..... . VALI disclosures . .....: 29/12/24, BIZnews

Sunday, December 29, 2024

29/12/24, BIZnews

Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities

After showing a narrow range movement in the last few sessions, Nifty moved up with range bound action on Friday and closed the day higher by 63 pointsamidst choppy trade. After opening with a positive note, Nifty moved up further in the early part of the session. However, it was not able to surpass the hurdle of 23900-24000 levels and slipped into weakness from the highs in the mid part of the session.

A small green candle was formed on the daily chart with upper shadow. Technically, this pattern indicates an attempt of upside breakout of small range movement with lack of strength. This is not a good sign.

The opening downside gap of 19th Dec is still intact after six sessions of its formation. The said down gap could be considered as a bearish runaway gap, which is normally formed in the middle of a down trend.

The short-term trend of Nifty is slightly positive with range bound action. The market could encounter strong overhead resistance around 24000-24200 levels by next week and any rise up to the hurdles could be a sell-on-rise opportunity. Immediate support is at 23650.

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The year 2024 has been a bumper year for public issues in India. The country saw record fund raising through initial public offerings (IPOs) so far in 2024. India eclipsed China and emerged as a top market for IPOs in Asia. The year 2024 is going to end on a strong note.

At least four companies are scheduled to list on the stock exchanges in the last two days of 2024 calendar year. Concurrently, the IPO of Indo Farm Equipment will open for subscription.

On the macro front, the government will release revenue and expenditure figures for the April-November period. The central bank will update bank loan and deposit data. Infrastructure output, US jobless claims and China manufacturing PMI are other key data points to track.

Monday, December 30

IPO Listing: Shares of Ventive Hospitality, Senores Pharmaceuticals and Carraro India may list on the stock exchanges.

Board Meeting: The board of Sejal Glass is scheduled to meet on December 30 to consider a proposal for raising funds by way of issuance of equity shares or any other instruments.

Tuesday, December 31

IPO: The public issue of Indo Farm Equipment will open for subscription.

IPO Listing: Shares of Unimech Aerospace and Manufacturing may list on the stock exchanges.

India Budget Value, Infrastructure Output: The government will release the revenue and expenditure data for April-November period. The infrastructure output data for November and current account data for the period ending September will also be updated.

China Manufacturing PMI: The official NBS Manufacturing Purchasing Managers Index (PMI) rose for a second straight month in November indicating an expansion in factory activity. Data for December will be updated.

Thursday, January 2

Board Meetings: The board of Dollar Industries is scheduled to meet to consider a proposal for raising of funds by way of issue of one or more instruments including equity shares.

US Jobless Claims: The initial jobless claims data for the period ending December 28 will be released. The initial jobless claims eased in the earlier week.

Friday, January 3

India Bank Loan, Deposit Growth Rates: The Reserve Bank of India will release bank loan and deposit growth data. Both bank credit and deposit growth slowed in the fortnight ending November 29.

US Manufacturing PMI: The ISM Manufacturing PMI increased better than estimates in November. Data for December will be updated.

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Trade Cycles

The four important features of Trade Cycle are (i) Recovery, (ii) Boom, (iii) Recession, and (iv) Depression!

The trades cycle or business cycle are cyclical fluctuations of an economy. A full trade cycle has got four phases: (i) Recovery, (ii) Boom, (iii) Recession, and (iv) depression. The upward phase of a trade cycle or prosperity is divided into two stages—recovery and boom, and the downward phase of a trade cycle is also divided into two stages—recession and depression.

Phases of Trade Cycle:

The phases of trade cycle are explained with a diagram:

(1) Recovery:

In the early period of recovery, entrepreneurs increase the level of investment which in turn increases employment and income. Employment increases purchasing power and this leads to an increase in demand for consumer goods.

As a result, demand for goods will press upon their supply and it shall, thereby, lead to a rise in prices. The demand for consumer’s goods shall encourage the demand for producer’s goods.

The rise in prices shall depend upon the gestation period of investment. The longer the period of investment, the higher shall be the price rise. The rise of prices shall bring about a change in the distribution of income. Rent, wages, interest do not rise in the same proportion as prices.

Consequently, the margin of profit improves. The wholesale prices rise more than retail prices. The prices of raw materials rise more than the prices of semi-finished goods and the prices of semi-finished goods use more than the prices of finished goods.

(2) Boom:

The rate of investment increases still further. Owing to the spread of a wave of optimism in business, the level of production increases and the boom gathers momentum. More investment is possible only through credit creation. During a period of boom, the economy surpasses the level of full employment and enters a stage of over full employment.

(3) Recession:

The orders for raw materials are reduced on the onset of a recession. The rate of investment in producers’ goods industries and housing construction declines. Liquidity preference rises in society and owing to a contraction of money supply, the prices falls. A wave of pessimism spreads in business and those markets which were sometime before sellers markets become buyer’s markets now.

(4) Depression:

The main feature of a depression is a general fall in economic activity. Production, employment and income decline. The prices fall and the main factor responsible for it is, a fall in the purchasing power.

The distribution of national income changes. As the costs are rigid in nature, the margin of profit declines. Machines are not used to their full capacity in factories, because effective demand is much less. The prices of finished goods fall less than the prices of raw materials.

