India Morning Report: Correction day, follows Indian Markets predilection with “Modiphoria”

Hat Tip – FT’s demure casual and below the belt rough Indian journalism that helps them along as they staff other shallow EMs

Though others have been very supportive of this rally, shorts may not be able to get in to this section of the rally’s correction for much either. The Bull rally continues of course bu t the intra day mark of 7500 was lost in rather a hurry in a single session, revealing empty profit taking induced price bids and probably leading the markets on to a stronger hope for a sharper correction to tear down the bull phase per se, as evidenced in the 7500 Call OI build up. ( which means 7500 is now being sold down)

Thus except for the couple of PSU Banks being unshod ( Karnataka Bank, Hat Tip Tulsiani) which are being dropped from buy trade lists in F&O ( hence, unshod) not many other scrips will have any tradeable targets down and will just trade wat their Friday/this rlly ‘s stable marks than lose momentum or give way to short traders waiting in the wings with or without a DII mandate for lower prices. Kotak has another announcement from the RBI requesting it to pare promoter shareholdings to 30% by December 2016 and it joins HDFC Bank in waiting out current regulators for what they believe is a temporary hiccup, with the whole market waiting with them for the next few months as the new Cabinet digs into the high chairs in North and South Block

The Cabinet, we agree with most watchers was a best effort and not a radical change from normal polity, though it is obvious that Narendra Modi has a defined agenda some of it targeted at the outgoing government style of the Congress to drive in his advantage with the electorate. PM Narendra Modi will have to walk a thin line when he expands the Cabinet in 4-6 weeks, though with large portfolios being shared at the Cabinet level, the exercise is still a unique attempt in the direction of downsizing government and likely to be lauded in the first year and more as he plays out a defined point by point action plan from his own Office.

That would bode well for our recovery as well, though it is probably safer that markets begin from 7300 levels and that means most great policy pronouncements will not get another standing ovation from the markets as they get down to the serious business of maintaining fair value markets. Eventually performance only will be able to allow the markets to beat 7500 marks ont he Nifty and the 25k on the sensex. When it does cross the mark again, it is obvious that that would be steamed by existing shorts now back on the index options,  and would easily cross 7800 or 26500 on th Sensex to the court of broker dealers betting on the magical 30k pronouncements and will likely end the year at all time highs comfortably above 7500

F&O strategies at this time could thus easily avoid the short strategies and go back to a new straddle every week starting with a looser straddle bullish at 7300 to 7500 using the existing leverage in 7500 to build the smaller range from 7200 and 7300 sold puts.

One does not again see anyone missing the chance to go long in cash equities all day today and the fall in indices should fool no one. The best outcome ofcourse which could define such simple price discovery all day would be if DIIS step in to buy even in salutory quantities on longer range buys in Pharma and Domestic cyclicals which have hitherto been tom tommed by us as Bajaj Auto, Bharti ITC and even Non discretuionary consumption builds like Colgate, Britannia and Dabur Marico with the HULs as the private banks get back into the saddle on the Banknifty, YES Bank probably continuing without a break alongside Financial services companies closer to yesterdays high marks as they are still likely to look undervalued in the recovery strike. Some DIIs are probably even waiting for Cipla and Lupin again but many will move on to building positions in Glenmark Pharma and Cadila, waiting on Sun Pharma, Orchid, Aurobindo Pharma and Stride Arcolab (DRL and Ranbaxy are that might falling arrow sign i.e.down all the way)

More than earnings data it would be worries about the real agenda meeting reform as Energy stocks start with questions on if subsidies would indeed be tricked out again instead of being wound down as per plan as the NDA finds its Welfare feet in the magical Mansarovar of deficit financing.

Also, sooner or later the honey moon with the markets is likely to wind down for the Modi government as it refuses to be led by Markets like all institutions in Emerging markets are wont to publicly end up showing in their winning hand. Also cuation reigns on the performance of India in governance given the political pitfalls of sharing a Rajya Sabha in Congress majority

Yesterday’s quick exits probably resulted in FII outflows pressuring the rupee back to near 59 levels on Tuesday’s open mark. SBI on the other hand may not see any moves out and continues up from 2650

The step to combine Finance, Commerce and Corporate Affairs under Jaitley is probably the most positive and ambitious move by the new government that should be a commitment from PM Modi and Jaitley will have to walk the plank to cross a real issue or two of mis coordination in evidence of late. Rather Nirmala Seetharaman should work closely with FinMin Jaitley to make it work. Also, MSME has a separate Minister all by itself (KM) and Modi has kept pension affairs with personnel and science departments in his dhoti. Inderjit Singh’s portfolio of Programme Implementation would additionally have been something I would have moved to priority levels in a new aggressive India that should probably look at more 2030 and 2050 targets with a renewed vigor in Planning ( anathema yet to the NDA government?) The implications of that are not lost on a Chief Minister coming from leading a progressive state still relying on Central Planning as much as Private investment. The Ganga rejuvenation programme will probably be closely watched too for someone iwth a record of execution having given the portfolio to a sangh loyalist. We will probably continue to pop surprises to the world from Defence and Ext Affairs mandates with India deciding on a long term commitment to Modi aided by a performance beyond just an earnings beat from India Inc

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s