Category: Your Money

Analysis: DCB

Today’s pick is DCB [stockquote]DCB[/stockquote]. The stock started the year with an upmove to Rs. 52, and following resistance, fell to Rs. 36 levels. The stock has been in this channel for the entire year now. It is currently on the lower side, and hence it can be said that it will try to reach the top once again. In the last three months, the stock moved -14% vs. a flat Nifty.

DCB Technical analysis chart

Oscillator RSI and CMO are currently in no-man’s land. The stock is currently trading in the middle of the Bollinger bands. Short-term technical just saw a 9×18 bullish cross-over.

The MACD line and signal line are moving very close to each other in the positive direction, but the histogram levels are dropping. Also, the Long-term GMMA lines are contracting to reverse the direction of the move, giving out a positive sign for the stock.

DCB Correlation chart

DCB’s average correlation with the Nifty is 0.64, which is positive and quite strong. The scrip will be closely replicating movement of Nifty. [stockquote]NIFTYBEES[/stockquote]

DCB Volatility chart

DCB has a historical volatility in the narrow range of 0.4 to 1.0. The scrip’s volatility is currently in the lower end of the range.

Globe capital has a buy call based on fundamentals:

· The Bank reported Net Profit of Rs. 26.9 Cr. in Q3 FY 2013 against Rs. 15.6 Cr. last year

· Improved asset quality

· Focus on building low cost franchise

· Robust promoter background and experienced management team

Given the technicals, we suggest a short-term BUY. A longer term call could be taken based on stocks behavior near Rs. 52 levels. Also, it is advisable to have a tight trailing stop-losses level to book profits in case of a sudden trend-reversal.

For a better picture of the NBFC sector as a whole, you can look at what the experts have to say here and here.

Sunder’s List

Roundup: S&P +0.56%. Dow +0.58%. Nasdaq +0.43%. Gold $1,590.40. London +0.74%. Germany +1.10%. France +0.93%.

U.S. regulators are scrutinizing whether prices are being manipulated in London, where a handful of banks meet twice daily and set the spot price for a troy ounce of physical gold. (WSJ) [stockquote]GOLDBEES[/stockquote]

Will RBI cut rates next Tuesday? Core inflation, which measures the rate of price increase in non-food manufactured goods and is usually regarded as an indicator of consumer demand, eased to 3.76%, below RBI’s target of 4%. (ET)

The country’s top three private sector banks — ICICI Bank, HDFC Bank and Axis Bank — said they will investigate allegations by an online magazine Cobrapost.com that their executives at some branches and insurance affiliates had offered to convert politicians’ black money (or tax-evaded income) into white (legitimate income). (HBL) [stockquote]ICICIBANK[/stockquote] [stockquote]HDFCBANK[/stockquote] [stockquote]AXISBANK[/stockquote]

Titan has been having a rough year. Concerns over a proposal by the RBI of linking the gold leasing rate (about 3.5% at present) to the base rate (about 9-10%) can potentially reduce its earnings by up to 10%. Also, the company opting for direct import of the metal can trigger additional working capital needs which can reduce earnings by up to 4%. Keep an eye out for some technical buying soon. (ET) [stockquote]TITAN[/stockquote]

On sugar deregulation: “Sugar needs to get deregulated as it has been under control since its inception and the deregulation commissions have just sat for the last 40 years. We are hopeful that this time it will go through.” (ET)

Sometimes, the right thing to do is to just drink coffee:

dilbert

Have a nice weekend!

Analysis: SKSMICRO

Today’s pick is SKSMICRO [stockquote]SKSMICRO[/stockquote]. The stock started the year with a down move to Rs. 50 levels. After finding support at the levels, the stock started its up-move to see its 52 weeks high of Rs. 200 in December. Since then the stock has been on an down-trend finding support near Rs. 140 levels. In the last three months, the stock moved -21% vs. a -1% of the Nifty’s.

SKSMICRO technical analysis chart

Oscillator RSI and CMO are currently in no-man’s land. The stock is currently trading in the middle of the Bollinger bands. Short-term technical just saw a 9×18 bullish cross-over.

The MACD line and signal line are moving very close to each other in the positive direction. However, the Long-term and short-term GMMA lines are contracting, unable to provide any outlook for the stock.

SKSMICRO correlation chart

SKSMICRO’s average correlation with the Nifty is 0.30, which is positive. The scrip will be replicating movement of Nifty. [stockquote]NIFTYBEES[/stockquote]

SKSMICRO volatility chart

SKSMICRO has a historical volatility in the narrow range of 0.6 to 1.8. The scrip’s volatility is currently in the middle of the range.

Given the technicals, we suggest a short-term BUY. A longer term call could be taken based on stocks behavior near Rs. 180 levels. Also, it is advisable to have a tight trailing stop-losses level to book profits in case of a sudden trend-reversal.

