The India Investment Post

After the March 2012 IIP data of a contraction in Industrial output as big as 3.5%, I feel the blog's readers again felt a need for a change in the blog's direction, though without the use of interactiv features by the audience, it remains a largely directive effort on which way the world and India's position in the same is headed and that has not changed at all. Also wit remains germaine that public news networks especially Tv continue to show a shallow knowledge and lack of interest in arguable still Asia's #2 growth Economy. The current derating of India's growth forecasts to our 2008 argument of return to the Hindu rate of growth seems a point to anchor.

Also moot is the fact of my being busy with trading across markets and thus Economic and trend commentary becoming specific to more stock and other asset classes as to their performance in the markets and their probably since bludgeoning the IIP data's sanctity I have been lazy in updating the data items that keep flowing including the new reports on hidden money and the old reports on inflation and IIP as the phenomenal price hike at retail covers ground on India's real fuel billa nd its payment thereof. A nice infographic in The Economic Times shows the price in rupees for India's Fuel basket still costlier than at the time of the Crude's peak because of the negative gains on the Rupee since, itself caused by the fuel bill deficit or the Current Deficit as we know it.

However, with reform on the backburner, more such snide actions by this government and the next will be the only options for the Indian engine to chug along. today's RBI intervention for example in the FX markets reaped a perfect dividend ont he back of the day to break the Euro globally yesterday and the dollar's weakness today on the Dollar indices Of course the Dollar index is hardly determined by a lesser currency like the Rupee int he Global FX markets and we can easily keep the gains ont he intervention and the local markets in the Rupee even as US markets pre open send the USD back to 82 with no one wanting to lose this Reserve currencyin the Pacific or European markets and China remains pegged to the currency as well 

The way forward is yet simple. The understanding of th e undercurrents in making reform happen, and timing stories so more of you can appreciate the value of India inthe global economy. my global ites meanwwhile also need a pinch of writing pixie dust to put on 'paper' that what we are showcasing and dong in banking, Global retail lifestyle champions and others who ave the next two decades right. Obviously that means the thought process and the interaction must continue. 

One week to go, rupee made an equally violent come back even as the Euro finally matched INR levels to its own performance in Europe rather than wait for its comeback with stronger levels against  the rupee on the back of depreciation against the Dollar. Dollar marched on relentless against currencies yesterday before Chines Flash PMI data again confirmed the worst and again a rally in base metals and precious metals has been nipped in the bud because China would not be importing any more in a hurry esp after the export crunch began in APAC last month.

For equities, it means the risk trade is definitely off but the Dollar may have stopped rising giving a temporary synaptic failure between rupee depreciation and Equity crash so equities recovery can likely continue after the rupee is back at 55 levels too, not necessairily nose diving at every pick up in the USD against our currency. Changes like China's tick down and the crash in Newzealand exports for example could disconnect the all markets correlation and that would be fortunate for most FIIs too as the Risk on trade can continue while Europe implodes on itself Spanish and Greek yields continuing rising upwards and ECB unable to afford another LTRO. 

But then a lot of you should npow just be trading June futures and banks and select equities like IDFC, REC in the infra sector ( or construction if you prefer) 

If you are not in the midst of having bought Natural Gas, which has just reached $2.6 per mmbtu on the global markets, and are not trying for the Copper, Gold and Silver triad we have right now in perfect correlation, you have to make money on the Dollar contracts and now start switching to the Banks and select Pharma scrips for a start.

Retail Auto may not move immediately in Maruti and Bajaj Auto as traders evaluate the impact of new competition in Exports and the EEFC month end accretions ( as shared by Rajiv Bajaj on networks) 

Check out individual picks at http://next.advantages.us

For example REC, PFC Powergrid and PTC are moving back together from their bottoms and are unlikely to yield much for another round of bargain picking till a rally fails three- six months down the line.

The India story now almost all available here at The india Post and the Blog of Blogs, showcases a loose bottom around these valuations and nothing in the fundamentals is going to take the markets down further. However as governments go, any steps that look like reviving reforms and rejuvenating indian flows areunlikely before June.

Accumulate best picks now or perish at leisure and as MS' Ridham Desai also mentioned on the networks over the weekend ( Bloomberg UTV / Market Guru) indicated Nifty picks may not be the ones available at undue arbitrage / discounts in the market. I was thinking of checking up on PFOCUS contracts i.e. not F&O but what future Order pipeline looks like as the ONMOBILE saga also gets a knife edge away from disaster. 

HDFC is a good pick for markets to start back but then someone is still looking for a bargain out their or hoping for a rally breakout on the rebound and that is going to keep the markets yonder from both ends of the horizon. 

Those betting on dollar rupee depreciation and gaining the losses in the amrkets thru its direct correlation on Dollar value would be sitting pretty without portfolio losses but unless bthey actually exit cross movements as the Euro stays nose down, ithey will not really benefit fromt he trade of sell nifty buy FC. The Euro is already down 4% since the ride started and as we pointeds earlier someone is happy that indian currency markets are shally espo in Non Dollar currencies. 

Though faith in the new management has not built up and is unlikely that the bank will enjoy previous confidence levels in the market the Q4 results are pretty impressive for the public sector monolith. The PAT is up to INR40.5 B after its string of new provisioning died a natural death. 

