Get started

Rbi

Kotak Mahindra Bank HammeredNSE:KOTAKBANK shares have tumbled after RBI banned the private lender from taking on new clients digitally, due to IT-related deficiencies, raising concerns about the potential impact on the lender that relies heavily on online banking. The current levels may act as a support but this firm stance by RBI is in line with the recent past actions on various other companies as well. This sector has the maximum headwinds currently and one should be careful of investing in these companies specially when opportunities elsewhere exist. However, long term investors can start to accumulate this share if they want to have Kotak Mahindra Bank in their portfolio.
NSE:KOTAKBANK
by jatin_agarwal
24 Apr 2024– RBI bank on Kotak credit cards will create ruckus ?BankNifty Analysis - Stance Neutral ➡️ BankNifty also had a neutral day today, but the OTM options premium was so weak that I did not play expiry at all today. I frankly do not remember the last time I missed playing BN expiry day. The regular algos, which has the same logic for banknifty every day ran as usual and that is the only trade I did on BN today. NiftyIT was totally against BankNifty today, the split showing its impact on Nifty50 (in a way helping its neutral case). But looking at the price action, BN was not able to generate any momentum to go for the next levels. Even though the chart says there is further upside momentum left, the fundamentals may not really help BN this week. The news of RBI banning Kotak from issuing new credit cards broke after market hours (source). If the news came during trading hours, the BN would have expired at a different level altogether - but the news would have priced in and things would have settled. Now, we may have some push/pull for the price discovery tomorrow and it could really drive up some volatility. We would still prefer to maintain our neutral stance and go short only if 47465 is getting broken. BN algos made 28600 today and I exited the trades by 13.15.
NSE:BANKNIFTY
by viswaram
05 Apr -Algo trades went from profits to loss in last 30mts -BNBankNifty Analysis - Stance Bullish ⬆️ The line we drew yesterday was more or less right. Banknifty respected the trend line and moved ahead when Nifty was trading flat. RBI MPC outcome expectations were not the reason we had the fall yesterday. I can say that with a high level of certainty because today we went past yesterday’s high. And as soon as we cut through that level an additional boost of 300+ points came in via short-covering or long build-up. I guess we discussed a higher-high, higher-low formation last week. I just drew that with the green-colored path lines. Can you spot the HH, HL pattern? All this was possible only after the 47465 resistance was breached. Also, notice how the momentum picked up right after the crossing. The major highlights from the RBI MPC meeting were The Repo rates are unchanged at 6.5% The stance is the withdrawal of accommodation (M3 money supply can be tracked to see if liquidity is getting removed or not) Inflation projected at 4.5% for current FY GDP expected at 7.6% for the current FY – Algo Trading Our algo trades ended today with a loss of Rs3246, things were cruising quite well when BN picked up momentum in the last 30 to 40mts.
NSE:BANKNIFTYLong
by viswaram
8th Dec ’23 - RBI’s meet clears the air for banknifty & finniftyBankNifty Analysis Banks had a totally different chart pattern than Nifty50 today. I would say the pattern by BankNifty was more mature and stable compared with Nifty. At no point in time, a breakdown was visible in BN today - yes, we dropped 0.67% ~ 316pts in between, but it was not as scary as N50. 4mts chart link - click here RBI Governor maintained status-quo today, A few of the important points from his meeting today - Repo rate at 6.5% - unchanged Withdrawal of accommodation stance - unchanged CPI inflation fell by 2% after the last MPC meet Real GDP for 2023-24 projected at 7% Connected lending framework - work in progress UPI limit enhanced Set up a Fintech Repository Remember how the banks were shy on 6th and 7th of December? The air is now clear for them - there are no hidden surprises from RBI this time. This could be one of the reasons we had an intraday bounce of 449pts ~ 0.96% after 1pm today. 63mts chart link - click here For the last 2 days, I was neutral on Banknifty - after the clarity shown today, I wish to change my stance back to bullish. The new ATH is now 47303.65. Would like to see some action by banks in the next week.
NSE:BANKNIFTYLong
by viswaram
8th Dec ’23 - Nifty is still long, Banks will lend momentum tooNifty Analysis Recap from yesterday: “Tomorrow’s RBI’s meeting @ 10.00 AM is going to be a decider — no level of technical analysis can predict when there is a news flow expected. I wish to maintain my long stance as of now although it’s itching to go neutral.” 4mts chart link - click here Nifty had a gap-up opening and because of that, it defended the ground. There were 2 instances of a possible breakdown appearing. See the chart, almost a M-like pattern and we hit the intraday low by 13.47. From there we reversed pretty quickly to end the day with net gains of 0.33%. Firstly, we hit the 21000 milestone, the new ATH being 21006. We hit it twice at 09.59 and 10.31 - what a week it has been. RBI’s meeting today turned out to be business as expected (we will discuss this in detail in BankNifty’s postmortem). But the 142pts ~ 0.68% intraday fall was not attributed to the RBI’s decision or comments. But one thing is sure, the recovery from 13.51 was mainly by the Financial services & bank index. 63mts chart link - click here On the 63mts TF, The uptrend stays intact. BankNifty has resolved the directional doubt on the upside which may impart more strength to Nifty next week. How high can we go - I am not sure. I wish to continue with my bullish stance till proven wrong.
NSE:NIFTYLong
by viswaram
7th Dec ’23 - tomorrow's RBI meet- more liquidity drain ???BankNifty Analysis The opening candle was very similar to the Nifty’s. The low set in the opening minutes ended up as the low of the day. In a way, it shows the bulls are still in control. The pattern was quite similar to yesterday. Weak open and then range-bound trade. 4mts chart link - click here Banks will be on their toes tomorrow huffing and puffing to the RBI Governor’s announcement. I feel he will bring in some measures to cut down the liquidity. The 2 last attempts by varying the iCRR and CAR did not go that well. Bank stocks reacted pretty badly but recovered and hit new highs. Paytm fell 20% today when it said it might cut back on small value loans ~ Rs50000. I guess this impact came from the hike in CAR weightage from the last meeting. 63mts chart link - click here I guess there is no clue from the chart here, will have to spend the time in front of the TV tomorrow to hear from the RBI governor directly. Since I am already neutral on BankNifty, my level to go short for tomorrow will be 46341.
