Sorry, the bears are here. Even as the India Morning Report moves away from Posterous forever, Post having turned off autopost services, PC's sense for India Inc and financial markets digesting a moderate budget are the ones that are likely to get the chop on Budget day trading or immediately after. The rally did provide the right exit to everyone in the last six months and retail investors are no longer enamoured to their equity prowess given the attractiveness of the VIX segments i.e. Derivatives and the attendent risk and inflation proving to be too much of a risk. Even as Kotak is identified as a going away story for the earlier heady growth rate of India in 2004-2009, Uday Kotak himself talks about the higher hurdle rate for retail as his bank prepares to reach wealth with new structured products that are unlikely to be offered in retail tranches of les than $10000 and thus will be available to only top 1% of the Wealthy and not the real rich salaried class that pay the taxes and carry most of the country's disposable personal spend. 

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States have unwittingly contributed on the green side of the Fiscal Report for India in FY 2013 as plan expenditure which does include state allocation ( which was likely fully drawn) had been drawn only 56% by December 2013 making likely according to the ET follow up that India will spend less than 90% of the budgeted Plan Expenditure for FY 2013 at INR 4.28 tln. That means Chidambaram is under less er pressure in the last full year budget to be presented by this government and need not hold back investments in 'populism' espoused by Food Security and Employment guarantees safeguarding the few precious investments India has made in social infrastructure though not making it better for sectoral spends on Education Health or reining in higher subsidy expenditure leading to a non plan bill of INR 13.5 tln this fiscal , a three quarters of a trillion more than budgeted.

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 Twitter's posterous is not quite preposterous its also post post posterous

While US tries to balance its Economy after a spate of QE liquidity is seen as injuring fiscal and monetary health, a rise in interest rates in the Economy with or without inflation could do wonders for the paradigm of growth as China and Japan return as investors in US treasuries and 10 year yields rule around 2%. The US economy may not be able to break the limits of a sub 3% growth even if yields spurt in the next few years in the US even as Europe falls back in an extended recession and the South catches up, esp Italy and Spain with imports to offer to the rest of the Economy making a brilliant recovery this 2013

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more sectors seem to creep into the equation as the marketstructure gets hijacked by those trying to make it look like the same as a retail investor could do in the fun 60s rolling on the floor...but Power NBFCs led by REC and PFC remain good moves in 2013 and PTC could get a bigger stronger role in the quad with Powergrid unlikely to lose relevance and despite roads being deprioritised, there may be enough speciality infrastructure bids ( I mean ports and urban planning ventures as well as welfare structures for the new deal) to keep all other infra midcaps floating. Also I personally back GMR Infra and Reliance Infra while berating overleveraged pops like even GVK and some mid cap Mumbai Real estate juggalos

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Yesterday's move up was a defining one and is likely to be bet dowwn in today's reaction. Also, infra is likely to be rated down as Election year approaches and India inc battles with inflation. However shorts on larger movers like LIC Housing and IDFC are unlikely to give more than the required minimum in the reaction and remain larger movers on the upside. Also Jp associates as expected followed last eek's DLF into the quagmire of being shortlisted wwithout a salary for the bulls on offer and are unlikely to be further good for more than a 5-10% move down or up. 

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A quick re-rating of the F&O market in the early trades yesterday meant  that writers of the 6000 call had a hurried exit from trades and very few have tried to cap the maarket already at 6100 or any other digits as the markets actually show signs of a breakout. The low volumes of MCX SX are perhaps an open invitation for the short club to try something faster and tighter in F&O trading on that exchange but with index trading not open yet, it is unlikely to have any impact and in this predominantly Asian leg of the bull tour, it is unlikely they will get past petty strategies to break up the trading interest up while 1 in 3 rating agencies have already fallen into the usual rut of calling for India's derating showing up our lack of faith in India as another 90 days look set to pass without any execution bombs and those analysts and short side traders aree undoubtedly still just waiting for actual policy and roll out execution announcements which can then accordingly be belittled for giving them a leg to stan din the crowded room . Givcen that it is used by most large media as well, the tac has become almost respectable but is painfully obvious and can usually be shot down with larger negative consequences for purveyors like these rating agencies 

