The Banking and Strategy Initiative

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India Morning Report: markets tinker with 6000, shorts fail again

Shardul kulkarni, despite his hanging on to the short trade on the indices since 5800 for the 5600 mark or thereabouts is a pretty chastised man as he leads the discussions of the index topping off at any time and falling south. if you subscribe to his school and few still do including DIIs, you would expect larger profits in the aftermath of a continuing move north, giving these positions extra incentive to come in given Nifty volatility is just south of 16. However, the depth of the market and i do not track the Historical volatility measure to track the ranges otherwise , the IDV measure could again give 25% upside from that.


The Ascent of Money

The Ascent of Money (Photo credit: Earthworm)

The caveat being the monthly series are still not good for the volatility trades and this move cannot be captured with May series transaction costs and premia making it more probable that options will lose the extra profit opportunities across voltility(vega) and the prices (delta) itself and thus the long trades have to be played in Cash equities or futures rollovers till LEAPs also make an entry for the large pool of wholesale trading money that rules the Indian markets going forward.


But then trading in Autos for this limited period is strictly a choice for the liquidity or requirement for trading income you might see as it does not befall the fundmentals of the sector despite India Inc’s impending bounceback and if you are already not long 2013 for these few scrips in the sector you might have to rule out 2013 for any opportunities later.


Today’s newspaprs carry the concise summary of results season, showing the outperformance on profit growth of nearly 20% with raw material costs down almost 5% and Sales continuing to grow only in retail/consumer and banks but many select stocks have broken through the 20% topline and 30% bottomline barrier thru a mix of cost and sales efficiencies even as in the FY14 periods the downfall of PSU bank sales continues unabated and a limited impact of the resulting credit slowdown might still show on private bank top lines esp in retail as banks fail to reduce credit costs having no option but to continue to raise cost of retail deposits, continuing with a unified ;term structure’ for retail and corporate / wholesale customers

Indian markets have to respond positively as rare cash chases India after a long hiatus and is sticky for lack of the promised revival opportunity in China and Europe. High yield debt meanwhile also presents a global investment opportunity at this time with yields just 6% may actually be supported by the US fixed income markets chasing higher yields and creating a move up all across the term structure  to revive the interest rates starting with the 10 year and smaller yields



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This entry was posted on May 7, 2013 by in Financial Markets and tagged , , , , , .


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