In a pattern that has repeated earlier Indian market cycles, India again came out tops on its long running market crisis just ithin a eek of the orst ETF outflows from the country. Emerging Market ETFs lost $3.5B in May and Sovereign Bonds & Investment Grade bonds gained $5B and $9 B respectively. India ETFs lost $300 M in the same three four weeks and instead of craling back into the bunkers for the 30% premium to other Emerging markets , India has broken out north of 5000 as inflation trends down on the commodities don cycle and the currency continues to a near 30% depreciation from last year (27%) 

 

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Calendar for The week ahead

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Concerns over India's rising inflation attributed to structural issues as imported inflation hung over India like a blanket have finally ticked down as Commodities remain downbeat after China's rush in Copper precludes much more of a safety hike to Gold and Silver.

Though the bull will remain in precious metals and Copper most other commodities are down as is the Dollar India inflation reports marked up the MArch data of 6.9% to 7.2% in April but it is not expected to go up much from there as the Indian currency joins the fightback against the Dollar Further drops in the Euro are unlikely to affect the Dollar index per se. 

Indian indices continue consolidating above 5000 ith the Global rally in equities and the prospects of Manmohan Singh taking over the reins from Pranab Mukherjee as the next Finance Minister. 

 

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The past months made the current 135 point rise in the Nifty today almost an Herculean effort as 1 in 6 $ for Indian ETFs have been withdrawn. Also 25% of the Futures derivatives Business has moved back to SGX Nifty in Singapore and Dubai General DGCC Exchanges as nespapers report. Pranab da is seriously moving to Raisina hill and everyone's on edge waiting. The government meanhile is trying hard to get the retail FDI saga restarted having withdran most of the discretion from the retro activation of GAAR rules. 

Of course the current rally is a temporary respite and there is more pain to come as the new old 6% watermark ( remember the Hindu rate of growth) comes back for India. And then thre are the FII investors and analysts bothered by the 30% premium India enjoys for its liquid markets and developed industry et al that they do not want to come in the way of a good return . so buying could still take some more time to return, but history tells us that india would not ait for Secondary portfolio investing for much long once its hardly 2-3% of the retail population gets activated on the trading and the Indian story starts working, most non India centric Investment Banks having suffered the fate on missing half the India bull run.  But the Current Account Deficit issues are not solved yet and the Fisc is going to stay at least around 5.5% and the current conditions are a sea change from the growth momentum that has become a benchmark for India. Meanwhile China controls most of the Shanghai Cooperation council and may not like India onthe board of the Old Silk route nations, 

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The S&P JV in India, CRISIL, India's own rating agency which has been pioneering Equity ratings and leading the three rating agency field in the sub continent picked up Coalition Development Analytics for $43 M

A human capital company, Coalition Development provides revenue and market sizing level estimates to Global investment banks

According to Dealcurry, CRISL's Global Research and Analytics business operates out of four International centers including Argentina, China nad Poland ( and of course, desh)

CRISIL's KPO is Irevna. it bought Pipal Research for $11 mln in 2010

The GIR effort thus continues to look for scale. I wonder if the KPO model is indeed going anywhere. Yes Bank abdicated its KPO extension plans in 2007 before the Financial implosion in US stopped groth in its tracks for the outsourcing industry. Yetr the outsourcing annuity business is worth INR 750 B or $13.6B apart from any single digit growth they can still get. Infy's the dark horse now and CTS keeping the dream alive. Needless to say, size dictates that the KPO model is also best served byeither a Infy subsidiary or a global client subsidiary. Hoever Goldman SAchs and JP Morgan for one are happy enough keeping indian participation to tecnology.

The limitations of niche KPO businesses arise from the proprietary nature of most critical Financial research and the closeness of research and trading teams ( not insider trading) that is a necessity for executive direction and maximum benefits to the banks.

Of course global banks already working on 25% reduced business in Commodities ill be back to a low revenue base in trading businesses this quarter and Commercial Banking ill be trying to make a return as the mainstay business of the banks. 

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Though the SGX Nifty has factored in all eekend heebie jeebies into the opening price, the increase in Volatility on Friday to 26-27 would indicate a likely rush to reach the "ultimate botttom" and shorts on Nifty seem to be controlled and careful hile the buyers have been out in full strength at these prices even in 4900 calls now. At the worst it will be more 4400-4500 puts and 4700 calls. However, the week is crucial to determine india's fiscal and monetary future. If it enters a bottomless pit behind these 4700 levels it will likely find more bananas than the precious investment which has already jumped to 3.5% from a contraction in the earlier quarter in the latest 5% growth shock

Consumer and Pharma remain very critically poised sectors as ell. IT is more negative than positive and Banking is more positive but yet thae pressures on the Sector are really higher even in quality like ICICI, HDFC, SBI and of coure the vulnerable axis under new management 

Going back to the VIX, a higher VIX should mean higher returns on the Spreads, esp if you use Vertical spreads. Also cover asymmetrical strategies if you have sold calls

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India managed to maintain last april's exports value that was a pretty big jump from April 2010 at a 20% groth but there was no growth. Auto sales have started trickling in weak though markets and currency having over corrected ere more comfortable rising back than staying don Nifty stay near 4850 levels at the close. 

Maruti's downtick in sales or the recent spiralling ccosts continue to orry the behemoth as the Yen also rushes up t o cover its global strength. in that case however, the Yen Yuan trade will likely cut down the aged triggers appreciating a "deflated and downtrodden" currency like the Yen  as China welcomes Japanse trade to grow its yuan tentacles and rejuvenate larger ties beteen China and Japan.

Indian exports survived the duties on Gold and the clampdown on Gems trade hich though large categories apprecaiate distinctly standalone cycles for the rupee including Laundering in the Gems trade. The Auto Sales in the meantime seem still likely to cross 3 million for the year if not 3.5 M despite Maruti's losing share.

Most BRIC and ASEAN nations reported an export contraction in the mean time in April incl China and Japan as shared earlier and South Africa here the trade deficit for April ballooned to ZAR 6B (Google it!)  

China's Export data is likely to bounce back in may from data of the first fortnight. Indian export groth ould be fine as long as it remains above $25 B or near the number as the May PMI came in really strong compared t global oes at 54.8 showing the strength of the 5-6% groth number as we return at our worst to the Hindu rate of growth ith Q1 bottomlines still up in double digits and topline up by 20% 

 

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