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If you were among those selling a strangle on network recommendations expecting Nifty to not slip from 5900, you would have realised the folly of undermining your native knowledge of the country's markets with your observations of futility on the range and almost immediately the trappers were in action making the signature comeback in the second half of the session which was fortunately not sharp like the dying minutes. Wealth investors also have much more to punt with structured and naked futures shorted in Oil and event he other base metals as China plateau is defined as was in early 2012 when we were rooting for a China comebacks. However, back in local equities, our credit flows despite retaining a skew to construction and finance companies because of the higher multiple in the factor of productivity are not as lopsided as 50% of all credit as in China and so the slowdown in Credit could still turn higher and is anyway likely to never lose the double digit growth tag.

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At 40, I should probably be more considerate about feeling young, given how I felt about India's youngest dynamic Prime Minister about 20 years ago, but Cameron's trip to India definitely highlights that young Britain though trying to make new bridges with India thru London is a different equation and with tough domestic economic conditions, the easier migration philosophies of the UK and the US for multiplying factor productivity are in danger of being decommissioned as defence deals unravel and India searches for relevance from a different end of the equation as the budding largest Economy and UK looks at being the struggler keeping the light on regulation economics of a past era alive in the new European 'coalition' 

Jeez, that was a snapper overcooked in Indian spice, definitely. 

The morning however, is as dull as last week, despite a new Infrastructure corridor, which seems to matter more to small investors with linkages to the 'barely productive' IT and annuity economy of Bangalore with theold warhorse of Bombay not the same as the Jap funded Delhi Mumbai corridor. the bangalore and the Economy of the South in general is more about spread out factors of productivity that a re more socialist and crowdfunded social media fed than the big money Economy that links Mumbai with Delhi or the more labour Economy linkages of Bombay with the East

On Morning Report questions however, Mumbai Real Estate hopes continue to drive DLF and the rest of India's Construction Economy, and in this leg of the Nifty/Banknifty rally the entire bank, consumption and pharma portfolio too that is priced into newer levels and is looking for a little lightweight and adroiting sifting thru real value and jump to all time high levels on the indices. the Budget expectation part is mostly done except for the small trading rally in the week prior asor post as we nail down the ne fiscal deficit range and if all the improvement we have espoused and made appear indeed converts into a hard positive number. While JP Morgan has been adroitly positive onthe rally too, Adrian Mowat for one, does not believe inthe Economic Miracle of India despite the Japanese engine having taken over Asia's future and China having taken a brief break into the new chinese yeara fter a good 2 month rally and again despite profittaking, made all funds flow to Asia wait and watch till liquidity returns in inflows to Japan and India in a couple of months. 

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Energy prices globally continued easing and the raising of Domestic diesel and gasoline prices have also been completed over the weekend, making the morning amenable to a quick rise in ONGC and the four OMCs. GAIL might also get good news to recover with IGL and other during the week though that would be definitely just Capital Market logic.

Also if banks are to surive with more than a dead cat bounce more policy execution nuggets and deal news are needed for the elusive pre budget push, denigrating itsel finto the ussual 3 day move before the budget for which the starting level could indeed still get lower than the 5900 we got. SBI should be able to lead the coming Banknifty recovery and even rally while Axis Bank continues its solo correction move for that trading move spike on 'real news' this time kind of biryani that the market wants for its optimism to hold

Its true IT has also reached its level of incompetence within 30-40 days of the recovery move and Infy would be a good short, TCS losing its current value premium in the coming rally and likely survivig as a defensive instead. 