✳Reality Tips to Traders

1)Trading in the stock market is a marathon. 2)Protecting your capital is key. (Learn to protect first) 3)Making 0 on the day is better than losing 50k 4)Losses happen; they are part of this business. 5)It’s not you vs. the market. It’s you VS you. 6)You are your biggest enemy; learn to be mentally disciplined. 7)Don’t follow the majority; follow the correct path. 8)Traders without a stop loss end up not being traders for long. 9)There is always another trade. 10)The big money is made waiting for the right set-ups. 11)Waiting for the right trade is the most powerful strategy. 12)It is better to cut a loss than to wait to be proven right. 13)Position sizing can make or break you. 14)Worry about the downside before you even think about the upside. 15)Don’t listen to headlines

..BANKING TERMINOLOGY

There are various types of Banks: PSU Banks, Private Banks, Co-operative/Regional Banks, Small Finance Banks and Foreign Banks. When you deposit money in a bank, let's say the bank gives you an interest rate of 4%. But when the bank lends out this money, they lend it out at say, 12%. The difference of 8% in the above scenario is effectively the profit of the bank! The loans that do not pay interest for 90 days are known as Non-performing Assets. Banks have to provide for such bad loans. Structure of a Bank Asset for a Bank: The asset portion of a bank's capital includes cash, government securities, and interest-earning loans (e.g., mortgages, letters of credit, and inter-bank loans). Liabilities for a Bank: The bank's main liabilities are its capital (including cash reserves and, often, subordinated debt) and deposits. The latter may be from domestic or foreign sources (corporations and firms, private individuals, other banks, and even governments). Banks are required to maintain Liquidity with the Reserve Bank of India: SLR (Statutory Liquidity Ratio): It is the money a bank needs to preserve in the form of cash, gold or government Bonds before providing credit customers. This limitation is added by RBI on banks to make funds available to customers on-demand at your earliest convenience. Banks are required to maintain SLR at 18%. CRR (Cash Reserve Ratio): Banks are required to hold a certain proportion of their deposits in the form of cash. Banks don’t hold these as cash with themselves, but deposit such amounts with RBI / currency chests. CRR rate is at 4.5% currently. Repo Rate: The rate at which the RBI lends short-term money to the banks. The RBI through its Monetary Policy committee changes the repo rate to balance growth and Inflation. Reverse Repo rate: The rate at which banks park their short-term excess liquidity with the RBI. Now let us understand various terminologies for Banks Net Interest Income (NII): This is the spread the bank makes on its lending. It is calculated as Interest Income – Interest Expended Net Interest Margin (NIM): This is the spread the bank makes on its lending. It is the earning which is left after deducting the cost paid to depositors from its yields on Loans. This is denoted in % terms. The formula is Yield on Loans – Cost of funds Capital Adequacy Ratio (CAR): The capital adequacy ratio (CAR) is a measure of a bank's available capital expressed as a percentage of a bank's risk-weighted credit exposures. Essentially, it is the Capital that is available to lend. Tier I Capital – In simple words this capital is freely available with the bank to lend out. Tier II Capital- This is the capital tied up somewhere and is less freely available to lend. In case of an adverse event, the bank can use this capital to lend. Under Basel III norms, a bank’s tier 1+tier 2 capital must be a minimum of 8% of its risk-weighted holdings. The minimum capital adequacy ratio, also including the capital conservation buffer, is 10.5%. Current Account Saving Account (CASA)- There is no interest paid on the Current Account and a small interest rate is paid on a savings account. The combination of both is called CASA which shows the liabilities of the bank on which it pays relatively less interest. Deposits: Bank deposits are a savings product that customers can use to hold an amount of money at a bank for a specified length of time. In return, the financial institution will pay the customer the relevant amount of interest, based on how much they choose to deposit and for how long. Now let us come to NPA. Gross NPA (GNPA): It is the total loans on which no payment has been paid for 90 days or more. GNPA % is usually shown in each Bank’s quarterly results. The percentage is basically the GNPA amount as a % of the total advances. Slippages: Slippages denote the fresh amount of loans that have turned bad in a year. The slippage ratio of a bank is calculated as Fresh accretion of NPAs during the year /Total standard assets at the beginning of the year multiplied by 100. Provisioning Coverage Ratio (PCR): This is the ratio of provisioning to GNPA and indicates the extent of funds a bank has kept aside to cover loan losses. For Instance, a company has GNPAs of Rs 100 and they have set aside 50 Rs, then the PCR is 50%. Net NPA (NNPA): The total figure left after deducting provisions made for bad loans from GNPA. (GNPA – Provisions+upgrades/writeoffs = NNPA) Special Mention Account (SMA) SMA-0 is a category in which stress with respect to the principal and interest has remained overdue for a period of 0 to 30 days. SMA-1 is a category in which stress with respect to the principal and interest has remained overdue for a period of 30-60 days. SMA-2 is a category in which stress with respect to the principal and interest has remained overdue for a period of 60-90 days

..... . VALI disclosures . .....

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Sunday, December 29, 2024

29/12/24, BIZnews

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01/02/25, Finance minister Nirmala Sitharaman has pegged India's nominal growth at 10.1 percent for FY26, higher than 9.7 percent in the previous fiscal.

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