..... . VALI disclosures . .....: 17/02/25, Share Market Wrap

Monday, February 17, 2025

17/02/25, Share Market Wrap

The selling pressure has sustained for the eighth consecutive session, with the Nifty 50 hitting a new low of 2025 on February 14, losing 102 points amid high volatility. Given the consistent downtrend, the index may attempt to bounce back, but the sustainability of the recovery will be key to watch, experts said. According to them, if the index rebounds, 23,250 can act as resistance, followed by 23,400 as the next hurdle. However, sustaining below 23,000 could open doors for 22,750, and then the 22,600 zone.

SENSEX

Levels For The Nifty50 (22,929)

Resistance based on pivot points: 23,083, 23,168, and 23,305

Support based on pivot points: 22,809, 22,724, and 22,587

The Nifty 50 formed a bearish candlestick pattern with a lower shadow on the daily charts, while on the weekly scale, there was a long bearish candlestick formation. The index has sustained below all key moving averages (10, 20, 50, 100, and 200-day EMAs) as well as the lower band of Bollinger Bands, with a negative bias in momentum indicators and a lower top-lower bottom formation, signaling weakness.

Call Option Data:

According to the weekly options data, the 24,000 strike holds the maximum Call open interest (with 1.07 crore contracts). This level can act as a key resistance for the Nifty in the short term. It was followed by the 23,300 strike (74.5 lakh contracts) and the 23,500 strike (62.78 lakh contracts).

Maximum Call writing was observed at the 23,300 strike, which saw an addition of 50.38 lakh contracts, followed by the 23,900 and 23,800 strikes, which added 38.4 lakh and 31.32 lakh contracts, respectively. The maximum Call unwinding was seen at the 23,400 strike, which shed 3.72 lakh contracts.

Put Option Data:

On the Put side, the maximum Put open interest was seen at the 22,000 strike (with 75.14 lakh contracts), which can act as a key support level for the Nifty. It was followed by the 22,500 strike (66.17 lakh contracts) and the 22,400 strike (36.74 lakh contracts).

The maximum Put writing was placed at the 22,500 strike, which saw an addition of 33.89 lakh contracts, followed by the 22,100 and 22,800 strikes, which added 19.32 lakh and 12.3 lakh contracts, respectively. The maximum Put unwinding was seen at the 23,100 strike, which shed 1 lakh contracts, followed by the 23,500 and 23,200 strikes, which shed 81,675 and 52,500 strikes, respectively.

Levels For The Nifty Bank (49,099)

Resistance based on pivot points: 49,471, 49,677, and 50,010

Support based on pivot points: 48,804, 48,598, and 48,264

Resistance based on Fibonacci retracement: 49,409, 50,381

Support based on Fibonacci retracement: 47,880, 46,078

The NiftyBank also reported a bearish candlestick with a lower shadow on the daily timeframe and a long bearish candlestick on the weekly charts, indicating weakness. Furthermore, the index has entered the lower band of Bollinger Bands and is trading below all key moving averages on the daily charts, while exhibiting a lower top-lower bottom formation.

NiftyBank Call Options Data:

According to the monthly options data, the maximum Call open interest was seen at the 51,000 strike, with 17.17 lakh contracts. This can act as a key resistance level for the index in the short term. It was followed by the 50,000 strike (14.47 lakh contracts) and the 50,500 strike (11.65 lakh contracts).

Maximum Call writing was visible at the 49,000 strike (with the addition of 2.38 lakh contracts), followed by the 50,500 strike (2.04 lakh contracts) and the 49,500 strike (1.51 lakh contracts). The maximum Call unwinding was seen at the 50,900 strike, which shed 22,410 contracts, followed by the 49,800 and 50,800 strikes, which shed 19,800 and 18,930 contracts, respectively.

NiftyBank Put Options Data:

On the Put side, the 49,000 strike holds the maximum Put open interest (with 12.81 lakh contracts), which can act as a key support level for the index. This was followed by the 48,000 strike (12.16 lakh contracts) and the 50,000 strike (8.45 lakh contracts).

The maximum Put writing was observed at the 48,800 strike (which added 87,300 contracts), followed by the 48,000 strike (60,000 contracts) and the 48,200 strike (38,580 contracts). The maximum Put unwinding was seen at the 50,000 strike, which shed 1.2 lakh contracts, followed by the 49,500 and 48,500 strikes which shed 1.09 lakh and 1 lakh contracts, respectively.

NIFTY MIDCAP100

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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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Monday, February 17, 2025

17/02/25, Share Market Wrap

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