ICICI Bank is a good buy. IDFC is good, ready for a move and most susceptible to bottomline news on policy execution and political stability in India which market is satisfied with but could easily unravel, yet the sensitivity is largely positive, the losing interest in IDFC largely a rerating of the sectors ready for the rally and those betting on infracos ( vs Real Estate and Construction Booboos) are more likely to win than lose though aggressive naked tradin gon real estate and the LRB prospects continues to define the market's unknown unknowns

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The Q3 results of the bank showed a limited increase in profits , standalone bank improving Net Income by 4% on last year while Net Interest income at INR 111.55 bln withstood the onslaught of a move of INR 220 bln in assets to Pension provisions making it a creditable performnce with PCR above 60% , very few banks have maintained the said high ratio as they have indiscriminately reduced provisioning to show profits.

SBI has cut provisions by just 15% or INR 3bln. Provisioning costs are high in Indian Banking already because o fnew regulations regarding restructuring assets requiring 2.75% for the first two years after which they can be declared standard assets again as per performance. 

In Fee income Loan processing has grown by 27% at the cost of other heads including public business. Salary costs have increased in Superaannuation benefits ( the same pension provision corpus) NIMs are good and the bank deposits grew in double digits. to INR 11 trillion. Advances are more than 13 tln. Cons Profit is 46.48 bln and standalone profit at 34 bln both indicating the health required for the Indian banking sector even as deposit and Advance growth has slowed down in the Industry data available till December and an immediate breakout can be ruled out but the bank stock is likely to be resilient at 2200 levels eevn 2250 by the EDO and provide support to any bullish banknifty moves. 

WPI earlier in the day came to within RBI's March target of 6.62%

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Tata Steel which pushed out another round of poor results struggling in its European pick up is ready to open new capacities for production in 2014 in Odisha and Steel may indeed pick up though not a fast ramp up with China struggling ( Open tomorrow after New Year festivities) and Domestic Auto production for one will also be out of the woods within this fiscal as low rates trickle down and consumption spending remains a norm for the younger demographic india enjoys. 

New Auto capacities in Sanand and in Tamil Nadu (Ford) as well as continuing growth in Gurgaon and Manesar will lend strength to India's consolidation auto saales while the increasing cars on the road strike another discord of insufficient highways by 2014 or 2015 and int he meantime the fiscal strength discussion between MSA and Chidu may well be more important for active wholesale Investors to watch and may careen or tank up FII flows as appropriate.

The ratings companies could have grown their franchise but have faltered in the politically opportune moments and are not likely to partner up with Indian banks and corporates in the given plop of bird produce that India begets in their global schema, leading one to wonder in cogent terms if they will indeed survive into the next decade as ratingcos.

But that is so inadroitly expressed even I just know it is a valid hypothesis for trendatchers that RatingCos are likely redundant and center of the ne fallout before 2020 in the Financial world as it tries to come out of the 2008 crisis and bad RoE math that strikes its every rich yielding FICC and Equity trading businesses and even conservative and High yield lending and issuance. 

The Bank nifty will likely run up a good score without going 3-Cliff on expectations of better improving resuults if SBI delivers on expectations and does not do another Q4 washout of expectations as India's largest bank, having presumably cleaned its augean stables and dealt with pension liabilities and in possession of a clean retail portfoliosince they strated building it up 6 quarters ago. 

Even though PSU banks have been rerated 40% down in the Banknifty the current strength in banking from 12400 is contingent on State Bank being in the green and ready to take off from atleast 2080 levels and the results need to build up from the current 2250 levels to atleast 2400 to let the others with good and bad results of the wuarter convince the maarket of the Fiscal and FY14 performance potential especially at BOB , PNB and All Bank. Axis ICICI and HDFC Bank should have no problems maintaining current levels

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Are Sun Pharma and TCS yet Defensives?

