threads running here that have to be taken care of, The Euro for example uis a great investment at $1.42)

India Earnings Season: Another Score for YES!

Yes Bank
Image via Wikipedia

 India’s crème de la crème again got a pleasant surprise per their expectations as YES Bank continued increasing its presence in retail with bigger and better CASA scores now comparable with Indusind (27% CASA) and ING Vysya Bank(with ultra retail focused franchises purchased from Vysya)

The bank scored $84 million in Net interest income, 40% higher than last Q4’s $62 million and profits have cruised to $50 million after an equally resounding growth to $35 million last year. The numbers ( NII 349 Crs and NPAT 200 Crs ) are well ahead of expectations and the bank will be key to corporates harnessing the global emerging markets and more important the big Super India – super growth storyline, still intact after recessions and slow growth demons

We’ll keep adding as details come out

It also seems ET is finally responding to competition and results from YES got a much erudite response after things have been sharply upped by us and mint (Tamal Bandhopadhya) in Banking: Here’s the ET insider

With deposit growth coming in higher as against loan growth, the credit-to-deposit ratio declined 400 bps sequentially to 75%.

However, owing to repricing of loans and hike in lending, the bank’s net interest margin ( NIM) — a measure of the difference between the costs of funds and the rate at which loans are priced — remained flat at 2.8%. Going ahead, with a low CASA ratio and the spectre of rising interest rates, there could be pressure on the bank to maintain its margins.

Currently, CASA (which is a low-cost deposit route) constitutes only 10.3% of total deposits. That may be boosted with the bank adding 65 new branches during the year.

Also as a later post suggests YES Bank detractors might like to get its borrowing rates in focus after Rabobank leaves town

Defining the new YES Bank

Finally, the cat is out of the bag. 
Yes Bank albeit a little late or cautious, 
has decided to step into the Institutional market. It will be asking investors to pick up a $250m QIP stake to shore up its capital. In the meantime, as reported earlier, they have also put on hold their diversification and market development plans on the board for the last 2 years now as they get into some serious consolidation in its core banking business. They have a good sleeping brand and their recent cost cutting efforts would also bear fruit. However, their focus on SME business might change now as the current ticket size is very unremunerative for them. There was some recent murmur when Rabobank announced its plans to enter the country directly, but that is a non-starter since Yes Bank would not go for the stake sale by Rabobank without making sure the house is in order as a deeper recession is equally likely in the next 12 months.

Yes would need a little serious selling with big ticket business while continuing to present simple and generous options for retail and SME customers. Their non presence in asset management and broking would hardly raise any eyebrows as the business entirely survives on institutional volumes and even a Kotakstreet and a sharekhan are essentially struggling with their current “low” period.
I wonder how any bank with a brand like Yes can today crack open the expat market which has a few relatively unknown niche players ( Geojit, recently acquired by HSBC) It would need key leadership experience to realise a valid entry point. One option however, at the barest minimum requirement, is to go for a PSB or a local bank in UK and Australia or the Middle east. That requires capital but any other option leaves you with a performance like ICICI Bank which has managed only rep offices in all its overseas expansion and have not been able to generate the required trust without a retail presence on the ground, leaving the field seemingly open for players like ING and HSBC.
Regulatory level liaison with developed markets would sadly continue to maintain the respectable disconnect that exists as emerging markets can barely acknowledge their requirements of the day as they are seemingly extended to the rest of the world. It remains to be seen if that home brewn recipee of the Basel and BoE would ever land in some drifting current and be taken care of. A way must be found for India to spare the cash and show their value in the developed world and invest in these international markets before much more will come out to bear on market shares of all the players. This is not to belittle current efforts from either side but I didn’t see it on the agenda in these last few years at work. It is never too late to start?
The scrip remains a good buy in Indian exchanges and I look forward to even more QIP issuance from YES Bank.

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