India Rates - Worsening technicals [Arjun Shetty]
Bottomline: The authorities in India have made it clear that stabilization of the
rupee is their highest priority. Even as they struggle to achieve the same
through a classic textbook style inversion of the yield curve; the spill over into
bond market technicals means more scope for pain on long end rates. In
particular, we note that RBI itself as a key buyer of duration will likely have to
stay out of the market, worsening the demand picture for bonds. While
nominal level of yields might look attractive to a section of end investors after
the recent correction, we see the risks more skewed still toward bear
steepening in curves.
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Bottomline: The authorities in India have made it clear that stabilization of the
rupee is their highest priority. Even as they struggle to achieve the same
through a classic textbook style inversion of the yield curve; the spill over into
bond market technicals means more scope for pain on long end rates. In
particular, we note that RBI itself as a key buyer of duration will likely have to
stay out of the market, worsening the demand picture for bonds. While
nominal level of yields might look attractive to a section of end investors after
the recent correction, we see the risks more skewed still toward bear
steepening in curves.
LIC Housing Finance - Asset quality comfort; valuations attractive; upgrading to
Buy [Manish Shukla]
We upgrade LICHF to Buy as we believe that following a sharp correction of
35% over the past three/six months, valuations appear attractive at 1.1x FY14E
P/B. In the current uncertain economic environment, LICHF offers comfort of
stable asset quality and steady loan growth, and is a high rated borrower with
LIC support. While there may be intermittent margin pressures, we believe that
LICHF offers strong capital protection with limited concerns about asset quality
or MTM losses. 1QFY14 net profit (+36% YoY) was 6% ahead of DB estimates.
Jain Irrigation - Revenue growth should gain traction, but rupee weakness the
key concern [Amit Murarka]
Jain Irrigation Systems (JIS) 1Q results were good, except for the adverse
impact of rupee (INR) depreciation. The company has started to deliver on both
revenue growth (+14% YoY in 1Q) and balance sheet consolidation
(receivables down 10% QoQ to INR17.4bn). We reiterate our Buy rating on
expectation of 17% EBITDA CAGR over the next two years driven by 20%
CAGR in micro irrigation revenues.
Tata Motors Ltd- JLR's July volumes likely reason for stock performance
(Srinivas Rao)
Tata Motors share price has increased by 12.4% last week leading to a 13.4%
outperformance. During the same time, the share price of BMW (Hold, EUR
75.53), TTMT's closest peer increased 4.5%. YTD, TTMT has outperformed the
local index by 4.3%. We have a HOLD rating on TTMT with a target price of Rs
275 and maintain our investment view.
US Daily Economic Notes - Don't miss these two key events in the week ahead
[Joseph LaVorgna]
This week’s jobless claims data take on heightened significance given the
potential for near-term labor market developments to influence policymakers’
QE-taper decision at the September FOMC meeting. As such, the +14k
increase in the first week of the month followed by a 22k decline in the
following week were consistent with the pattern of past years. In the last labor
market recovery after the 2001 recession, when claims finally dropped to
similar levels in November 2004, the unemployment rate was in fact 5.4%. As
a result, if claims remain near recent levels, the unemployment rate is poised
for significant further improvement.
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