For a better picture of the NBFC sector as a whole, you can look at what the experts have to say here and here.

Sunder’s List

Roundup: S&P +0.13%. Dow +0.04%. Nasdaq +0.09%. Gold $1,585.70. London -0.45%. Germany +0.06%. France -0.10%.

Foreign institutional investors purchased the highest-ever amount of Nifty and Bank Nifty options in a single day on Tuesday. But the quantum of bearish bets far outweighs bullish ones, indicating some of these are to protect FIIs’ cash market holdings, while others are cover against their sales of Nifty put options to hedge funds and international funds through P-notes on offshore markets. (ET)

At least 15 banks are auctioning distressed assets of Rs 9,000 crore, a move aimed at cleaning up their books and shoring up profits before the close of the financial year. (ET) [stockquote]BANKBEES[/stockquote]

The government, which holds 87.15% in the NALCO, is likely to offer a 5% stake on Friday, with an option to sell 5% more. The shares are likely to be auctioned at a base price of Rs. 40 each, a discount of about 13% to Wednesday’s closing price. (ET) [stockquote]NATIONALUM[/stockquote]

DB Realty: “On the ground, the market is slow compared to what we have seen in the last few years.” (ET) [stockquote]DBREALTY[/stockquote]

Most people are much better off if they simply do two things: Re-balancing their holdings on a regular basis and changing the tilt of their allocations on rare occasions. Focus on maintaining an intelligent balance of assets, and leave the martket timing to the newsletter writers. When they get it wrong, they lose subscribers. When you get it wrong, it crushes your retirement plans… (TBP)

Dubai: “We’re looking to create an offshore emerging market centre.” The DGCX launched the Indian rupee futures contract in 2007, which it says now accounts for just under a third of the global-traded value of Indian rupee futures.  It is now launching the first dollar based MSCI India equities futures contract. (FT)

Good luck!

New RBI Regulations for NBFCs and MFIs – Whats in store?

Non-banking Financial Companies (NBFC) and Microfinance Institutions (MFI) are often the only source of banking services in rural India. In October 2010, the sector took a hard hit after the Andhra Pradesh (AP) government passed an ordinance to check MFIs owing to multiple farmer suicides over coercive collection tactics. As AP was, and still remains, a big market for MFIs, those with high exposure in the state suffered losses amounting to ₹7,800 crore.

Microfinance loan portfolio

Since then, MFIs like SKS Microfinance have rebuilt their net worth and resumed operations in AP with the court’s consent; on the condition that they adhere to rules pertaining to loan interest rates and collection practices.

Post the AP incident, the RBI became the sole regulator of the microfinance function in India. A central bill was also tabled for Parliament approval to override state Acts on MFI regulation. The goal is to protect borrowers’ interests and clarify rules mandating the operations of MFIs and NBFCs across the country. According to RBI norms, all NBFC-MFIs must:

  • register as an NBFC-MFI with RBI
  • become the member of at least one Self-Regulatory Organization (SRO) recognized by the RBI
  • make 100% provisions for their entire exposure to AP
  • maintain 15% capital adequacy ratio (ratio of capital to risk-weighted assets)
  • maintain a cap on margins though the 26% cap on interest rates has been removed
  • not exceed 4% difference in minimum and maximum rates for individual loans
  • maintain 85% or more of net assets as qualifying assets
  • allocate 70% of loans to income generating activities and 30% to purposes such as housing repairs, education, medical and other emergencies

New NBFC MFI formations must have minimum net owned funds of ₹3 crore by March 2013 and ₹5 crore by March 2014.

While NBFC-MFIs appreciate the clear guidelines, they have reservations on the cap on margins. MFIs that have suffered heavy losses in AP could get wiped out if they cannot maintain the capital adequacy ratio expected. They are already struggling with high operational costs and hefty provisions.

NBFC NPAs

In February, the RBI invited NBFCs to apply for bank licenses by July 1, 2013. Applying entities must have a minimum track record of 10 years as well as clearance from sector regulators, enforcement, and investigative agencies such as IT Department, CBI and ED. Companies must have ₹500 crore as minimum paid-up capital to set up a bank with not more than 49% foreign investment. They must also open least 25 per cent of branches in unbanked rural areas.

While the increased competition is expected to benefit borrowers in terms of interest rates and loan terms, the entry of corporate in NBFC could be disruptive. Established companies like Aditya Birla Money Ltd. will gain from launching a bank but the business volume and profitability of existing MFIs and independent NBFCs will be affected, at least till the time they can match their deposit franchise with existing borrowings. Furthermore, corporate business models could conflict with the social objective of MFI leading to its dilution.

 

[stockquote]SKSMICRO[/stockquote]