NSE:BANKNIFTY
by viswaram
7th Dec ’23 - Should I change my Nifty stance to neutral?Nifty Today’s Analysis Recap from yesterday: “As an analyst, it is very difficult to predict when the trend will end, but we need to keep looking. For tomorrow, I prefer to continue with the long bias unless we give up the 20853 in the morning session.” 4mts chart link - click here The opening candle was explosive, in line opening with a strong fall. See the depth in RED - you will understand from the chart. I was eagerly waiting for it to cross that 20850 level today but that did not happen. Let us try to analyze why we had such a bold opening candle move. Both BankNifty and NiftyIT had a similar opening, so it was not an isolated issue. Some players might have sold off their winners to go light into tomorrow’s RBI meet or it could be a long unwinding out of fear that the markets will fall today due to the US market handout. From there Nifty climbed back to the 20920 level by 11.03 and then the trade was in a small range till the close. From 14.31 to 14.59. At 13.19, 20850 PE was trading at Rs1.95 when the spot was at 20911 - for me, it appeared damn cheap. Nifty made one more attempt - but it went nowhere. 63mts chart link - click here The last 4 candles of today had perfect “open = close” values. 3 of them were perfect Dojis - look up the textbook for Doji candles, maybe the example quoted there won't match with the real ones of today. Tomorrow’s RBI’s meet @ 10.00 AM is going to be a decider - no level of technical analysis can predict when there is a news flow expected. I wish to maintain my long stance as of now although it's itching to go neutral.
NSE:NIFTYLong
by viswaram
6th Dec ’23 - stance changed to neutral, RBI policy on Friday ?BankNifty Today Analysis BankNifty also had a gap up open, but the first-hour price action did not seem normal. Not just because we went underwater and traded negative for the rest of the day, but the lack of will by the banks to move up. We all know the RBI MPC started the meeting today and we will have the summary on Friday @ 10.00 AM. 5mts chart link - click here Seems like the market is expecting something from the RBI Governor this time. The last time he came up with a CAR (Capital Adequacy Ratio) weight increment - the markets fell. Prior to that, we had the I-CRR incremental cash reserve ratio of 10%. I guess he is doing everything to control the liquidity without raising the repo rates. What will he do this time - increase the weight on SLR (statutory liquidity ratio), ask banks to keep more collateral with RBI ? The next move by Banks will make or break Nifty, that is because to continue the breakout strategy we need strong momentum. We cannot have a situation where Nifty rockets with the BankNifty stalling. 63mts chart link - click here The first 63mts candle of today is encircled, see the weight its body carries. There was a drop of 482pts ~ 1.02%. So even though we hit a new ATH today, this candle looks worrisome. I wish to change my stance to neutral from bullish for tomorrow. We will get 100% clarity only by Friday on what RBI Governor has in mind, till then it is better to take only high-conviction trades.
NSE:BANKNIFTY
by viswaram
16th Nov ’23 BankNifty Postmortem RBI's news about CAR triggersBankNifty Analysis Banknifty did not have the fuel to rally today, unlike Nifty50. The major reason was because NiftyIT was doing all the powerlifting today (closed 2.69% higher). Between 11.00 to 11.15, I almost thought BankNifty may participate in the rally and take out the swing high of yesterday. We had the first cooling off between 11.15 to 12.30 - something that said BN is not interested in going up. Then there was a broader rally between 13.50 to 14.45 where BN also participated and this time we took out the swing high. 99% of traders would not have predicted what would happen next. We fell 358pts ~ 0.81% between 14.45 to 15.10, at that moment I had no idea what could be the related news that triggered it. Later found out about the RBI’s risk flag regarding new loans especially unsecured, credit-cards & loans from banks to NBFC - source. What we understand is that RBI has hiked the Capital Adequacy Ratio by 25% for a few types of loans. CAR is a measure of the strength of the bank if a majority of its loans default. This could just be a warning shot & I would like to dig into this information as time permits. A few starting points would be the bank’s recent loan growth, the percentage of unsecured loans, and the real impact of the recent rate hike that got progressed to the end user. On the 1hr TF, BankNifty retests the 44063 support today but its well within the ascending channel envelope. I wish to change my stance from bullish to neutral and would like to go bearish if 44063 gives away in the forenoon session. To go bullish, I would wait till 44542 is broken on the hourly candle.
NSE:BANKNIFTY
by viswaram
6th Oct ’23 - RBI meeting status quo - PostMortem BankNiftyBankNifty Analysis I had a bearish view for today, but it played out as a bad day for the bears. The RBI MPC meeting at 10 am did not move the needle that much. Usually, the RBI Governor’s speech drives up the volatility and we have some adverse moves. There was one strong move of 250pt from 10.50 to 11.20 where we pulled back from 44500 levels. Even then the options data did not get excited - and we knew that the fall was not going to last. Rightly so, Banknifty recovered quite decently and ended the day with good gains. Let us look at some points discussed by RBI Governer today - source Keep the repo rate unchanged at 6.5% Continuing the withdrawal of accommodative stance GDP growth is projected at 6.5% Inflation is projected at 5.4% The US Fed rate is 5.5% and ours is still at 6.5%, keeping the rates lower is not good for a country that needs to attract foreign investments. Although he started talking about the USDINR - that conversation did not last long. If the US decides to hold these rates for a longer tenure - a major chunk of emerging market investors could flee back and invest in dollars. An accommodative stance is usually provided to stimulate growth in the economy. RBI is just withdrawing the accommodation. Its fight is not removing liquidity with full intensity, as it may impact growth. If removing liquidity was a top priority - the stance should have been more hawkish. GDP growth at 6.5% is very good - no comments on this. Inflation at 5.4% is still bad. In his speech, he said he is very particular that inflation returns to the 4% band and then he forecasted the next FY inflation around 5.2%. By Shaving off 0.2% a year - how long will it take to reach back at 4%? He also said about removing liquidity by selling Government Bonds - I am not sure how that will work. Will have to burn my midnight oil to dig deeper into it. I am changing my stance from bearish to neutral as we have managed to break the 44068 resistance. Today’s price action imparts some stability to the current levels. The next levels to watch for will be 44702 if we are going up and 44136 if we are falling.
