30 Jun 2015

“how wrong can a weather forecast be?”

The big question of the week has to be “how wrong can a weather forecast be?” As soon as the ceremonies surrounding International Yoga Day concluded in Delhi, it started to rain, with a deluge eventually driving away the vestiges of the recent heatwave and with it the gloomy outlook for the effects of a bad monsoon on food inflation. The final national figure for rainfall in the past week was 44% above the LPA (long-period average), bringing the season-to-date average since June 1 to +28%. Furthermore, the geographic spread is much better than last year, with 30 regions out of thirty six reporting rainfall equal to or better than the LPA. The months of July and August usually account for 60% of seasonal rainfall, so it is still a little early to be counting the chickens but it seems like the independent forecasting service Skymet is having a better year. The IMD forecast had been revised down to a season-long average of 88% of the LPA compared to 102% by Skymet.

29 Jun 2015

A big short squeeze

Greece continues to hog the headlines in Europe with the prospect of default looking more likely by the weekend. In the US, markets were buoyed by very strong consumer spending figures but then held back by interest rate fears and concerns about the next quarterly earnings season. In India, the week started with a big short squeeze as monsoon rains deluged negative IMD forecasts, reigniting expectations of more interest rate cuts. The Nifty added 156 points for the week, closing 1.9% ahead at 8381 after trading in a range of 2.6%. FIIs returned as net buyers of $102mil of cash equity, some reportedly reallocating funds from China and joining domestic investors, also net buyers, of $50mil. Average daily trading volumes remained below the trailing average though, at $2.9bn. Market breadth was strong, as advances outran declines by four to one, with the Financial Sector contributing almost 50% of the net points’ gain in the Nifty. Volatility remained subdued, the India VIX closing at 16 for a gain of a point on the week. Nifty futures closed at a premium of less than 1% to cash as external uncertainties clouded the outlook for next week’s trading.

25 Jun 2015

Triggered by GST Amendment Bill

The GST Amendment Bill is potentially a major trigger point for Indian markets; the empowered states’ finance ministers, who are largely on board, have made their submission to the Parliamentary panel examining the Bill. The government has named two committees to accelerate the implementation process: one is to propose GST rates and the other to ensure IT systems can handle the timetable.

Keep an eye on pharma

TCS has opened a new centre for IT consulting and business solutions at its Hyderabad campus. Infosys expects to make acquisitions which will contribute $1.5bn in incremental sales as it plans to boost sales to $20bn by 2020. The Pharmaceutical sector in India can expect to exploit $80bn worth of plain product patent expiries in the period 2015-19, as well as nearly $100bn of patent expiries of complex formulations, to sustain its rapid growth for several years. The government has approved four FDI proposals worth $75mil from pharmaceutical companies, including Torrent Pharma.

24 Jun 2015

Bank news, and Nestle update

ICICI bank will raise $8bn in additional funding by way of private placements of bonds and non-convertible debentures. Consideration of a proposal by Kotak Mahindra Bank to raise its FII limit to 55% has been postponed by the government for a second time. HDFC Bank announced a 15 basis points cut in its lending rate, as credit growth continues to languish at less than 10%; the bank expects to be able to grow its asset base by 3-4% more than its competition. Nestle continues to wrestle with the ignominy of having sales of its best-selling product banned by the government; the company is withdrawing the product from the entire market at a cost of $50mil. Government agencies in Singapore and Hong Kong have found the product safe for consumption. In India, it looks like government inspections of all such products will be intensified.

23 Jun 2015

The monsoon, 13%+

The monsoon finally arrived but precipitation by this week had reached 13% above the long period average, confounding widespread expectations of a drought. Of course, geographical dispersion is key and so far the northwest, central and southern peninsula regions remain deficient. It may yet turnout to have a benign effect on inflation.

How doe companies do?

The latest inflation figures give reason for confidence that the prevailing conditions will continue to allow the governor of the RBI to keep to the recent path of monetary easing, even if not until later in the year. The latest CPI numbers show a slight increase to just over 5% on an annual basis. All food categories continued to be soft, while the energy group was the notable contributor to the increase, reflecting the recent recovery in the oil price. The WPI was negative for the seventh successive month at -2.4%; this index contains a higher proportion of international commodities, which remain soft. April’s IIP was a positive surprise at 4.1%, well above expectations. Manufacturing grew by 5.1%, Capital Goods by 11.1% and even Consumer Durables grew, by 1.3% after ten months of contraction. 

