CP | Dalal Street

Rising Tide Lifts All Boats / Stocks – Go Selective

May 19, 20092 min read

We had anticipated a strong market rally, in our view the 20-25% higher closing prices of several index heavyweights reflects the strong pull from the futures market rather than genuine price discovery in the cash market. The substantially higher activity in futures and options (US$560m) supports anecdotal evidence that futures were the preferred choice of participants for gaining exposure to the expected market rally on the basis of cost and effectiveness.

The extent of the rally in some names is not that surprising if viewed against the (more…)

Economy, Markets and Macro Views

Golden Monday – Markets trigger final upper limit

May 18, 20091 min read

Equities triggered final upper limit on Monday in response to Congress-led United Progressive Alliance’s (UPA) unparalleled victory at the general elections.

When the market halted for the day, the Sensex was at 14, 272.63, up 2099.21 points or 17.24%. Similarly, the Nifty gained 636.4 points or 17.33% to 4308.05 at that time. The base for calculating the percentage rise was SENSEX and NIFTY closing figures of March-31st. I don’t know who did this rule, but this is the rule.

According to the new rules, if there is 10% movement of either Sensex or the Nifty, trading is halted for an hour market, if this happens before 1 pm. Post 1 pm but before 2.30 pm, there is halt for half-an-hour, while after 2.30 pm, trading does not halt at the 10% movement. (more…)

Breaking Corporate India Earnings News

Overnight Change in Outlook

May 18, 20091 min read

With a stable Government in place, Analysts believe business confidence will look up and the prospects of fiscal consolidation will improve. The street is Overweight the investment cycle and adding to our positive stance on Financials.

Upgraded Industrial from Underweight to Overweight
Utilities from neutral to Overweight
Financials from Underweight to Overweight
Healthcare and Consumer Staples from Neutral to Underweight
Materials – Underweight
Downgrading IT Services, from an Overweight to Neutral
Upgrading Telecoms from Underweight to Neutral

However, the big question is will earnings match the new ratings for FY10 or will they start selling the FY11 story ? Tezi Mein Tezi seems to be the buzzword 🙂

Equity Research

Morgan Upgrades Financial Services

May 18, 20092 min read

With strong election results for UPA, in our opinion, reduces the tail risk of sharply higher NPLs. Morgan’s economist has upgraded his GDP forecast for India. In an improving economy, banks are less likely to underperform. Morgan has raised its industry view to In-Line.

The negative view on Indian banks has been premised on a weak outlook for revenues and a likely increase in non-performing loans (NPLs). This view still holds. However, with the general elections sending the strongest government since the early 1990s, the outlook for reform has increased – implying potential pickup in capital flows. (more…)

Economy, Markets and Macro Views

Verdict and Direction for the Market

May 17, 20092 min read

The situation of ambiguity has come to an end. This is a big relief for the Investor fraternity as this is a mandate to the run the Government for the next five years and most importantly Congress would have a say as far as the policies and the key ministerial berths are concerned.

Political risk premium, in our opinion, certainly would recede significantly with this decisive mandate. This is likely to help India improve its sovereign rating going forward. The weightage assigned to the Indian Equity within the emerging market (more…)

Breaking Corporate India Earnings News

Fiscal Risk A Drag on the market

May 15, 20091 min read

We wouldn’t be surprised if raters – Fitch just sounded caution – downgrade India on fiscal risks. And we wouldn’t be astonished, if fiscal sustainability fears, like in the previous down cycle, prove wrong. We do not share concerns about a medium-term impact on the India story, as the present spike in the fiscal deficit is essentially cyclical . Risk: election of a completely irresponsible fiscal regime next week.

It is critical, in our view, to appreciate that the causality essentially runs from growth to the fiscal deficit, rather than the other way round. It is surely no one’s case that the benign 5.4% of GDP FY07-08 fiscal deficit led to the current growth collapse! Once growth revives FY11 on, we expect the fiscal position to improve with a rebound in tax revenue.

The very growth collapse contracting taxes, after all, is also shrinking credit demand. This leaves banks with surplus to fund the fisc, moderating the yield impact of high government borrowing and enabling softer lending rates to support growth.

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