..... . VALI disclosures . .....: 07/01/25, Market Strategy

Tuesday, January 7, 2025

07/01/25, Market Strategy

A short-term pullback is probable if the NSE Nifty 50 maintains above the level of 23,500, according to Hrishikesh Yedve, research analyst at Asit C Mehta Investment Interrmediates Ltd. "However, if the index slides below 23,500, weakness may intensify."

The markets are expected to remain volatile until concerns relating to the human metapneumovirus ease out, according to Siddhartha Khemka, head of research, wealth management at Motilal Oswal Financial Services Ltd. "We could see stock/sector-specific action on the back of pre-quarterly business updates and the start of the third-quarter result season."

The daily chart shows a strong bearish candlestick, indicating that the Nifty is likely heading towards testing its previous support zone of 23,260-23,460. The resistance for the index is seen at 23,900 (according to Aditya Gaggar, director of Progressive Share Brokers Pvt).

The 49,700-49,600 level would act as immediate support for the Bank Nifty. "If the index remains below 50,500, ongoing weakness will continue."

Indian Bond-Index Inflows May Lag Estimate, Morgan Stanley SaysFII/DII Activity

Foreign portfolio investors stayed net sellers for the second straight session on Monday and sold stocks worth approximately Rs 2,575.1 crore, while domestic institutional investors stayed buyers for the 14 consecutive session and bought stocks worth Rs 5,749.7 crore, according to provisional data from the National Stock Exchange.

F&O Action

The Nifty January futures were down by 1.5% to 23,730 at a premium of 114 points, with the open interest down by 1.34%.

The open interest distribution for the Nifty 50 Jan. 9 expiry series indicated most activity at 25,000 call strikes, with the 21,850 put strikes having maximum open interest.

Tata Motors - The company reported a dip in production but an increase in sales during the third quarter of fiscal 2025. Production stood at 1,33,898 units, slightly lower than the 1,35,296 units produced in the third quarter of fiscal 2024. However, sales rose to 1,39,424 units compared to 1,37,875 units in the same period last year.
Mahindra & Mahindra - The company reported a 20% increase in total production, reaching 53,361 units in comparison to 44,495 units in the same period last year. Total sales saw a 14% rise, amounting to 66,676 units compared to 58,369 units YoY. Additionally, total exports surged by 70%, with 3,092 units exported versus 1,819 units in the previous year.
Currency
Asian currencies pared some losses after Trump denied the Washington Post's report that the upcoming President's aides were exploring tariffs that only cover critical imports.
The dollar index - which tracks the greenback's performance against a basket of 10 leading global currencies - was trading higher by 0.09% at 108.35 after rising over 1% on Monday.
Traders brace for a volatile first half of 2025 with policies in the US government during the Trump presidency and trade decisions in focus. Most stocks in Asia traded lower on Monday with Hang Seng leading the fall among major regional benchmarks.
The Canadian dollar rose after Prime Minister Justin Trudeau resigned on Monday amid mounting pressures. Tuesday, Jan. 7 will see CPI releases from the Philippines, France, Italy, and the Netherlands, along with US job openings data, offering insights on the labour market.

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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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Tuesday, January 7, 2025

07/01/25, Market Strategy

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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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