India Morning Report: Banks keep investment cycle hopes “flying”

PSU Banks have mostly reached the highest expected NPA levels at INR 100 Bln each even as SBI discovers the choice to sell off current NPAs in the market, giving it enough tailwinds for the stock to catch up to rally leaders as ICICI Bank and HDFC Bank work to renewed targets after a buoyant Friday when the Banknifty’s 600 points led the index rise to above 6500. Asia opens much lower as China’s first targeted trade deficit makes it on lower exports, confusing markets looking at the same as a weak signal for other Asian and Australian exports to China.

The indices can now apparently score their new peak much before General elections are counted opn May 16, 2013 and a new government sworn in. The market is however not looking to correct anytime soon even as the PCR has ticked back to 1.16 on the Index and call options at 6400 and 6500 unqind with Puts and option hedges switching to writers and volatility for the overall markets still barely above 15, despite the big move up all of last week

Investment stocks getting delivery attention ( CNBC TV18) like Ashok Leyland and JP Associates, still lag behind immediate trading up potential in Eicher and Crompton Greaves, old stalwarts since the reform story of the 90s propeled India into investment portfolios. The weakest link in the market spine still seems to be heady interest in margin devolved Real estate and construction stocks  a little ahead of the real conversion in investment interest in India outside equities. The Pharma sector sees buying interest returning with shorts in DRL, Ranbaxy and Cipla countering excessive defensive runs by delivery buyers earlier in 2014.

Continuing short covering does not preclude higher levels in ICICI Bank and HDFC Bank, with FII investment cycle also updated in Mannapuram Finance and indices now continuing further consolidation and increases in levels on use of index hedges converting to written puts at even 6500 levels by the end of the week despite it being a new high for the Indian markets starting the week with easier 6200 expiries if the markets continue to showcase buying strength as delivery interest in many undervakued index components and blue chips keeps up new bullish levels in the market. BOB almost seems like as good  a short candidate till 550 levels as DRL or Ranbaxy on Monday Morning

If markets ignore the steady stream of buying and keep 6500 levels it would definitely point to a better 2014 overall , however  an improbable choice would be a sharper run right away for quick profit- taking at below 7000 levels followed by a sharp correction ( Ashwini Gujral on ET Now had our ‘improbable’ prediction today morning)

SGX Nifty was unable to lead the trend over the weekend and waits for the Monday open at cash levels of the index. Apparently the Mid Cap index has on cue broken thru 50 DMA levels on Friday as well, broadening the rally as most index components and blue chips also continue to trade far below their final potential given the anemic recovery and continuing threats of a rate hike

SBI may also continue to react downward but the broader markets may not turn the same into an overall red tick recovering by the afternoon’s closing trades keeping 6500 marks to start the week. YES and the Power NBFCs could be still stronger with IDFC as buyers are likely to find their value case appealing for investment accumulation and Kotak likely to ride lower ticks to its 665 levels with Indusind Bank. ITC again looks like its not going anywhere at 335 levels while buying should continue in Barti all week irrespective of market trends

The Rupee remains stuck at 61 levels unable to move beyond that Friday peak and Fixed income markets continue to trade india debt a t 8.8% allowing more buyers to lock in that rate for India buys much before any Bond index entry is firmed up with current FII investment limits in Indian Gilts and other bonds good enough for now.

I agree, private sector banks will again be available at lower levels for buyers to come in the afternoon

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