India Morning Report: Market correction sows signs of split down the middle?

English: Human Capital Investment Model!!

English: Human Capital Investment Model!! (Photo credit: Wikipedia)

The correction from yesterday’s opening highs continued into Tuesday, as markets have opened with Banknifty below 12000.

What has transpired is that the correction and the realisation of the individual mixed fortunes of investment sector favorites like L&T and BHEL have combined with a strain of distraction from the recovery as investments into the real economy continue to lag and the same has seeped into the other Capital investment beneficiaries including drilling and project engineering stocks like ABAN and others, forcing the markets into a rumination on whether markets will resume any bullish candles in the remaining days of the week settling in at 6350 levels for most of the interest additions till mid series. Pressure on markets will however ease as Put Call Ratios trundle up on every such small reaction and saturated markets will only unwind shorts. Thermax is definitely on a stronger wicket compare to other Capex companies

The FII portfolios had added $5 bln of flows in the market rally since September, all being attributed to a BJP vote and change in government since Sunday but the production data coming towards the end of the week and the RBI rate hike designs may likely be sullying the recovery for the markets. The Fixed Income yields are down again to 8.88% after showing the strong surprise in splitting from a strong rupee back into the historic strong Currency /Bond markets stream at 8.88% yields after Rupee also lost most of the gains at 61.25 in the morning’s trade.

The RBI’s cause to not live with Inflation seems surprising as also the increased likelihood to get the MSF higher to 9% in next week’s announcement with a corresponding 25 bp hike. However as Rajat Monga points out in CNBC TV18 snippets, the banks are quite comfortable with the current liquidity given the policy rates and the bond markets at 9%

NTPC struck 10% lower after CERC guidelines announced take Power Reform to a new level. NTPC has been utilising the gap period making up for unavailable guidelines by showing tax activism towards consumers which has been hit b the regulator primarily as it also moves towards Generation based incentives

CERC reforms have hit ancient contract ridden NTPC which continued to charge differential tax rates to customers while paying lower rates at a much later time , an arbitrage blocked by new CERC guidelnes. Distcos will not be impacted as much with Hydro projects enjoying a 35 year useful life along with the Distcos and Powergrid will be connecting the South grid adding Power to shortage marred Andhra and TN

Comment period lasts till Mid Jan for these guidelines whence other clauses impacting the Power companies will be clarified but do not impact the ROE assured by CERC for 12% on older PPAs and up to 16% on newer pricing including PPAs

English: Image depicting Central Electricity R...

 

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One thought on “India Morning Report: Market correction sows signs of split down the middle?

  1. Pingback: India Morning Report: Will India follow the midweek Global Gotchas now? | The India Investment Post (earlier india.advantages.us)

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