Much as Consumer goods led by HUL had been lumped in Defensives with Pharma, so also today while Pharma while awaiting the Domestic breakout remains defensive as a sector, stocks like Glenmark and Stride Arcolabs aren't and Sun Pharma is probably unlikely  to last in the Defensives list too long (it ould not be shifted on account of Taro, however) 

Similarily IT as a sector and TCS as a defensive remain sectoral strategies or more Big Pig strategies at the start of the macro uptrend where Trendlines can be drawn and in such moves as are in 2013, the stock probably would move out as a mainstream investment much like Infosys earlier. Either way those watching for a bottomed out markets are right in prognosing the comfort moves in stocks like TCS and Sun as a likely vote for no Bull run than the other way around and thus the to get cast in the same leagues as HUL, Sterlite and SESA which would be the Defensives the markets could ascribe. While Axis Bank may not get rebranded as the 'defensive' for 2013's mini moves, Airtel still likely will be as the corporate gets shafted out of bull only and 130-30 portfolios for lack of a volatility linked move in the stock

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Of course, the markets could still decide to browbeat the equities segment further from here despite the mild recovery at the end of the session. As of now my plans for going to Ahmedabad are on course and the indian Ph D programs are getting better lookie loos again with Ahmedabad "Management" ranked in the Top 100. More importantly for the markets, delivery based buying cannot be expected to ramp up in this rally as retail investors are not just stung by 2008 as journalists perceive or want to name the shroud, but are infinitely better placed by investing in inflationary spending than in equities for the future canvas.

Mutual Funds, Insurance and Bank savings still come next and pretty importantly yesterday's negative IIP score and a near 11% CPI inflation clip ( more than 11% decidedly in urban areas, but thats just the trend) are unlikely to matter to this question of volumes. A slowdown in bank deposits could be an interesting quasi middle management at 100s of growing India corporates and IT investors could take to watching as it mirrors the real response to the production slowdown even as investment makes a faltering return to the Indian Economy and the Savings Investment gap recedes.

Revival of fortunes in steel seem to have hit an "early call" WALL a new block and tackle strategy likely to hit traders nah speculators in the F&O segment and though I normally desist but the morning call on JP Associatees straddle buy invites my derisory attention by the spades. The JP Associates stock is unlikely to tank from 71-75 levels and if one expects action in the scrip in this series further it ould b  a positive, likely kicking off the pre budget mini rally instead of the rally we were going to have at the start of the series. Of course those promoting this market hiccup were the ones betting on fundamentals instead and thus calling off the big pre budget move. Meanwhile the Tata Steel calls are good to sell off probably as JSPL and SAIL indicated a slowness in the sector which is to be shed in 2013 and 2014 so it is also the time for buying this defensive as well for Domestic fund houses avoiding buying for so long since August as they get another Start of Rally point to invest surpluses. 

Banks are the move I am waiting for as PSU banks finally acquiesce to getting rerated instead of trying trading jumps to catch up witht he gap created by the NPL imbroglio int he last six months at Banknifty 13500. Thus the move from 12,400 on the Banknifty and it is not made today, will be a decisive one as Public Policy recedes and Finance takes over as the bete noir of the India Comeback strategy for 2020 and beyond. 

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Globally emerging Markets have become a unique asset class and the first month of 2013 was as sunny as the latter part of 2012 in terms of asset flows. US enters a period of so-so uncertainity in equities a stronger currency on the anvil to stew the growth equation for the largest democracy, and not mirrorred in the Yen's ever increasing appetite hitting a weak 94 /95 against the Dollar last week enroute to par economics.

However predominantly from investor behaviour on MCX' new segment highlighted in launch yesterday with volumes of just 1.1 bln it is obvious that wealth that favors Oil speculation, Fixed income, Currency and Commodities is wary of this simple growth paradigm advocated by equities and even when it invests in growth it by passes the "stock market" dream with much more muscle than any lip services its banks pay to the segment. Though at Goldman Sachs and European houses, equities trading for clients till forms a substantive segment of business, back int he country and in real markets Equities are failing to entice banks, institutions and retail wealth equally miserably. 

It is possible that ironing out execution flaws and goading institutions to trade the segment in due course will bring volumes to India's newest stock exchange, but it is unlikely that equities get any more weightage in this large wealth market already lening on just that precious drop of gold more than anything else and addedly missing its calling in the global markets with shallow and reefy fixed income, currency and even commodities markets though courtesy of MCS we have volume leadership in key contracts. 

