India Morning Report: Markets drain out the good guys gokum

Markets seem to have initiated a bout of profit taking on ICICI Bank and even PNB as the small shard of storyline of reform and growth reflected by 4 of the 14 odd great showtime picks of India inc celebrated a min rally holding 6050 in the last month and , lending hope to the army of naysayers ill-equipped with research and running out of options in PSU banks that do not merit much research before going up and other such streams in midcaps dead in the water, still looking for predilections like Crompton Greaves in infrastructure and foreign brokerages still waiting for client monies to fuel the new rally, leaving markets without shore leave. Bajaj Auto has indeed switched in , in most reflective portfolios that fully analysed policy impact and Hero or Maruti shucked out. Maruti of course will remain in an uptrend but domestic automakers cannot hope for new sales till the second half

I am hopeful of the banks and the Power NBFCs with IDFC and YES coming back in supporting the winning segments of the rally and portfolio churn must have impeded quite a few changes till here since the halcyon NaMo days of the market post Halloween. The Dabur, the Maricos and the Godrej’ failed to make a story and are not a winning FMCG half dozen, with investors wary of saturated markets and tired memes. ITC for example, is not new but qualifies as a winner expanding into new amrkets effectively at the touch of a button, getting into Icecreams and frozen foods after HUL failed to hold it back in food and beverages. The answer seems to be in Investment Capacity in all such cases and somehow markets refuse to carry that answer home, still reliving penny stocks and midcap turnaround sagas from the eighties.

Pharma markets have missed a significant opportunity in overseas markets with the USFDA oitself exerting a pull to reduce the cost of drugs in the US and over sensitive on Quality  concerns. With innovation pipeline getting critical support from Academia in the US, it is all the more imperative for Indian Pharma to get beyond $500 mln molecules/formulations in this clean bill of health in the US markets even as struggles continue for Indian drug makers. As of now Glenmark, Cadila  and Sun have settled back with only Cipla and probably Lupin continuing long in portfolios

Earnings growth will definitely outperform double digit expectations market advisers like Nomura has given them for par score as growth has the best chance of getting nose up for a takeoff this year. investment in both Consumer and Infrastructure are beyond policy hurdles now, and the silence is deafening. Adani’s return on the bourses today is again like Torrent earlier not part of a secular story ( ; or a communal story as the case may be 😉 but jsuta stop gap switch . Shorts in Kotak as expected lead other corrections in the Banksa nd NBFC space ,a sure sign of a saturated market, trying to like a free market player waiting for a mannah from heaven to further declare businesses that can make a profit.

Here’s hoping the final six or let’s say ten banking license holders at the end of the month have a story to take forward and licenses allowing speecialist banks do come to be on tap, though the regulatory reticence to do so would be so understandable. HDC Bank and ICICI Bank ( in retail business) would definitely do their but to grow the business more than 20% again by the time MArch results are announced despite some contraction in the linked quarter

Energy cos catch up with old levels as the expected did happen on cue in FY2014 for India Inc. IT companies have obviously overshot the mark in possible for even FY15 earnings valuations. The Gold rally is a mirage waiting for the fall at 1300 itself but definitly not beyond $1400 or INR 31500 whence it will come back to 29,000 and retest marks.

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