Category: Your Money

Sunder’s List

Roundup: S&P +0.45%. Dow +0.47%. Gold at $1,576.60. London +0.69%. Germany +0.59%. France +1.22%.

Goldman: NIFTY 7000 by March 2014. (ET) And bullish on commodities: “The recent sell-off in commodities on worries about Chinese growth is overdone in our view and we upgrade to overweight on a 3-month horizon.” (Bloomberg)

Did the Bank of England sell its gold reserves to protect banks that were severely short the yellow metal back in 1999. Or was it in response to the damage being caused to African gold producers due to European central banks deciding to suspend gold sales? What a mess. (FT) [stockquote]GOLDBEES[/stockquote]

China bears have been dead right on the existence and scope of the Chinese “Ghost Cities” – developments that have been built just for the sake of giving people something to earn a living doing and for “growing” the economy. Here’s the latest expose.

Mukesh Ambani’s Reliance Jio Infocomm is eyeing to get the largest foreign direct investment in the country by selling a little over 25% stake in Reliance Jio for $3.5 billion to US-based AT&T, valuing the company at $14 billion. (TOI) [stockquote]RELIANCE[/stockquote]

There is zero correlation between economic growth and stock market returns. “There is a cross-sectional correlation of -0.37 for the compounded real return on equities and the compounded growth rate of real per capita GDP for 16 countries over the 1900–2002 period.” (Economist)

Weekly Recap

NIFTY.2013-03-04.2013-03-08

The NIFTY ended on a bullish note, shooting up +4.16% for the week.
Biggest losers were HINDUNILVR (-3.31%), AMBUJACEM (-2.67%) and BAJAJ-AUTO (-0.73%).
And the biggest winners were IDFC (+9.76%), SESAGOA (+8.57%) and ICICIBANK (+7.85%).
Advancers lead decliners 44 vs 6
Gold: -0.22%, Banks: +3.96%. Infrastructure: +1.27%,
Net FII flows for the week: $364.58 mm (Equity) and $353.58 mm (Debt)

Banking for the poor: Will corporates do what PSUs failed to?

In India, there are about 6,00,000 villages, but out of these only 60,000 villages have banking facilities which means 90 % of the villages are unbanked. Against such a grim background, the Reserve Bank of India’s (RBI) recent decision to issue new licences to private corporates and public sector entities has aroused renewed hopes of improving banking services in unbanked areas.

Since India has opted for a bank-driven model to achieve financial inclusion, banks will play a crucial role in the whole process of inclusive growth.

STATE-WISE DATA

So far, RBI has made the right noises as far as improving financial inclusion is concerned saying banks must view it as a business opportunity rather than an obligation. While issuing guidelines for bank licences in February, RBI had said, “The business plan of applicants will have to address how the bank proposes to achieve financial inclusion.”

While the intent of institutions and regulators is little to doubt, they have all come a cropper as far as execution is concerned and it is high time that we differentiate the ‘doers’ from the ‘talkers’?

Financial inclusion has been a dud so far due to lack of technology, lack of a viable business model, higher cost of transactions and absence of reach and coverage, etc.

SEPT 2012

Every year, the government spends thousands of crores (Rs 14,000 crore in 2013-14) in recapitalising public sector banks to enable timely and adequate credit and other financial services to the weaker sections and low income groups. However, PSU banks have failed to extend basic banking services to the ‘bottom of the pyramid’ due to various factors like lack of clear policy framework and poor infrastructure and execution, resulting in financial inclusion remaining only on paper.

Institutions must overcome primary challenges like high cost of transactions, huge initial investments to create the necessary infrastructure and other expenses like financial education for the poor before financial inclusion can yield dividends.

But in this era of cut-throat competition, where banks are constantly driven by higher interest margins and intoxicated by the ideology of profit maximisation, asking bankers and financial executives to opt for social banking is a conflicting proposition that makes for a great headline but will make little headway.

