India Morning Report: Earnings season drills on to new baselines up here

Sun Pharma for example may be under pressure for nothing but quasi “asset stripping” SPARC as revenues at the subsidiary fell40% in the quarter. One would be well advised to not enter SPARC again till there is a clear road map for it post Teva as couple of the earlier drugs planned under MNC marketing agreements had already been withdrawn and now more seems to have moved on since Teva went live, earnings report being a confirmation of the market news undercurrents. A deal in Crompton greaves combined with a hunger for Capex stocks displaces United Spirits from The Dealmakers premium reserve with a 20% gain (updated after open)

DRL may however have limited upside too as the Rupee stays strong at the beginning of the week despite only $5 Bln in overall FII inflows this quarter a similar lower number for FDI at less than $4. However, equities overall just need some good news to keep them moving. Those moving into smaller midcaps will suffer esp with projects like Purvankara in a mini deal in Kochi with Sobha not helping either and V Guard’s improved margins to below 10% Gross and Operating margins do not really augur well for the stock despite the “huge improvement”. Ashok Leyland also reported sales downtick of 20% along expected lines.

Monday morning sees the Nifty and the Sensex however starting from the virtual bottoms of this rally at 22400 and 6700. Another robust move up that awaits bigger earnings stories is still to come. That brings us after a brief respite with ET offering a cogent IPL game preview between Chennai and Delhi tonight, to SS and my favorites in ICICI Bank and Axis Bank that qualify between them a 100 point uptick on the Nifty in this week from 1250 and 1525.

M&M and M&M Fin may be good for another rally soon with M&M sulking on April sales data to 1000 levels already and Maruti potentially short till another 400 points. Market has expectedly gone short with Calls under pressure in F&O in the Fridyay market but they may well lead to more losses for adventurous shorts as markets remains undervalued for the 5 year outperformance in earnings under strong duress that kep the markets from trying for sentiment highs and markets will hopefully rerate around 6700 and 22000 levels only as the new baseline

Again the IT sector has no good news to offer and export data will apparently sustain at the 59-60 levels of the Rupee so the rally may still see a new high for the currency as the bond markets get ready for a big jump from 8.9% levels to 8% in the recovery. IIP numbers for 2013 were also revised by 7-8% last week and similar revisions on this year’s numbers may be due later. Dips to even 6650 are unlikely.

IDFC and YES Bank remain the best investor buys with Bharti , Bharti infratel and ITC following up and making up for bad performance continuing from quasi capex and power bets like L&T and BHEL or non starters in metals like Tata Steel and Cairn owner Sesa Sterlite. IOC and other OMC stocks are in the middle of a long trade wedged in on Friday and may well make aup a good support channel for upside sentiment

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