NSE:BANKNIFTY
by viswaram
5th Oct ’23 - Bearish despite gap-up - PostMortem BankNiftyBankNifty Analysis BankNifty had a similar chart pattern as that of Nifty. An opening gap-up of 272pts ~ 0.6% and then a 2nd leg of rally from 10.30 of 279pts ~ 0.63%. The only difference I saw was that after the day’s high was hit - BankNifty started falling gradually whereas Nifty went flat. Tomorrow’s RBI MPC outcome at 10.00 might be interesting. We would like to see how RBI governor is planning to suck the liquidity out. The I-CRR implementation and then its withdrawal created a ruckus last time. Markets fell first and then recovered equally. If the liquidity is left unchecked - the costs of goods & services will keep getting inflated. Unlike other developed countries - we do not want to hurt the growth and the growth in inflation is not hurting us that badly. I do not wish to change my bearish stance on BankNifty despite an up day today. The M pattern at 44650 levels are looking quite strong for me and until BankNifty takes them out - I do not even plan to go neutral as well. The biggest enemy of the bears is the implied volatility - the options premiums are not expecting a massive move this week even though we have an RBI event. Option sellers are having a tough time these days - I still think it's much better not to trade than sell strikes cheaply.
NSE:BANKNIFTYShort
by viswaram
22 Sep ’23 Post Mortem on BankNifty - Target 1 - 44451BankNifty Analysis BankNifty was trying to recover from the fall yesterday and it got lucky with 2 news events. Firstly JP Morgan announced its adding India to its Emerging markets bond index - source. Catch the discussion in Trading QNA. Secondly the news broke out that Govt’s commentary that I-CRR withdrawal will give ample liquidity with the banks - source Both the news gave some thrust to Banknifty and thereby Nifty in the forenoon session and helped it avoid a big fall (according to me). BN rallied exactly 1% from the lows hit at 10.00 to a comfortable position by 12.05. Both the news logically does not make sense for the bank nifty to rally. India’s bond markets meaning GOI bonds are serviced by RBI and the banks may choose to serve its debt - but not directly. Secondly the I-CRR withdrawal news was made on 1st Sep and the ATH hit by Nifty50 was due to this (Please refer to the post-mortems from 01 Sep to 15 Sep for more details). My targets for BankNifty did not work out today, but I am still continuing the bearish stance for Monday. The first target being 44451 and the second - 44219. In case BankNifty is not breaking the current low in the opening 2 hours - I would prefer to change my stance to neutral.
NSE:BANKNIFTYShort
by viswaram
1
14 Aug ’23 Post Mortem on Nifty | CPI comes at 7.44% RBI missed?After the trades on Friday, I modified my stance to 100% bearish. What other boon could I ask for when we had the opening 5mts better than expected? “The first target to take out will be the recent swing low of 19296. The next support comes at 19190.’ As soon as 19300 was taken out in the 2nd candle, my conviction for a bear rally was growing. But that did not last long enough, the bears were unable to push down the prices further and this hesitation gave the confidence for bulls to make their move. There were 2 news/events that should have tipped the scale to the bear’s favor Deloitte quitting Adani’s audits Net Interest margin could take a hit, HDFC bank The first news was speculative, it does not give any indication of the health of Adani’s finances (atleast for the general public). Auditors could resign for a number of reasons. Whereas the second news was more authoritative as it came from the CEO himself. The final impact ADANIENT down -3.29% and HDFCBK down -0.49% (not at all a big impact). The bulk of the recovery was by RELIANCE, INFY and HUL and I am quite sure 99% of the traders would not have guessed Nifty will close in the green today. I had sights on 19500 CE at Rs19 levels which ended at Rs40 today. If I had any clue of the power of bulls, I would have grabbed on to this opportunity! At the end of the day, what got formed is a classic double bottom at the support level of 19311 and a descending bearish trend line. If it goes like this - it becomes a falling wedge pattern which is not at all good for the bears. Having said that, there is one piece of comforting news for the bears. The retail CPI inflation comes in at 7.44% a 15 month high. Guessing RBI made a big mistake of not hiking the interest rate last thursday. I continue to remain bearish as of now, if the support level is getting broken in the next session - it's an advantage. If not the wedge (triangle) will catch up and it could even mean a reversal of trends.