22 Jun 2015

Default and monetary tightening

Against a continuing background of impending Greek default and approaching monetary tightening in the US, India had a third successive week of decline, followed by a sharp recovery. The Nifty added a net 110 points over two weeks, to close 1.3% ahead at 8225 after trading in a range of 3.9%. Average daily trading volumes have slipped considerably, to $2.3bn over the period as FIIs continued to sell a net $812mil; domestic institutions went bargain hunting however, buying a net $1bn+ in cash equity. Volatility went the same direction as volume, rising briefly from the previous close of 18 to sink steadily, eventually closing three points down at 15. The only notable points’ contributors were ICICI Bank with 20 points on the upside, while the IT sector majors cost the same number of points on the downside. Nifty futures closed at a premium of just 1%.

17 Jun 2015

Himalayan Fund to open London Stock Exchange

This photo shows the board of Himalayan Fund, business associates, shareholders and friends who assembled at The London Stock Exchange for the market opening ceremony on June 17th to mark the 25th anniversary of the Fund’s initial public offering amidst a spectacular technological pyrotechnic display. It was a remarkable occasion and, given recent performance, should encourage investors to exploit the excellent return prospects in Indian markets by investing in Himalayan Fund.

 

16 Jun 2015

HF in Financial Times

As of today, on a daily basis, the price of Himalayan Fund - as listed on the London Stock Exchange - is back in the Financial Times. In the section 'Managed Fund Services' every Tuesday to Saturday.

11 Jun 2015

Corporate news Q4 not in line with expectations

Fourth quarter company results were a disappointment overall, as negative surprises from the top hundred companies amounted to 52%, against 33% positive. Earnings forecasts for the current fiscal year are still running in the high teens based on evidence emerging of a cyclical upturn in GDP growth. The fourth quarter GDP number was a positive surprise, at 7.5% year on year. Digging into the detail though gave grounds for more optimism. Excluding government expenditure, which was under a tight squeeze to meet the fiscal deficit target and agriculture, affected by unseasonal rainfall, the underlying growth number jumped to more than 9%

Modi, one year in office

Mr. Modi’s first year as Prime Minister has drawn mixed reports. Critics abound, many highlighting what they see as a lack of promised reform and an absence of government stimulus to investment. Two key legislative reforms are stranded in a kind of limbo, having been referred to parliamentary committees to avoid lapsing at the close of the recent Budget session of parliament. The GST Constitutional Amendment Bill and amendments to the Land Acquisition Act are now the subject of committee-wrangling before reappearing in the next session. The GST Bill is widely expected to be successful but more emotion surrounds the Land Bill. This is contributing to the delays affecting major development projects, for which land acquisition is an obstacle. In the Indian land-mass, some sixty percent of land is 'cultivable' and another 23% is forest. Of the 'cultivable' land, about 7% has not been cultivated for more than five years, an area which represents about 50% of current industrial land-use. The current legislation makes it very hard to make compulsory purchases for development projects of any land, let alone unused land, hence the need for amendments. Passing the Amendment Bill is seen as a necessary ingredient to accelerating public sector investment, to say nothing about private sector investment. Passage of these two key reforms would give a sharp boost to investor sentiment as well as a platform for the next phase of upward momentum in the markets.

10 Jun 2015

Monsoon under debate

The Monsoon debate is turning into quite a barney this year with the Indian Met Department cutting its forecast to near-drought levels of 88% of the long-term average, due to the presence of an El Nino effect in the Pacific Ocean. Meanwhile, an independent forecaster, Skymet is saying that thanks to a periodic contrary effect in the Indian Ocean which it is forecasting, the rains will be better than normal. Meanwhile, the government’s Chief Economic Advisor said that food stocks are more than adequate to handle a deficient harvest adding that supply-side reforms by the government will facilitate distribution. The Finance Minister has joined the debate, saying that a weak Monsoon is not a worry.

9 Jun 2015

Constructive monetary policy

The RBI delivered its first interest rate cut from a bi-monthly review since the new calendar came into effect. The market response was a 2.5% drop as participants had wound themselves up into expecting twice that. The governor’s commentary was quite hawkish, in fact, focussing on Monsoon risks and external factors, such as US monetary policy and Euro area turmoil from the Greek negotiations. Mr. Rajan also expressed concerns about the transmission mechanism: 75 basis points of policy cuts have only brought 30 basis points of cuts in borrowing costs. The governor is throwing water on expectations of further monetary easing this year until he has evidence that there will be no adverse impact on inflation from food prices. He is also seeking to hold the fort against liquidity effects from monetary tightening in the US.