Gross NPAs remain above the bearable industry limit but have ticked down by nearly 4% to 4.44% from 4.61% Net NPAs  are an important item of progress at 1.82% nearly 25% down from December. NPA provisions are less than INR 30 B at INR 28.37B with provision down 25% from INR41.6 B levels in March 2011.  NII is better at INR 117 B from only INR 82 B in theY/Y comparisons with Treasury Income at INR 96 B Fee income is INR 52B and PCR has ticked up further froma  respectable 65% to 68% 

Increase in NII at 49% is based on much better NIMs and the Basel 1/2 CAR remains at 13.8% with india not updating the RWA guidelines for its area of influence. The bank was close to the brink at a CAR of 11.98% last year

PAT beat expectations by 13% Last quarter's provisions were lower at INR24.1 B (not just NPA provisions) but Year End NPA provisions after catch forward accounting of all restructured accounts and data consolidation would have been much higher in the normal course

After the 27% depreciation on the Rupee to Rs 55 per dollar, The indian It companies with unhedged exposure ( TCS probably hedges only a quarter worth of billing, after its Q3 fracas when it lost INR 1 B in forex translation losses). Even Infy and others except for HCL remain unhedged for more than a quarter currently making up for each quarter's level with the current 27% depreciation since January (USDINR at Rs 44) 

However that means the small FX gains on $5B of Q1 and $6 B of Q2 revenues for the Top 4 firms excl CTS would yield extraordinary gains of nearly $400 mln each and the same even if only 50% is hared with key clients would mean extra savings thus just ensuring near period growth in outsourcing business but perhaps enough to maintain long term growth in the Industry

Non IT businesses like Energy and Automotive however will still be stuck with rupee purchase agreeemnts and likely pass by gains on Dollar earnings from the depreciation in the rupee while the costs for FCCB/other ECB borrowings will rise another INR 100 B for Indian companies having borrowed at 6% levels yet.

The Euro has broken the sound barrier by going below 1.27 overnight and is trading at near time lows as it completes the down move to 1.22-1.23 but given the queer hedging and predispositions of indian exporters and currency traders the Dollar depreciation seems to be keeping enough pace to drive Euro to a matching significant depreciation in the EURINR trades. The shallow market thus seems to be proffering a great opportunity ( sarcasm should be detected!) for those caught long on the Euro as the cross Fx movement has a long way to go before it catches up to Euro's own depreciation which continues unabated as silent options for the euro to exit or rather for Greece and others to exit the Euro present itself. The Euro is stable of course but there is hardly anything to stop it till 1.19 and thus it seems a degree of political chicanery and shortsighted ness is involved in the hot trade keeping the Euro to 69.27-69.5 to the EURINR rate when it should easily settle below 68 and the near forward should also in the extreme case lose its premium on the currency. 

Spanish auctions went by cheerfully even as Spain paid a 50% higher yield on 3-4 yr bonds to 4.38%

Data released today shows Indirect Tax collections at INR 330.45 B could have been up 22% over April 2011 except for the reductions in Excise on Petroleum products in July 2011. The Service tax collections have risen robustly by nearly 33% after the increase in rate with the April 2012 colections at INR 88B or INR 8,846 Crs. The 2012-13 Fisc target for Indirect tax collections is INR 5.05 T ( INR 5.05 lakh crores) 

India ended FY2012 with Indirect Tax collections of INR 3.92T on target with B.E. though the rise in Service tax collections was not matched by rcustoms and Excise collections.

Customs collections for April slowed to INR 115.94 B but the increase in excise and Service tax rates yielded the net growth of 17% in Excise to INR 126.05B. The political impasse in passing along prices of Petroleum pdts to consumers continues to bind the government to a weak and growing Fiscal deficit and the Current Account Deficit even as import prices decrease is balanced by a fdrop in the value of the Rupee

india apparently has no bad news left that could shock markets further and yet being one of FDI's favourite Asian destinations it is unable to get new monies flowing into the deep $2 T markets in equities while Fixed income holds at 8.5%, inflation likely to trend at 7% or below with soft conmmodity prices and Greek exit from the Euro concerning it in the very least even as the Eur INR holds almost close to 1.28 levels when the currency plans to breach 1.27 globally giving it the annual yatra trade for a round trip arbitrage with globa markets.

Japanese and Singapore GDP growth enthused the Asia economies but not India, China's slowdown has given impetus to the maxim that India will lead the recovery but no hard cash has followed yet. Most global banks and institutions are carefully looking at India's bank regulations and though there is no GAAR there is no impetus for investors to grow their India investments like they seem to get in China's totalitarian regime. 

Corporates like Bajaj Auto become very poor examples of India's independent matured markets having gone by RBI diktat, hedged 85% of their large export earnings at below Rs 50 to the USD and looking at quick EEFC redemptions again to shore up India's 5% Fiscal and a not far behind large current deficit where again lowering commodity basket prices still do not mean any benefits accruing and now the bar has been obscured by another 10% fall int he Rupee. there is no real bad news still left though and that means probably market wants to consolidate before moving up while traders are already impatient leaving the markets open to more whipsaws in trading,