NSE:NIFTYShort
by viswaram
10 Aug ’23 Post Mortem on BankNifty RBI hikes CRR by 10%BankNifty Weekly Analysis Between the last expiry and today, banknifty has fallen 34pts ~ 0.08% (flattish). Compare this to Nifty which rose 0.8%. In our markets banks are the leading indicator, whereas in the US its the non-banks. That is why professionals look up to banknifty in India and Nasdaq in the US as leading indicators of trends. BankNifty Today’s Analysis We had a gap down opening and traded with no special punch till 10.00. The RBI Governor first announced the status quo on the repo rate of 6.5%. With the prices of food, groceries spiking, I think he made a bold move to keep the interest rate unchanged. This really excited the banks and we started to rally and took out the intraday high of yesterday. The next 2 announcements tanked the markets, first he revised the inflation forecast for the current year to 5.4% (more pain to the poor). And then he announced a 10% hike in the cash reserve ratio that needs to be maintained by the banks (temporarily). Read the full minutes - click here. The best way to control inflation is to reduce the liquidity in the markets, a higher CRR will do that - but is it more effective than increasing the repo rate only time will tell. The surprise announcement of withdrawal of Rs2000 notes would have added more liquidity into the system and most of these funds would have found their way into the financial markets (equity or debt). Banks may have to reassess their cash levels to maintain this additional 10% cash with RBI. It will be prudent to hear from HDFCBK, ICICIBK and SBIN on the impact (maybe we can expect a news/event in 1 week). If you look at the 5mts chart, the fall of 499pts ~ 1.11% stands out. What is more dramatic is the low point went below yesterday’s swing-low unlike Nifty50. And the further price action was negative unlike flattish for Nifty50. Credits to the bulls who held the ground pretty well even with so much of news/event and historically bubble style valuations. Or it could be because the bigger bears are still hibernating. Dont be confused with a lot of trend lines. The blue one was there from yesterday, the orange line I drew today, because I felt the blue trend line may be too steep and misleading. What if the gap-up on 27th July was just a blip? If yes, the orange trend line that touches the close of 26th July should be more accurate. The green highlight shows the double top as well as the H&S pattern in a falling market and respecting the trendlines. I wish to change by stance to 100% bearish for tomorrow.
NSE:BANKNIFTYShort
by viswaram
09 Aug ’23 Post Mortem BankNifty + RBI MPC analysisBanknifty had a perfect W like pattern formed in the 5mts TF. Even though the rally from 13.50 to close was inspiring, it was not as fierce as on Nifty50. The fall of 441pts ~ 0.98% steals the limelight today. Now was the 380+ pts reversal from the intraday low to close due to the RBI MPC outcome expectation tomorrow? Some facts to consider. The vegetable, fruits, cereal, and rice prices right now are totally overheated. A middle class family of four will outrun their budget. Even a household income of Rs50000 will fall short. More pain if they have 2 school going kids or ageing parents who need medical attention. The sad thing is, even if RBI hikes the interest rate to control the inflation (which would have resurrected now) - it seldom goes into the control of Vegetable prices. RBI’s rate hike will only reduce liquidity to the formal sector. The guy who owns a super speciality air conditioned hypermarket that sells tomatoes = YES!. The guy on the roadside selling tomatoes = NO. The small farmer who harvests 20 bags of tomates = NO. I personally feel a hike of 25bps is overdue, mainly because fuel prices are rising and banks have reported decent quarter results - their balance sheet does not look that stressed out right now. Liquidity is not getting reduced that much and Inflation may hover around the upper band of 6% by the end of this festive season. I guess the current product & service prices are unaffordable for the lower range of middle-class. The ultra poor get DBT, cash benefits and ration benefits from the Govt. - but the inflation hits them the most. I seriously think the poor people will opt-out from buying vegetables at these prices. The best solution they can pray for right now is a full blown depression. On the hourly chart, banknifty has managed to stay out of the bearish territory in the 14.15 hourly candle. But the bears have not really lost control - a change in the status quo of RBI will tip the scale in their favor tomorrow. I am going with a 55% neutral and 45% bearish stance for tomorrow.
NSE:BANKNIFTY
by viswaram
PostMortem on BankNifty Today & Analysis of 08 JUN 2023A good day to take out the support zone of 44068 - was it an over-reaction to the RBI rate decision today? Lets analyze. RBI MPC decided to keep the repo rates unchanged at 6.5% and continue its withdrawal of accommodative stance. Logically no major changes w.r.t last policy day. Handful of participants including me were expecting RBI to hike the rates so that the nail on the inflation coffin can be hit. The reluctance to hike rates and just a 10bps cut on the next fiscal inflation has lot of meaning. for FY23–24 inflation target has been revised to 5.1% from 5.2% - what this really means is the inflation is not going to come down even in the next year. And not hiking the rates will add oil to the fire. Had there been a rate hike, we could have assumed a steeper inflation fall trajectory & then a rate decrease to boost demand. As it stands RBI will have its hands tied next fiscal also not to cut the rates as inflation is only expected to come down 0.1%. And also election is around the corner, unless the Govt. slash the fuel rates - the perceived goods price hike will only keep going up. The central bank has decided to have a bleak looking tomorrow for the comfort of today. More worries will add up when the Rs2000 currency notes comes back to the banking system. Monetary assets will again appreciate in value with no real perceived changes. --- Banknifty weekly analysis Over the last week 01 Jun to 08 Jun, banknifty has fallen on 0.32% ~ 140pts. Its not really too much, imagine we fell 530pts from the HOD to LOD today. So on a weekly basis banknifty is still continuing to exhibit stability. --- Today's analysis We had an inline start and then a rally of 249pts till 10.55. RBI Governor speech was from 10.00 AM - so the initial