India Morning Report: Bank Deals, 6350 targets, Decisive Earnings and No Taper but Overdone IT?

NSE building at BKC, Mumbai

NSE building at BKC, Mumbai (Photo credit: Wikipedia)

 

The markets are of course steadying themselves as data shows (Analyst speak on ET) that cross currency hedges for FIIs also induced a short hedge on equity to prop rupee positions and that unwinding thus has emptied the rally by 6200. However as noted by a few others, this point is no longer the ‘death of the rally’ and the markets are enthused by the better earnings this quarter. Also as noted Nomura has bought a stake in Karnataka Bank and the offshoot of that is the trade in Federal Bank another correctly sized target for Foreign banks and institutions buying out Indian Banks with Federal Bank rising another 16% today , making it 5 sessions in a row. The higher US rates have already started a correction in Indian equities and could provide the fuel for a cascade correction at these levels but the Taper has shifted out. Rupee remains weak on th way down because of an almost closed market for the currency with a big hole for those wanting to make money while its gains are limited when the Dollar index goes even lower from current levels the Rupee starting the week at below 61.50 levels on robable profit taking showing this weakness, though Economically it is far superior to Turkey and the South African Rand

 

The Dollar will be moving south and as currency and equities both share the spoils and incite EM flows India will return to consumption and infracos in equities as well with banks holding and then leading the ensuing rally. Airlines have reported heady seat volume growth in both August and September and the Festive season months would absorb the high increase in seat pricing if not produce positive growth

 

However some stocks may see changing eigenvalues as investors come in with a different charter of preferences and the 6100 levels may still be maintained. PNB has started off in the Banknifty components as HDFC Bank watches on the sidelines. ICICI Bank has also responded at the right time while Axis Bank produced a great show, 25% higher on bottomline and an equally bg jump on topline based on growth in retail and cards, while its corporate book also outperformed bigger competitors

 

In size terms Axis is overvalued compared to its less than NII Of INR30Bln this quarter and profits of INR 13.62 Bln which though compare well with HDFC Bank of 4 quarters ago, meaning it has made some inroads only on the gross profit share among banks Gross and Net NPAs grew in size compared to its portfolio at 1.1% and 0.33% for the half year

 

IT will also be back in the second surge of the rally as we mentioned on Friday. The Forbes list of 50 most powerful women saw Chanda Kochchar(ICICI Bank) and Chitra Ramakrishna(NSE) counting fo rthe highest Indian contributions

 

Markets will remain careful at these levels esp throughout today for a big sharp exit from select investors to restart the upline trade but the scenario likely is of markets staying above 6080 /6150 levels in this leg Bajaj Auto and ITC are still gaining investors at current levels and a Bharti correction may lead the  switch trade if a mild correction decides to extend the rally at current levels

 

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