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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