Noodles, FDI limit, acquisition

Nestle has run into a storm of regulatory action following accusations of breaches of additive limits on its market-leading Maggi two-minute noodle product line. This line helped it to an exceptional improvement in operating margins in its latest quarterly earnings. The company has now withdrawn the product from outlets nationwide as it awaits clarification from laboratory tests and, presumably, a costly exercise to rebuild its reputation. South Indian Bank has approved an increase in its FDI limit by 10% to 59%, pending FIPB approval. ICICI Bank intends to accelerate growth in its loan book by 3-4% more than the market. Infosys has completed its acquisition of San Francisco-based Kallidus Inc., a provider of digital and mobile commerce solutions under the SKAVA brand.

8 Jun 2015

India in one sentence

In the short-term, the markets look range bound, as does the currency.

The market: stable, positive

Strong US job creation and a pick-up in wage growth unsettled markets all round this week as US monetary tightening again became a firm bet for the second half. An interest rate cut by the RBI failed to inspire the Nifty which has surrendered 344 points in the past fortnight, closing the week 4.1% down at 8115 after trading in a range of 5.1%. Average daily trading volumes hovered around the twelve-month trailing average at $3.4bn. Foreign investors sold a net $225mil of cash equities to domestic institutions, though foreign buying recovered later in the week. Volatility was pretty stable, the India VIX trading down from its opening at 17, hitting 14 before recovering to close at 18 for a gain of a point. The advance/decline ratio was just in the red and only two significant points’ effects were notable: Tech Mahindra cost the index 17 points on disappointing earnings and HDFC Bank added 20 for all-round good standing. Index futures closed at a premium of 1.1% to cash.

5 Jun 2015

New Changes To India GDP Give It China-Like Numbers

India’s growth beat consensus estimates of 7%. This was up from a downward revised 6.6% growth in the third quarter for current fiscal year 2014-15, and brings annual growth of 7.3% so far. Barclays estimates Indian GDP to come in at 7.8%. @KennethRapoza

4 Jun 2015

India’s economy grows 7.5% in Jan-March, Brazil contracts 0.2%

Official data released on Friday in Brazil and India paired the two BRICS members in opposing ends of the spectrum, with India witnessing a spurt in growth and Brazil sliding back towards recession. New data unveiled by Brazil’s national statistics agency IBGE, in Rio de Janeiro, says gross domestic product contracted 0.2 per cent in the first three months of the year from the previous quarter. This was a better show than the the 0.5 per cent contraction predicted by most economists
(Read more: http://thebricspost.com/indias-economy-grows-7-5-in-jan-march-brazil-contracts-0-2/#.VW1xIWTtlHw)

3 Jun 2015

India cuts rates

The Reserve Bank of India cut interest rates for the third time this year, lowering its key repo rate by 25 bps to 7.25%, in a move that appears at odds with recent data showing the country's economy has become one of the fastest-growing in the world.

2 Jun 2015

India's output expansion

Data Friday showed India’s output expansion accelerated to 7.5% last quarter, outpacing China in terms of growth. Meanwhile, the Reserve Bank of Australia kept rates unchanged at a record low of 2.0% today, in line with analysts' expectations.

Poll: Equities will be highest returner in 2015

In a survey of more than 11,500 investors by asset management firm Franklin Templeton Investments, 59 percent said stocks would be the most lucrative investment this year, followed by real estate (55 percent) and precious metals (39 percent). Almost a third (32 percent) said they plan to increase their exposure to stocks this year, more than double the number (14 percent) that plan to reduce it, and a higher percentage than those who will increase bond, alternative investment or cash holdings. Globally, equities were seen as the riskiest asset class in 2015 and over the next 10 years, according to 35 percent of those polled, closely followed by the euro (34 percent) and non-metal commodities (32 percent) (http://economictimes.indiatimes.com/markets/stocks/news/equities-will-be-highest-returner-in-2015-poll/articleshow/47508622.cms)

1 Jun 2015

Retail market in India in 2020

India's retail market is expected to expand and reach the market cap of $1.3 trillion by 2020. Also, the GDP is set to grow at 8 per cent over the next three years, making it the world's fastest-growing major developing market, a consultancy firm has forecast.
"Consumer and investor sentiment have seen an uptick, as the pro-reform government under Prime Minister Narendra Modi sets out on an ambitious goal of improving its Ease of Doing Business ranking from 142nd to 50th in the next two years," it said.