The India Investment Post

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, 

Indian yields settled down to 8.5% comfortably after a run on the Indian bonds brought them back above 8.5% when the Dollar ran up a big 1% wall and kept the Euro from crashing in Indian trades. The recovery in rate sensitives may now have a stronger reason to yield to Export heavy businesses like Bajaj Auto and Infosys but whatever be your sectoral poison, the Indian markets will accept all inflows and the inflows will keep getting stronnger from these levels in the equities market.

And though no one would bet on the Rupee's recovery, the RBI would come in only once and thus that currency equation remains weak for us under pressure from hot money as always. Asia leads global recovery and in the Asian recovery, India leads from the front followed by China and its ASEAN friends with Chinese investment 

The Euro unfortunately complicates india's still effectively Dollar pegged currency as it wants to protect the interest of Exporters dependent on Price for European demand for indian goods for reasons best known to India's specific non Capex led dependence on Exports. 

The import basket continues to offer super deals to aid the india inflation story and that has definitely eased the pressure on policy planners. But trading whipsaws keep India inc busy rather than new business paradigms. Facebook's $104 bln IPO or Piramal's INR 35 bln purchase of Deceision Resources Grp become easier to appreciate for predominantly consumption Economies in the USA than for the Indian palate. 

While Indian inflation is likely to step out of the sub 7% mark on the wholesale levels to more than 8% following the retail index, Chinese inflation ticked up to 3.4% leading to a reaction in the morning's Asian opening. Chinese imports were up only 3% like for India at $37.9 bln with not just Oil but in India's case two thirds of the Diamonds and Gems trade shutdown and Gold and Silver imports are down by a third from a government increase in import duties. The tradedeficit thus comes to below $160 bln at the cost of over $100 bln in Exports according to the trends explained by the Govt official,  after the first month of the Fiscal at Data release yesterday

Chinese inflation easing further may not be a good thing as it also follows a drastic fall in demand consumption, the bulwark china is relying on to stimulate growth though outgoing Premier Wen Jiabao has been vocal in the last few months against the culture of imported consumption items in China. We felt more comfortable for China at the 3.6% mark for inflation in March as it was within the 4% mark and Banks though restricted by opportunity on Lending had still managed healthy Q1 profits

Asian Economies of India and China's leadership in growth is a required element for the continued recovery in Western markets and limiting of European troubles though European trade continues to favor banana policies and non South Asian economies for trade and investment hopes. India on the other hand reported new FDI of $ 8 bln in March but the Exxport slowdown and the increasing inflation from the 21% depreciation in the Rupee  int he last six months will hurt growth and consumption with Automobiles sales in April already down to 4% growth or 235,000 units for April including Exports. Ford, Nissan and others would be increasing exports from the added capacity in their indian plants from this year

India is hoping to get a further $1 Tln in Infrastructure funding from private funds to quasi SWF structures sponsored by banks and government

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India'a FDI process received a tremendous boost in March after $2 bln flows in January and February, itself a fair score were boosted to $8 bln for March even as international media slips into a morass susing ignorance of India to blindfold and play with Economic Darts which India is well provided with starting with the 4% Current Account Deficit and the double digit depreciation of the rupee to the curbs on FX trade imposed by RBI since October and added to today with punitively enforced conversion of Export dollars to a local currency. That boost was also needed for the Rupee as it faces severe action by European speculators stunted by the lack of LTRO ritual and a drying up of business back home. 

FDI grew in the last month of the fiscal and even allowiing for the fiscal end corrections if any in the tabulation, is still agreat score considering that FDI in multi retail was never satisfactory after coalition politics robbed the Indian markets of a great expected boost in the Hindu new year. The $36 bln FDI in 2011-2012 is still below the FDI receipts expected when the Fiscal began last year before it ended on a low note, expectations of growth scaled down to below 7%. Asian competition from China and Indonesia apart, India still expects to see a boom in retail consumption and needs a lot of private participation in infrastructure. Telecoms and GAAR apart as they target specifically sensitive corruptiona nd governance issues, Foreigners remain welcome and banks may not be the only ones growing businessin Asia esp India in 2012 and later. 

Routing of FDI thru Mauritius has been a special charm for the India story signalling to most Indians on the ground that jugaad is still the order of the day and hence the efforts by the government to re emphasise that india is not one of the banana republics or one scrip economies that Western investors seem to favor. Indonesiana nd ASEAN FDI story is however more freely linked to Chinese FDI into and from these Countries.

The March rush may be explained by earlier announcements, large ticket investments expected in Mining and Energy from BP and other global players. Rio Tinto is part of a diamond exploration project in Central india. 

Is it the May series with a special corner for Shorts on the Indian index or is there another carry home from this battering of the index this week? The battering of the Rupee is incomplete and mainly destroyed by the political risk people carry when they see India. but another reason obviously is that there are about 300 scrips to choose from as one chases quality and the half of them that are the best have already reachedd FII investment limits. But that's just me. I think the markets are tremendously undervalued right now but everyone is too worried about entering into the Buy mode with so much short interest so early in the series. Yesterday's definitive turnaround in the commodities and the cracks in the Euro are final though and the Euro should now seperatley lose its premium to the Rupee which it gets from being "jined aat the hip" to the Dollar in Rupee tradiing, where sophisticated desks like Stan Chart and maybe HSBC can come in now that their credentials are established in the currency ( SCB ) in the past 4 years. 

Only two months to go for the Olympics and what a medal haul it will be for Indian pugilists and Badminton teams. Archers, Shooters and Hockey should also present good fun. Over 70,000 volunteers in London are making the games happen and I belive 14 or more games are being held in temporary arenas. Let's see how the games go! 

The Banks and the markets thus have had a direct correlation with trading movements in the Rupee over the last week which cannot last and the Bank nifty a good 9400. I have started nudging it. Ofcourse the market still wants to look for a 4700 restart to the new bull run or whatever it will be this year...

India gets to consolidate the new $300 bln a year target with just under $25 bln in Exports in April and thankfully Imports started off at a low rate keeping to $37 bln for a $12 bln deficit even as EEFC restrictions / conversion of $2.5 bln into rupees shored up the dollar earlier in the morning

Yields are already below 8.5% for a target and will likely range to a 8.75% mark at the most liquidity unchanged from last week. June is likely the bbig Oil import month though that is pure speculation. India is doing fine in Cotton exports to China for a few days yet, 

Dollar should have crawled back to 53.27 and their should have been more pressure on the EUR INR rates given global movements