market reaction was positive - but there was no outperformance. Nifty50's chart showed more meaning today, because the reversal came right at the resistance level for it. Since banknifty has no more resistances - it was tougher to trade today. In fact it was Nifty50 which started falling first and then the banknifty caught up to it. NiftyIT was weak early in the day itself. In total banknifty fell 533pts from the HOD to LOD breaking the support of 44068 on its way. There was a recovery from 13.40 to 13.55 which lured me to close the PUT position (that went jackpot). --- 15mts TF - things were looking flavorless until the support break came today. The chart is still emotionless - there is no threat of bearishness if 43600 is not taken out tomorrow. --- 1hr TF has brought back the importance to the 44068 SR zone. There has been multiple touch-and-go instances in the recent past. Still we need a close below 43253 till we have a change in bias to view all 6 charts of today, visit viswaram. com
NSE:BANKNIFTY
by viswaram
PostMortem on BankNifty Today & Analysis of 07 JUN 2023 Banknifty was looking weaker compared to Nifty50 today, finally the day ended in green with a W pattern on 5mts TF. Although we started today with a gap-up, the index was bleeding. Banknifty fell underwater by 10.40 - meanwhile Nifty50 was surging supported mainly by NiftyIT which came back strong after yesterday's trashing. There was no strong downside momentum for banknifty, but the index was just weaker not having enough in it to rally as well. It was easy to tell that we will not have a big fall today looking at the options premium. Banknifty options had a lower implied volatility than Nifty50 thereby translating into cheaper option prices on BN. After 13.40 there was a huge buying momentum on Nifty50 mainly aided by Reliance, TCS and then the bank stocks also caught-up. Nifty50 went up 0.4% in the last 2 hours today pulling up banknifty above water and finally giving it gains of 0.25%. Nifty on the other hand closed 0.68% --- 15mts TF still shows banknifty in a range bound trade, we might need a range expansion trade day to exit this deadlock. If the momentum of Nifty50 is considered, then banknifty has higher chances to break upwards. --- 1hr TF shows banknifty trying to build up the momentum to go upwards. Still not clear why we had a drop on 31 May, there is no continuation of negative bias/event/triggers that could take banknifty further lower. All eyes will be on the interest rate decision by the RBI Monetary Policy Committee. Almost all the market participants are expecting a continuation of rate-pause (i.e. current interest rate of 6.5% will continue). I personally feel we might see a hike of 25bps to 6.75%. The main reason being the inability by the banks to stop the loan growth. Liquidity is still abundant in the system which will cast a shadow on "Inflation" by not cutting demand. Inflation which has cooled off, will not need that much of a time to rebound. If RBI is not deciding to hike the interest rate, they need to seriously consider bring down the liquidity. Withdrawal of accommodative stance has to be changed to "Withdrawal stance". I still think RBI has to be equally hawkish as the US & Europe central banks.
NSE:BANKNIFTY
by viswaram
PostMortem on BankNifty Today & Analysis of 22 MAY 2023First time in many weeks, banknifty underperformed nifty50. Ideally this move should have come last week when nifty50 had 2 more resistances to break and banknifty was near ATH. Better late than never. Nifty50 shooting pass banknifty is actually good for the entire stock markets in India. Only when all the components have caught up - a bullish trend is synchronized. This will pave the way for further breakouts. Friday we went home with the news that Rs2000 denominated currency notes are getting removed from circulation w.e.f Sep 30 2023.  Theoretically this should be good news for the banks - approx. 2-3 lakh crore stashed cash is going to return to the banking sector. Majority of this will flow into fixed deposits, debt mutual funds, equity mutual funds & stocks. From a formal economic perspective - this may be the best decision ever made. Ideally Rs500 currency also should be withdrawn in the next 3 to 5 year (according to me) so that the digital migration will gain more momentum. Having said that, I assume the economists & advisors has taken into consideration what will happen to the informal economy which is the silent backbone of real economic activity in India. Nobody has any clue how much of turnover is happening there - but its still huge! Kirana shops, road side vendors, dalals, brokers, drivers, maids, caretakers, chaiwalas etc are all from the informal sector. I am not really sure how many of them even have a bank account, leave alone financial investment opportunities. My grandfather used to carry cash with him, keep some in almari & some in the cash-pot near pooja room. Usually when the number of notes goes up - he exchanged it for the highest denomination available & stored it. He did not use a bank account then! I assume there would be lot of people in India who does the same even today (hope they get saved). --- Coming back to our analysis, as per the options data there was lot of fresh shorts taken at CE side. Mostly in the afternoon session. This contradicts with the nifty50 view which has got some new hope as the H&S pattern was negated today. The encircled traded region which just nullified a bearish chart pattern would have caused lot of momentum shift. Again as per options data shorts were created on the PE side. As I see it, market participants are long on nifty and short on banknifty. A real tough scenario to play out as banknifty has 38% weightage. Possible options are niftyIT to outperform (12% weightage) along with Reliance (10%) & LT + ITC (8%).  This should be a mega fishing week for the option sellers as a strong breakout could only emerge if there is short-covering on banknifty. Nifty by itself may not be able to pull all the weight. Tomorrow's Finnifty expiry may lead the way when few positions in HDFC & Bajaj twins gets unwound. --- 15mts is in a range based trade as of now which kind of makes it a good reward:risk for non-directional option strategies ultra short term. --- 1hr shows the trading range getting narrowed, the lows are getting shifted higher and the highs are getting lower. What follows is usually a range expansion. Chart may say the break would be on the upside, but the reality could be dependent on even macro/news events.