Structured Term investing probably brought the equity paradigm to oratory finery professed by the rich and the nouveau rich, giving them cleaner mirrors into what they wanted and perhaps their disregarding risk is what made them pliable which would be a pity as that market is unlikely to be permitted to grow that size again as Derivatives would go into regulatory scrutiny in more regime than those like Singapore and China willing to publish new regulatory regimes with large chinks int he armor, but that in turn just crimps the prospects of banks rOE and those seeking employment predominantly in Finance in Banks and other fund investors ( shadow banking). All classes of non bank investors including Private Equity though Hedge funds still trade in equity at almost negative returns, have shunned Equity markets underlining the need to perhapds reinvent the paradigm, which iss till more understandable and germaine to capital flows than even the post Bretton woods world and its currency wars

The Stride Arcolabs deal with Pfizzer at 8X Sales at under $2 bln highlights the efficiency of Dealmaking and Secondary equities esegments are but a highlight of the equity charaacter that allows such Capital flows to underwrite the growth in both G10, G20 and the emerging economies

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No one would have thought that Oil short targets would again appear at only above Rs 5150. In fact copper watchers and other commodity watchers would also aver the current bullish cycle in the doctor of metals and the rest of them are also tentative with global pricies still moving up only to $3.67 a pound expectations, implying  asteady discount at higher levels in the indian market. A sell off in Gold too underlines belying of Domestic expectations and will with sucha broad thrust be able to move the Rupee up as a better balance sheet beckons in March and an equity rally is pretty much out of the question

Cadila and GMR results disappoint and the former's doubling of losses though expected by many,  was supposed to have completed restructuring of its structures by this time to spread the debt load , Male notwithstanding and the latter is much a shocker after Sun Pharma climbed out of its stagnation pit almost on cue of ithe global business cycles improving. Sun's loss of Taro control will continue to bite as others like Glenmark continue to come up in the domestic ranks and that anyway leaves Cadila on the back burner with no visible leadership in either international or domestic segments but would be on as many buy lists as Cipla and Biocon with bigger and better stories because of an assured growth clip while others are subject to volatility from innovation and automated trading as well in a traders' frustrated market series in February 2013 when the pre budget rally has been scotched but the India report card is sunny as ever, when Asia FDI will start retreating as China peaks but India FII and FDI interest is safe in the pockets of stable acquiescence we engender in the world investor community.

Global High Yield and Yuan issuance seem to be good for Asia in the four quarters thru to 2014 as well and if that survives, Investment grade Debt and gilts could also come back on the strength of the currencies in the second half of the year

The morning Olympics have been a subcontinent show with only one or two comments in almost rabid monlogues making any sense, almost making one feel like a backbencher has been allowed to speak and you must just suffer through. Of particular delayed incapability and thus high Avodance quotient was the so meandering opinion of parrying institutional investors who are later than the last back bencher in grasping the importance of investing and if the same backworking backbencher theorems are applied and still make sense, these would produce more defensible evidence on employing of research teams in advance than jumping on to available decisions already in action, and thus the morning has been an almost entire waste of time and as readers can pick and choose when to survivve my opinion than comment on it as is being written, I was the only one who suffered. IIMA recruitments also back those wanting to get into a research career and I am still wondering Iif I will have to go thru an entire Ph D program to get suitable rich to be employment. Research for trading desks intermingling now with Front Office Quants, look like much more succinct and concise and thus productive except for Risk managers hoping to write a book on avoiding risk. 

Hexaare has finally survived a s a reminder of the annuity business IT and BPO bring, the sector surviving the month of Rupee appreciation only because Auto consumption is still on ttraining rails on the takeoff leg of the runway

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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 yesterdaty and the day before and while Asia was hot, most commentators would be wont to o 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 othere 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 abnd bigger at every leg of this rally. However, DIIs would soon be forced to buy as Domestic infolows 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 flatagainf or another week or month even

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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 alk 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. 

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