..... . VALI disclosures . .....: 11/01/25, Postmarket REPORT

Saturday, January 11, 2025

11/01/25, Postmarket REPORT

Benchmark indices Nifty 50 and Sensex cracked over one percent in the morning session on January 6, while stocks in the public-sector banking space lagged peers. Fear gauge India VIX spiked six percent, indicating heightened volatility in the markets.

At 12 pm, the Sensex was down 1,227.17 points or 1.55 percent at 77,995.94, and the Nifty was down 387.80 points or 1.62 percent at 23,616.95. About 573 shares advanced, 2932 shares declined, and 100 shares unchanged.

From its 52-week high, the Nifty 50 index has fallen over 10.1 percent to an intraday low of 23,615.10, to re-enter the correction zone.

The public-sector banking pack faced some pressure, with the Nifty PSU Bank index sinking over two percent as Union Bank, Central Bank and Bank of Baroda sank up to six percent.

The Nifty Junior index saw the sharpest fall, with the Nifty Next 50 index tanking almost one percent. The broader markets, represented by Nifty Midcap 100 and Nifty Smallcap 100, fell up to 0.7 percent, as the sentiment soured.

According to market experts, now that the holiday season is wrapped up and behind us, trading volumes are expected to recover. Further, the domestic markets will look towards the upcoming earnings for the three months ended October-December for market cues.

👉"The focus now is on earnings growth trajectory, which will be crucial for market sentiment. Third-quarter earnings are expected to be slightly better than the first half, recovering from challenges such as erratic monsoons and political uncertainties earlier in the year," Kranthi Bathini, Director of Equity Strategy at WealthMills Securities said.

In the midst of the earnings reports, investors will also focus on the Union Budget for 2025-26 as well as the RBI MPC meeting in February for directional cues.

Global cues are also likely to weigh on the market's sentiment. The external macro construct continues to be unfavourable with the dollar index at 109 and the 10-year US bond yield at 4.62%. The FIIs are likely to continue selling till the yields decline and the dollar stabilises.

👉Uncertainty around the Federal Reserve's rate path, President-elect Trump's inflationary policies, and spiking oil price might give rise to volatility. "Traders should watch how Trump's actions post-inauguration influence market trends, with Nifty's direction hinging on these developments," noted Prashanth Tapse, Senior VP (Research), Mehta Equities.

On the technical front, while market gauges suggest the Nifty 50 is in the oversold zone, there could be a possibility of a further slide towards the 23,500 level, according to Sameet Chavan, Head Research, Technical and Derivative - Angel One. If this happens, levels below the 23,000-mark could be on the cards too.

However, if Nifty 50 breaks past its resistance of the 24,800 level, then the markets would gear up for the much-awaited pre-budget rally, Chavan added.

Bajaj Finance, Bajaj Finserv, Titan Company, Shriram Finance and Tech Mahindra were the top gainers on the Nifty 50, while Kotak Mahindra Bank, ONGC, Tata Steel, Cipla and Hindalco were among the top losers.

Shares of Kotak Mahindra Bank slipped over 1 percent to Rs 1,808 after the private lender reported the exit of a senior management personnel, with Chief Operating Officer and Chief Technology Officer Milind Nagnur stepping down citing personal reasons.

👉Consumer staples major Dabur India Ltd. shares fell 3 percent after the firm shared its business update for the October-December period. "In Q3, inflationary pressures were witnessed in some segments which were partially mitigated through tactical price increases and cost-efficiency initiatives. We anticipate flattish operating profit growth in Q3," said Dabur.

source: Network18

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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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Saturday, January 11, 2025

11/01/25, Postmarket REPORT

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