NSE:BANKNIFTY
by viswaram
PostMortem on BankNifty Today & Analysis of 05 APR 2023 RBI MPCBefore we get into today's analysis let us spend some time on Inflation, MPC minutes by RBI & health of banking sector. You might be aware we have the MPC minutes & interest rate decision tomorrow. There are 3 possible outcomes status quo dovish hawkish  What really prompts RBI to rate hike are 2 things Inflation Liquidity in the markets Now the last minutes showed RBI not planning to lower its guard on fighting inflation - read here. What this means is that the inflation is still persisting at the upper band of 6%. And thats not at all good news for the economy as the cost of products keep rising at a level which will push a lot of people into malnutrition. The best tool the central bank has to counter inflation is to slow the economy by making the borrowing costs higher. ie increase interest rate (hawkishness).  In spite of the recent rate hikes, the 10YR GOI bonds reference index is trading at 7.27%. The banks has raised their lending rates as well as the deposit rates - but this is not materially felt in the GOI bonds or Gsecs. For comparison purpose, the 10YR US bonds has been plotted against the 10YR IN. Look at how steadily we have maintained a range whereas US bond rates has climbed 700% from the swing low. What I am trying to say is that the recent rate hikes here has not impacted the stock market, only if the higher tenure bond rates go up we can expect the stock market to fall. ie. people liquidating their equity scrips in favor of GOI bonds to get assured returns. Now the real reason why the Gsecs are not providing yields above 7.5% is something I have no clue on.  What happens if RBI increases the rates too much? The borrowers will have to cut down their expenses, capex etc to save money and reduce dependence on loans. One of the best way to do that is to reduce the employee strength. None of the previous rate hikes has triggered such a situation, RBI is also playing safe not to push it too much - a political move fearing the 2024 elections? I do not know.  Until they do that, people will continue to spend very heavily on commodity which will help inflation stay elevated. Recently the Govt. of India removed the LTCG indexation benefit for debt funds. Indexation benefit is the only thing that really accounts for the failure of the government in controlling the inflation. Because higher the inflation lesser will be the capital gains tax for the debt funds. Now the removal of this inflation index from picture is an open license to let inflation run elevated? I do not know. --- Coming back to the analysis part, NSE:BANKNIFTY opened well above the resistance level of 40880 at 40972. Made a strong 1st candle briefly coming below this SR and then closed higher indicating bulls may be in control. Today's NSE:BANKNIFTY performance might be skewed due to the moves in NSE:HDFCBANK - I am yet to figure out why we had a 2.68% gain in HDFCBK the highest weighted stock in bank nifty index. If you look at the opening minutes of the other major banks the counter balance trades that had to be done to keep NSE:BANKNIFTY at neutral position was so huge. NSE:ICICIBANK , NSE:KOTAKBANK , NSE:AXISBANK & NSE:SBIN had to go into negative territory to compensate for the weight exerted by NSE:HDFCBANK . And for some reasons these were not impacting the option prices. On some other day the option premiums would have shot up due to the uncertainty - but today we had a below normal premiums. Even with the MPC scheduled for tomorrow - there was no fear ! The option prices dipped below the usual Wednesday closing averages. --- 15mts chart is looking bullish now with the top most support point well defended. Bears can only hope we have a pull back rally, if they are lucky the HDFCbk trades could reverse tomorrow bringing NSE:BANKNIFTY back to the range. Charts do not work on hopes, but we humans do! --- 1hr is not bearish nor bullish. Further resistance break out will shift the sentiment in favor of the bulls. A decent pull back should be in the cards because of the distance price has covered from 27th March.
NSE:BANKNIFTY
by viswaram
What are ratios to analyse any banking stocksHAPPY REPUBLIC DAY 🇮🇳 Today we will study ratios for analysing any banking/ non- banking stock. Key Ratios are - 1. Net Interest Margin (NIM) 2. Provision Non Performing Assets (PNPA) 3. Loan to Assets Ratio 4. Return on Assets Ratio (ROA) 5. Capital Adequacy Ratio 6. Gross NPA 7. Net NPA 8. CASA Ratio 9. Cost to Income ratio --------------------------------------------------------------------- 1. Net Interest Margin (NIM) 1. Net Interest Margin = ( Investment Income – Interest Expenses ) / Average Earning Assets. 2. Positive Net Interest Margin shows that bank is earning more money in the form of interest than its cost of funding investments. 3. There are several factors that affect bank NIM. One of the most significant is interest rates. When interest rates are high, banks are able to earn more from loans and investments, which increases their NIM. When interest rates low, banks earning will loans and investments decrease, which lead lower NIM. 4. In summary, Net Interest Margin is important measure of bank's profitability and its ability to generate income from its existing assets. NIM is affected by interest rates and competition. Banks with a high NIM are generally considered strong financial position and better to grow and invest in new opportunities. Let's look at example Bank in India has total assets of ₹1,00,000 crore consist of loans and investments. The bank has total deposits of ₹80,000 crore and it pays interest rate of 4% on savings accounts and 6% on Fix Deposit The bank total interest income for the period is ₹2,400 crore which is earned by loans and investments. The bank total interest expense for period is ₹1,600 crore, which is paid to depositors. To check the NIM we take the bank net interest income (NII) of ₹800 crore (₹2,400 crore in interest income - ₹1,600 crore interest expense) and divide by the bank average earning assets of ₹90,000 crore (average of total assets and total deposits). NIM = NII / Average Earning Assets NIM = ₹800 crore / ₹90,000 crore NIM = 0.89% Bank NIM is 0.89% every ₹100 of assets the bank is earning ₹0.89 of net interest income. This NIM is a measure of the bank efficiency in generating income from assets and can be used to compare it with other banks and over time. NIM in India will be lower than developed countries due to lower lending rates and high competition among bank. -=-=-=-= 2. Provision Non Performing Assets (PNPA) 1. An asset, including a leased asset, becomes non performing when it ceases to generate income for the bank. 2. Provision for Non Performing Assets (NPA). The amount keep aside by bank, to cover it's potential losses from loans and other credit related assets that have been non performing.These provisions are made when a