Past efforts like nationalisation of banks, Lead Bank Scheme, development of Regional Rural Banks and formation of Self-Help Groups to take banking services to the masses have failed to increase penetration. Even the much-famed business correspondents (BCs) model has been a laggard.

 

FINANCIAL COMPARISON

In this context, a critical question that matters is- will corporates be able to design and deliver innovative financial services at affordable cost?

Corporates must create better awareness about banking facilities and design products which are poor-centric to ensure that the poor shed their inhibitions while approaching a bank.

Another area that corporates must grapple with is the high clout that politicians and bureaucrats wield in rural areas. Driven by electoral gains, many politicians exercise undue influence to push PSU banks to extend agricultural credit and other goodies to rural households, particularly close to elections. (Example- Rs 52,000 crore Farm Loan waiver.)

 

GRAPH

In the case of the farm loan waiver, a lot of funds, aimed at poor farmers, were allegedly diverted by middlemen and politicians. The mandate for corporates is to use financial inclusion to effectively check corruption and empower the poor.

But since they have been mandated to open only 25% of the branches in unbanked areas, it is hard to figure out if they can make any meaningful impact in addressing financial inclusion.

[stockquote]PSUBNKBEES[/stockquote] [stockquote]BANKBEES[/stockquote]

Analysis: GLENMARK

Today’s pick is GLENMARK [stockquote]GLENMARK[/stockquote]. The stock has been on an uptrend since the start of the year. It saw its 52 weeks high of Rs. 552 in January, and since then has been on a pennant formation. The decreasing volume levels are suggesting that it is soon going to decide on its next move. In the last three months, the stock moved +11% Vs. -1% of the Nifty’s.

GLENMARK technical analysis chart

Oscillator RSI and CMO are in no man’s land. The stock is currently trading in the middle of the Bollinger bands. Short-term technical just saw a bullish dragonfly doji and a bearish 18×4 SMA cross-over.

The MACD line is moving along the signal line since a month, not suggesting any directional move for the stock. Also, the Long-term and short-term GMMA lines are contracting, unable to provide any outlook for the stock.

GLENMARK correlation chart

GLENMARK’s average correlation with the Nifty is 0.33 which is positive. The scrip will be replicating movement of Nifty. [stockquote]NIFTYBEES[/stockquote]

GLENMARK volatility chart

GLENMARK has a historical volatility in the range of 0.4 to 0.8. The scrip’s volatility is currently in the middle of the range.

Given these technicals, we suggest a short-term Hold. A long-term call could be taken depending on the directional breakout of the pennant in formation. It is also suggested to have a tight trailing stop-losses level to book profits in case of a sudden trend-reversal.

Sunder’s List

Roundup: S&P +0.18%, Dow +0.23%, Nasdaq +0.30%, Gold at $1,577.40. London +0.18%. Germany +0.26%. France +0.53%.

Tata Motors cuts down production due to lower sales and inventory pile-up at dealerships and stockyards. (ET) [stockquote]TATAMOTORS[stockquote]

Gold is by no means in shortage. However, gold is a tangible store of wealth to make the transition from the present to the future monetary system. (AE) And investors have been liquidating gold ETF positions. (FT) [stockquote]GOLDBEES[stockquote]

NSE is tweaking the way option strikes are set. The step-value applicable for each stock will be determined based on the volatility of the underlying stock and the step value will be reviewed and if necessary revised on a quarterly basis. (ET)

Colagate is planning a two-for-one stock split and a 10% increase in its dividend. [stockquote]COLPAL[stockquote]

Ritholtz takes a swing on WSJ: “Over the years, I have mocked the WSJ OpEd pages as filled with drunks and cads hell bent on losing you money. Boskin is a classic example of why you should never let anyone’s politics influence your investing. He is part of the reason why I quarantined money-losers  like the WSJ OpEd pages.” (TBP)

Good luck and have a nice weekend!