This is the blog of Hrishikesh Prabhavalkar, a commerce graduate with close to 16 years of stock markets experience. With this blog you can get your self updated about the Indian Capital Markets, Political stories, and things impacting the economic growth.
Friday, October 16, 2015
Gloomy days ahead . . . ! ! !

Thursday, October 8, 2015
Darkness Engulfing
Back with the market update blogs after Ganapati Holidays.....
Nifty after bottoming out @ 7540...... now trading near a resistance of a downward gap from 8090-8225....
After 6 consecutive positive closes, today Nifty closed negative by around 0.5% @ 8129...
On daily charts a bearish candlestick at a resistance, increases chances of a weak outlook for short term.
Below 8100-8080, Nifty can come down till further support zones of 8000-7875-7700.
However 8080 level remains crucial for any downfall to unfold. Also, IV (from India Vix chart) looks like taking a support near 1699, and likely to bounce back from here, which in turn again raises concerns for bulls. Traders are also advised not to take a too many leveraged positions as the volatility is likely to increase going forward.
Supports - 8100-8080-8050-8000
Resistances - 8160-8200-8230
Traders advised to play safe with strict stop losses for Long and short trades on the back of higher volatility expectation.
Cheers...

Wednesday, September 30, 2015
Interesting read .... Rate cut of .50% - Is it really meaningful to us.....? ? ?
EMIs down by Rs 20 per lakh, we will all buy cars now | A A A |
Vivek is a writer who has worked at senior positions with the Daily News and Analysis (DNA) and The Economic Times, in the past. He has just finished writing a trilogy on the history of money and the financial crisis. The series is titled Easy Money. His writing has also appeared in The Times of India, Business Standard, Business Today, The Hindu and The Hindu Business Line.
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Vivek Kaul |
This line is believed to be the source of another quote that often gets attributed to Einstein: "Everything should be made as simple as possible, but no simpler." Irrespective of whether Einstein said this or not, it remains a very powerful quote.
It is typically applicable in scenarios where we are trying to explain things to people. And in our zeal to explain things we end up making things much simpler than they actually are. Now take the case of the Reserve Bank of India's decision to cut the repo rate by 50 basis points (one basis point is one hundredth of a percentage) to 6.75%, yesterday. Repo rate is the rate at which RBI lends to banks and acts as a sort of a benchmark to the interest rates that banks pay for their deposits and in turn charge on their loans.
This immediately led many analysts and experts who appear on television to conclude that EMIs will now fall and hence, people will borrow more and buy cars, bikes, homes, and so on. This simplistic sort of analysis you would have read by now in your daily newspaper as well.
Only if it was as simple as that.
The banks borrow deposits at a certain rate of interest. They lend these deposits as loans at a higher rate of interest. Hence, for banks to cut the interest rates at which they lend, they first need to cut interest rates at which they borrow.
Further, even if banks cut deposit rates, after a cut in the repo rate, they may not cut lending rates or they may not cut lending rates to the same extent as the deposit rates. As the RBI said in a statement released yesterday: "The median base lending rates of banks have fallen by only about 30 basis points despite extremely easy liquidity conditions. This is a fraction of the 75 basis points of the policy rate reduction during January-June, even after a passage of eight months since the first rate action by the Reserve Bank. Bank deposit rates have, however, been reduced significantly, suggesting that further transmission is possible."
Before yesterday's 50 basis points cut in the repo rate, the RBI had cut the repo rate by 75 basis points between January and June 2015. In response to this banks had cut their lending rates by around 30 basis points on an average. They had cut their deposit rates more.
Why was this the case? In some cases, banks were simply trying to make more money. In other cases, particularly in case of public sector banks, the banks also had to deal with a huge amount of bad loans that had been piling up. Basically banks had lent money to corporates, who were no longer returning it. In this scenario, in order to maintain their profit levels, banks decided to cut their deposit rates more than their lending rates.
Further, banks also need to compete with small savings schemes offered by India Post. Hence, they cannot cut interest rates on their deposits beyond a point, unless the interest rates offered on the small savings schemes are cut as well.
The larger point being the "transmission" as experts like to call it from a repo rate cut to falling interest rates on banks loans, is not so straightforward, as it is often made out to be.
In the press conference that happened soon after the RBI rate cut, the economic affairs secretary Shaktikanta Das said that the government would review the interest rate offered on small savings schemes like the Public Provident Fund (PPF) and post office deposits.
Soon after this, the State Bank of India cut its base rate by 40 basis points to 9.3%. The cut will be effective from October 5, 2015. Base rate is the minimum interest rate a bank charges its customers. This cut by the country's largest bank is expected to force the big private sector banks to act as well and cut their base rates. Andhra Bank also cut its base rate by 25 basis points to 9.7%.
Hence, this time the transmission of lower interest rates after a repo rate cut is likely to be faster than in the past. Nevertheless, does that mean consumption will pick up because interest rates are now slightly lower?
Let's do some basic maths to understand this. SBI currently offers a car loan at 10.05% to men, 35 basis points above its base rate of 9.7%. For women, the rate of interest charged is 10%.
A car loan of five years of Rs 5 lakh at 10.05% would mean paying an EMI of Rs 10,636 in order to repay the loan. With the base rate being cut by 40 basis points, a new car loan would be offered at an interest of 9.65%. This would mean an EMI of Rs 10,538 or around Rs 100 lower. Hence, for every Rs 1 lakh of loan, the EMI will come down by around Rs 20 (Rs 100 divided by 5).
So, does that mean people will now buy cars because the car loan EMI will be down Rs 20 per lakh? Does that also mean that people were earlier not buying cars because the car loan EMI was Rs 20 per lakh higher?
If the car industry is to be believed that seems to be the case. Rakesh Srivastava of Hyundai Motors told the news-agency PTI that the rate cut was a "festival gift" from the RBI. R S Kalsi of Maruti Suzuki said: "On the whole, it gives a good signal to customers. The market so far has been moving very slowly but with this (rate cut) sentiments will improve. It gives the much-needed boost to the market in the pre-festive season."
In fact, Pawan Munjal of Hero Honda also joined the rate-cut kirtan and said: "It has come at an opportune time as it will help in raising customer sentiment during the festival season."
Hero Honda as you would know is in the business of selling two-wheelers, motorcycles in particular. SBI currently charges 12.85% on its Superbike loan. The EMI on a Rs 50,000, three year loan, would work out to Rs 1681.1. With a 40 basis points cut, the new interest rate will be 12.45%. The EMI on this will be around Rs 1671.5, or around Rs 10 lower.
So people will go and buy bikes because the EMI is Rs 10 lower now? And they were not buying bikes earlier because the EMI was Rs 10 too high?
This sort of simplistic logic on part of corporates and analysis on part of the media, really beats me.
People will consume and buy things when they feel confident about their economic future. This will happen when they see job security and steady increments on the way. Steady increments will come when corporate profits start growing, which isn't the case currently. Corporate profits will start growing when the corporates are able to clean up the excessive debt that they have on their balance sheets now, among other things. And all this is easier said than done.
At the end of the day, monetary policy can only do so much.
Postscript: I would also suggest that you read the excellent piece by Tanushree Banerjee, Co-Head of Research at Equitymaster, on yesterday's rate cut. You can read the piece here.