bank expects that some of its borrowers will default on their loans, and the bank needs to set aside funds to cover the potential loss. 3. In summary, Provision for Non Performing Assets (NPA) Banks are required to make provisions for NPA on a regular basis, quarterly basis, amount of provisions is disclosed in the financial statements. Provision for NPA is an important measure of a bank's financial health, Help bank to absorb the impact of loan defaults and manage credit risk. Provisions for NPA is closely watched by investors, analysts, and regulators, it helps them to assess the bank's credit risk. Let's look at example Bank total loans of ₹50,000 crore. ₹2,000 crore classified Non performing Assets (NPA) borrowers defaulted their payments more than 90 days. Bank required to set aside certain percentage of the NPA loans as PNPA as per the Reserve Bank of India's guidelines. The current PNPA provisioning ratio is 15%. To get PNPA we multiply the NPA loans of ₹2,000 crore with the PNPA provisioning ratio of 15%. PNPA = NPA loans x PNPA provisioning ratio PNPA = INR 2,000 crore x 15% PNPA = INR 300 crore -=-=-=-= 3. Loan to Assets Ratio 1. Loan to Assets ratio can help investors obtain complete analysis of bank's operations. Banks that have relatively higher Loan to Assets ratio banks with lower levels of Loan to Assets ratios derive a relatively larger portion of their total incomes from more diversified, noninterest earning sources, such as asset management or trading. Banks with lower Loan to Assets ratios may fare better when interest rates are low or credit is tight. 2. In summary, Loan to Asset ratio is financial metric compares bank total loans to total assets. It's used to measure bank leverage assess the level of risk associated with lending activities. Higher Loan to Assets ratio indicates that a bank is more heavily reliant on lending and is more leveraged and risky, while a lower ratio indicates that the bank is less risky. Let's look at example Bank has total assets ₹1,00,000 crore, total loans ₹70,000 crore. to get Loan to Assets Ratio we divide the total loans by the total assets. Loan to Asset Ratio = Total Loans / Total Assets Loan to Asset Ratio = ₹70,000 crore / ₹1,00,000 crore. Loan to Asset Ratio = 0.7. Bank's Loan to Assets Ratio is 0.7 / 70% (0.7*100) bank assets in form of loans. A higher Ratio indicates that bank is heavily invested in lending activities, which can be sign of more aggressive lending strategy. it's also increases the risk of default. Than higher risk of NPA. Banks required to maintain minimum level of Capital Adequacy Ratio as per the Reserve Bank of India's (RBI) guidelines. -=-=-=-= 4. Return on Assets Ratio (ROA) 1. Return on Assets = Net Income / Total Assets 2. The higher ratio means assets are well managed and low ratio means resources didn't used effectively compared to the industry and competitors. 3. In summary, ROA is financial ratio measures profitability of company in relation to total assets. It is calculated by dividing the company's net income by its total assets. This ratio is useful to compare the performance of company with its peers in the same industry. It is an important metric used to evaluate a company's overall efficiency and performance but it's important to keep in mind that high ROA not necessarily mean that company have strong financial position. Let's look at example Bank has total assets of ₹100 billion and net income of ₹5 billion. To get ROA we divide the net income by total assets. ROA = Net Income / Total Assets ROA = ₹5 billion / ₹100 billion ROA = 0.05 or 5%. Bank ROA is 5% For every ₹100 billion of assets, the bank generates ₹5 billion of net income. Higher ROA show that bank is profitable and efficient in utilizing assets. It's important to note this ratio is sensitive to the size of the bank It's better to compare the ROA of a bank with other banks of similar size. -=-=-=-= 5. Capital Adequacy Ratio 1. The Capital Adequacy Ratio helps make sure banks have enough capital to protect depositors money. 2. Banks are required to maintain a certain level of Capital Adequacy Ratio as per the regulations set by central bank to ensure that they have sufficient capital to meet the potential losses and continue their operations even in adverse situations. 3. It helps maintain the stability of the financial system by ensuring that banks can withstand in unexpected situation. Let's look at example In India, the Reserve Bank of India (RBI) sets the minimum Capital Adequacy Ratio for banks at 9%. which means that they must hold capital worth at least 9% of their total risk-weighted assets. Bank in India with total assets of ₹‎100 billion and risk-weighted assets of ₹‎80 billion must maintain minimum capital of ₹‎7.2 billion (9% of ₹‎80 billion) to meet the Capital Adequacy Ratio requirement set by the RBI. It's important to note that, the Banks with a higher Capital Adequacy Ratio are considered to have a better ability to absorb unexpected losses. -=-=-=-= 6. Gross NPA 1. Gross Non Performing Assets (GNPA) is refer to the total value of loans or advances that have been classified as Non Performing Assets. These are loans or advances the borrower has defaulted on repayment or interest for certain time. loan is classified as an NPA if the borrower has not made any payment for period of 90 days or more. 2. A high ratio of GNPA to total loans indicates a higher level of credit risk and potentially weaker financial condition for the bank. Let's look at example Bank has total loans of ₹‎100 billion and ₹‎20 billion are classified Non Performing Assets (NPA). The bank Gross Non Performing Assets (GNPA) would be INR 20 billion. we see the ratio of GNPA to total loans we get 0.2 (₹‎20 billion / ₹‎100 billion). This ratio of 20% indicates that 20% of the bank loans are classified as NPA. This high ratio may indicate the bank is facing high level of credit risk it could be cause for concern. It's important to note that Gross NPA ratio is used in conjunction with other financial indicators to understand overall financial health of bank and single indicator may not enough to make a conclusion. -=-=-=-= 7. Net NPA 1. Any financial security owned by a bank is considered an asset. The interest we pay on loans is the primary source of income for banks these loans are classified as assets for bank's. when borrowers can't repay the amount these assets are classified as Non Performing Assets (NPA) because they are not generating any income for the bank's. 2.If loan provided by bank is overdue more than 90 days from the borrower end comes under NPA. If loan amount is unpaid more than 1 year from due date then it's a doubtful debt and if it’s unpaid more than 3 years then loss of an asset or default account. Net Non-Performing Asset = Gross NPA – Provisions. Gross NPA = Total Gross NPA/Total Loans given. Impact of NPA Due to higher NPA rates, banks will suffer significant revenue losses that will potentially affect their brand image. insufficient funds, banks will have to increase the interest rates on loans to maintain their profit margin. Let's look at example Bank has total loans of ₹100 billion and ₹20 billion are classified as Non Performing Assets (NPA). The bank is required to make provisions for ₹10 billion against these NPA. The bank Gross Non-Performing Assets (GNPA) would be ₹20 billion and Net Non Performing Assets (Net NPA) would be ₹10 billion (₹20 billion - ₹10 billion). If we see the ratio of Net NPA to total loans we get 0.1 (INR 10 billion / INR 100 billion). This ratio of 10% indicates that 10% of the bank's loans classified as NPA after making necessary provisioning. This ratio gives a clearer picture of bank's financial health than just Gross NPA ratio as it takes into account the provisions made against NPA. -=-=-=-= 8. CASA Ratio 1. CASA (Current Account and Saving Account) it is measure the proportion of bank deposits that are in the form of current and savings accounts. 