NiftyforAll: Weekly Review

Friday, April 25, 2014

Weekly Review - 28.04..2014

Dear All,

It looks like market may or need to correct as the modi wave getting dimmer.

A Reuters poll showed that probability of strong economic rebound are dim regardless of election outcome as industry remains weak.

Another issue is Monsoon rainfall in India this year is likely to be below average and there is a 60 percent chance that El Nino will affect farm output and economic growth, the weather office said Thursday.

So what is mean by El Nino ????

El Nino - a warming of sea-surface temperatures in the Pacific - affects wind patterns and can trigger both floods and drought in different parts of the globe, curbing food supply.

The worst El Nino on record in 1997-98 was blamed for massive flooding along China's Yangtze river that killed more than 1,500 people.

El Nino means "boy" in Spanish and was first used by anchovy fishermen in Ecuador and Peru in the 19th century.

The disruptive weather phenomenon El Nino could shave as much as 75 basis points off the country’s economic output as a hit on agriculture could cause the central bank to delay cutting interest rates.

So the question now is Will it derail Modi rally on Dalal Street post polls and also now; and by how much?

"Bad monsoon will lead to only a slight correction as our valuations are attractive unlike the US and other markets," says market analyst AK Prabhakar

"If it (El Nino) happens, it'll lead to higher inflation which will result in no rate cuts from the RBI going ahead. This will have only some impact on the stock market. How much the impact will be can only be said once final picture on El Nino comes out," says Gurang Shah, vice-president, Geojit BNP Paribas

>>> Nifty - Weekly <<<

>>>Click the chart to see on full screen <<<

So if you are a regular reader of this blog, then you must understand the above chart. Almost for many weeks warned about the possible end of rally.

Last week Hanging man may be a Warning and followed by a Inverted Hammer should be a confirmation for a fall.

Strongly advising Caution.

>>> Nifty - Daily <<<

>>>Click the chart to see on full screen <<<

As per above chart I feel 1-5 upmove almost completed. Negative Divergence on RSI also confirming the bearishness. So daily chart also advising caution.

>>> Bank Nifty - Hourly <<<

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We have seen a lot on Daily and weekly chart on Bank Nifty in past weeks. So Posting the Hourly chart. As it seems like Bank Nifty completed its 1-5 upmove. Hence a break below the channel may trigger a fall.

>>> Stock Performance for the Week <<<

>>> BIOCON <<<

>>>Click the chart to see on full screen <<<

>>>> IDFC - As on 21st Apr, 2014 <<<

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>>> IDFC - As Updated on 23rd Apr 2014 <<<

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>>> IDFC - So what's Next <<<

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So after getting a Banking Licence, IDFC continues to slide. I heard that many are long after the news break out and met a loss after that.

The reason for the fall is many long term investors started selling their shares for the following reasons.

1.IDFC will be impacted in the short term in order to comply with regulatory provisions such as maintaining SLR (Statutory Liquidity Ratio), CRR (Cash Reserve Ratio) and compulsorily giving loans as per the priority sector lending (PSL) which are both riskier and of low yields.

2.Operational costs of IDFC will go up as it will have to open branches in Tier–5/6 cities which will be a costly affair and low yielding as raising sizeable deposits from such cities will be a difficult task.

3.In an increasing competitive scenario, IDFC will face execution risk in acquiring and retaining talent as well as training the existing staff to perform banking functions.

4.Increasing competition will also make it difficult for IDFC to scale its asset/liabilities base. Edelweiss believes that it will take IDFC at least 4-6 years to ramp up their operations. Edelweiss feels that these measures would bring down IDFCs Return on Equity (RoE) to sub-10 per cent levels which in any case is a modest 14 per cent.

5.But the most important point as far as investors are concerned is that IDFC will have to bring down and cap its FII holding to 49 per cent from the present level of 53.5 per cent. If some of these FIIs refuse to sell in the market then IDFC will be compelled to go in for an equity dilution to the extent of 7-8 per cent. This would further lower the Return on Equity (RoE).

So whats next - Technically I feel good time ahead soon. Ignoring the above factors - I feel its a good bet in short to longer terms. Details Only to our Subscribers.

>>> HDFC Bank - As updated on 22nd Apr, 2014 <<<