India Morning Report: Breakdown trades in progress, don’t get fooled again

An HDFC Bank Branch in Hyderabad

An HDFC Bank Branch in Hyderabad (Photo credit: Wikipedia)

5500 is not holding. It may be FIIs affected by Infosys, it may be that those who rerated Infosys already have looked not so hot on India inc despite replacements like ITC and Bharti that signify winning consumer propositions on a near global scale while brokerages still chasing the tech dream led by Morgan Stanley with an EPS target of 185 for Infosys in FY14 are bound to be bad examples for traders and investors not stopping the exit of the weak. JPMorgan and Credit Suisse have rerated Infy at long last to 2700 and 2450 and the stock may well provide buying opportunities at 1950 again thus ensuring a good index momentum to the downside

The other reasons for worrying about India Inc showed us that only a rerating of positive expectations will continue to happen in the post crisis world and India market returns and economic performance remain exemplars in the new investing heirarchy while China’s struggles continue to define Asia/India. Nominal GDP and GDP at Factor Cost have grown 6.0% (12.5% excluding inflation) and 5% respectively according to the Advance GDP report. The fiscal gap will bring discussion on cyclic impact of exits which should not be significant and as Gold falls on thru in India as well, to below 28k, likely pressure on imports will be found to be reduced but both the arguments are inane and fueled by the ir relation to the fiscal gap in basic math but unordained by any data linking them thru the years when fiscal balance and non exits have again become primary reasons for India to continue recovery. Today’s trades seem to signify a 25k level for gold and 42-43k for Silver for 10grams / 1 kg respectively

Historically this should also be the last negative growth in indian non food bank credit growth at 12% as Deposit growth remains strong enough but that is a challenge that banks have to perform to and while HDFC Bank and ICICI Bank deliver , PSU banks will struggle with higher NPAs till they reach a mean 10% of the PSU bank assets apart from SBI and PNB which are expected to have been done with systemised NPA growth

One is probably looking at more dealmaking in FY14 as well though bigger M&A is not as likely, with PE likely to find a string of deals to match the fresh deal flow in March from Kotak Bank (Temasek/GIC subsidiary) to others in aviation and likely in NBFC and other services businesses.

However back on market levels there is no stop after 5500 till 5350 and waiting in the markets again is unlikely to be worth it, especially with results season likely to be good for only large market caps and selected banks already on buying lists including Indusind, YES and Axis Bank where fresh foreign investment is still likely

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One thought on “India Morning Report: Breakdown trades in progress, don’t get fooled again

  1. Pingback: Asia Wednesday 9 am: Rupee weakness predates another correction of the US Dollar | The Banking and Strategy Initiative

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