2. The ratio is calculated by dividing the total value of current and savings account deposits by the total deposits. It is typically expressed as percentage. Higher CASA ratio indicates that bank have larger proportion of stable deposits. This is because banks can use these deposits to fund their lending activities at a lower cost which improves bank's net interest margin. Let's look at example Bank has total deposits of ₹200 billion and ₹150 billion in form of current and savings accounts. The bank CASA ratio would be 75%. This ratio indicates that three fourth of the bank deposits are in the form of current and savings accounts which are considered the stable form of deposits. This high ratio is considered positive sign. Stable deposits can used to fund lending activities lower cost. High CASA ratio the bank will have access to cheaper funding which will improve it's net interest margin. This means that the bank will be able to offer loans at a lower rate of interest. which will make it more competitive in the market and attract more customers. And bank will also have more stable funding which will make it less vulnerable to market fluctuations and interest rate changes. Asset quality, capital adequacy play important roles in assessing a bank's overall financial condition. -=-=-=-= 9. Cost to Income ratio 1. Cost to Income Ratio (CIR) measure company efficiency by comparing it's operating expenses to it's revenue. calculated by dividing the total operating expenses by the total revenue and expressed in percentage. 2. Lower (CIR) indicates that company more efficient in managing expenses and able to generate more income for every unit of expenses. while higher (CIR) indicates that company less efficient in managing it's expenses and is generating less income for every unit of expenses. Let's look at example Bank A with a high CIR. Bank has total operating expenses of ₹10 billion and total revenue of ₹15 billion. The bank's CIR is 67% (₹10 billion / ₹15 billion). High CIR indicates that the bank is not very efficient in managing its expenses and is generating less income for every unit of expenses. The bank may need to review its cost structure and implement measures to reduce expenses in order to increase its efficiency and profitability. Bank B with a low CIR: A bank has total operating expenses of ₹5 billion and total revenue of ₹15 billion. The bank CIR is 33% (₹5 billion / ₹15 billion). This low CIR indicates that the bank is efficient in managing its expenses and is able to generate more income for every unit of expenses. The bank able to invest in growth opportunities and increase profitability. I hope you found this helpful. Please like and comment. Keep Learning, Thank you for reading!
Editors' picks
NSE:HDFCBANKEducation
by NARAYANTAPARIA
24
PostMortem on BankNifty Today & Analysis of 07 DEC 2022RBI Governor announced the Repo Rate hike of 0.35% to 6.25% currently - see the minutes here. Inflation in Oct 2022 reduced to 0.6% to 6.8%. And our GDP growth reduced to 6.8%. Listening to the speech i felt the global economy is in big trouble & India is in a far better shape. Also there is a possibility of further rate hikes as the accepted inflation band is ~ 4%.  What i did not understand is how the Indian rupee will gain strength once the US dollar starts cooling off - because the US FED is still hawkish, their inflation is much higher than India. So ideally they will keep raising rates helping the USD to appreciate much further. Did he mean to say that INR will appreciate once a top is formed by the USD?? Coming back to the banknifty trades today, the price moved exactly proportional to the amount of news broadcasted. Opening was at 43157 and then rallied all the way till 10.00 when the RBI Gov. started speaking. Then as the news was priced in the BN started collapsing. From 10.25 to 11.00 we had a fall of over 355pts. And then bank nifty recovered till 13.30. The fall from 13.35 to 14.10 was something i thought will not stop. I felt it could form a 2nd leg of dip closing below the 1st leg making a lower low - this did not happen indicating the enormous conviction by the bulls not to give up. Final close was just 0.09% down - not a meaningful margin considering the amount of news flow we had today. I would like to bring back the comparison with the SPX index just to show the strength of banknifty. The spreads at +21.61% vs -8.48%. Considering all this the BN is showing enormous relative strength and the willingness to hold the ground. Recently 2 of my bearish views did not work out - looking at the price action i am strongly inclined to go short, but the market is just not breaking down. For all the analysts who says the Indian equity market can stay insulated from the global macros - i dont have anything to counter with. I am of the club that believes the US market controls the direction of world indices by regulating the supply/demand of US dollar. --- Of the bank nifty components HDFC bank exactly mirrored the move in banknifty chart ICICI rose in the same period and then fell back to flat line - looks like a position taken to counter the selling in hdfcbank as the index weightage of both are not that wide now. SBI had a fall that shows continuation to the chart pattern yesterday. AXIS had a bullish move continuing from the trend yesterday. Kotak fell at the open similar to HDFCbk but the chart pattern appears to be negative when looked in continuation from yesterday's price action. IndusInd showed bearish chart pattern. --- 15mts chart pattern is yet to give a promising sell call, but since i am an aggressive trader - i'd like to go short. The chart pattern in itself shows a range based trade between support of 42883 and resistance of 43253. Conservative traders may prefer to execute non directional strategies and adjust if BN breaks any SR. 1hr has not given any directional clue so far.  ---
NSE:BANKNIFTYShort
by viswaram