Friday, September 11, 2015
Bulls Partying.... But be cautious....

Wednesday, September 9, 2015
Is it a reversal ? ? ?

Wednesday, September 2, 2015
Bears close the day.....

Tuesday, September 1, 2015
Bears attack, Bulls ready? ? ?
As expected, Nifty saw a huge decline after breaking 7960-7950 levels and now trading below 7800.
Now, the recent low of 7667-7650 will act the last ray of hopes for midterm bulls, sustaining below which will open the gates for 7500-7300-7000....
Even if there is a bounce, prima facie it will be a short lived bounce (called as dead cat bounce) and 8100 will act as a crucial resistance, midterm bias will only change after surpassing 8100-8200 levels.
However, for short term bias 7650 levels will be very crucial to watch out for and will turn positive if and only if Nifty surpasses and sustains above 7800 mark today or tomorrow.
Hrishi

Friday, August 28, 2015
Fell from the Top......

Sign of Concern ! ! !

Tuesday, August 25, 2015
Bottom Fishing Successful ! ! !

Bottom Fishing ! ! !

Monday, August 24, 2015
Black Monday ! ! !

Friday, August 21, 2015
Rising Window Calling....
Cheers
Hrishi

Thursday, August 20, 2015
Markets in bad mood.....

Tuesday, August 18, 2015
The cockroach theory by Sundar Pichai . ! ! !

Friday, August 14, 2015
Why Parliament did not function......

Thursday, August 13, 2015
In the Independence day week Bulls are dependent a lot on 8321 ! ! !
Owing to domestic and global negative factors Nifty plummeted badly in this Independence day week.
Though a positive weekly close has a remote probability Bulls will still depend a lot on 8320-8300 levels. A close below the same and Nifty is set for another down turn will 8200-8100-7950 levels.
However, personally I feel a lot of negative things are now factored in by now (Like, Yuan devaluation, GST not passing in, Policy Paralysis due to non functioning of both the houses of Parliament, etc.) and still Nifty managed to stay above yesterdays low of 8338 which is a sign of relief.
So If we hold 8320-8300 levels on closing basis a short term bounce can not be ruled out.
Bulls .... last ray of hope.... 8320...
Bears can party if the same is breached on a closing basis.
Cheers
Hrishi

Saturday, August 8, 2015
FNO lot sizes revised...
SEBI revises the market lot and minimum lot value criteria.
Minimum lot value revised to 5 lac. Minimum lot size for stocks reduced to 50 and in multiple of 25 there after.
For high value stocks minimum lot size fixed at 10 and multiple of 5.
Index minimum lot size fixed at 10 and multiple of 5 there after
At current nifty value of appx 8500. New Nifty index lot will be 60.
Bank nifty will be 30...applicable from
Oct expiry ..
http://www.sebi.gov.in/cms/sebi_data/attachdocs/1436782665000.pdf

Friday, August 7, 2015
How to Select a Fundamentally sound company......

Tuesday, August 4, 2015
And the God opens a Dmat Account ! ! !.. Why are you waiting.
Considered the first globally for a shrine management, Tirumala Tirupati Devasthanams (TTD) has opened demat account (1601010000384828) with the Stock Holding Corporation of India.
PS Reddy, MD and CEO of Central Depositories Service (CDSL), told ET that the innovative move by TTD was primarily aimed at addressing the hassles pertaining to transferring the physical share certificates. "TTD has been receiving physical share certificates as donations by devotees in its open Hundi, which indicates that devotees are interested in donating shares.
TTD viewed that enabling devotees to use the demat account for donations helps both." Reddy said though TTD is the first shrine management in the country till date to open a demat account, CDSL would explore similar interest from other temple managements in other parts of the country that were receiving shares as donations.
While acknowledging that the temple has been receiving thousands of share certificates valuing lakhs of rupees, a TTD top official, however, refused to divulge details on the quantum and value of shares received so far.
