Call Money Rates and Indian Stock Market
By krsna Khandelwal - A Stock Market Vedic Theory proponent
Friends,
The call rates are hovering at peak and three remaining days of the March month would keep them at high. While the banks are not letting the yield on long-term govt. paper improve, the whole load is on overnight money. The yield improvement would require the banks to make provisioning for the slide in bond (held by banks) prices. The banks would suffer in terms of falling profits next year as the simple equation is that when the raw material (funds in case of banks) cost goes up and when the end product prices (the interest on loans and advances in case of banks) are not possible to be raised in proportion to the raw material cost increase, the resultant profitability would be poor. The banks would not be able to raise the interest at least on credit cards and the personal loans, which have been big contributors to the profits of the new age banks like HDFC Bank and ICICI Bank. The PSU banks would suffer to a lesser degree as they are in the process of raising the share of such advances and thereby getting better average return on their lendable funds kitty. Further, their depositors are also not very smart as to cancel their old FDs and take advantage of higher interest rates. So the coming years is going to be all right for the PSU Banks and slightly troublesome for the new age ones.
A report done by Deepak Korgaonkar and Swapnil Mayker appearing in Business Standard of 28 Mar 07 (Ahmedabad Edition) gives some interesting figures. Fifty five percent of the stocks have shed value by 22% on an average while forty-five percent stocks have appreciated by 35% over the last year. The total slide amounted to INR3.02 lac crores and total gains amounted to INR5.55 lac crores, thereby swelling the investor kitty by INR2.30 lac crores. However, this has to be seen in light of the fact that it was the top five Sensex stocks that have contributed almost half of the gains, so there has been lopsidedness in markets behaviour and may askew the picture next year. There have been some real winners. sixty six stocks have improved in each quarter last year and have come from all the segments i.e. big caps, small caps and trade to trade.
In yet another report in BS, it is said that out of every 10 stocks that went public during the year six are trading at a discount. The Telecommunication, Refineries, Information Technology, Steel, Cement and FMCG are the sectors, which have given positive returns over the year but under 20%.
MF sector has INR 3 trillion in its kitty today and this is no mean achievement. This industry is going to scale new highs but the requirement of the day is that it should be constantly fed by good and bigger IPOs otherwise the growing funds base would not find suitable parking place and would distort the picture in the stock trading arena. There is however, a good development to take care; the govt. has allowed the MFs to invest abroad.
Another milestone has been crossed by the stock exchanges as their combined turnover has crossed INR 10 lac crore mark during the year gone by. Another sign of maturity is that the share of F&O section stands at more than 60% now.
A politician and self-proclaimed economist Mr. Jairam Ramesh has called the Sino-Indian economic world as Chindia. It is in fact a big contiguous two nation economic zone of enormous proportion as it represents 38 % of world's population and is growing at a break neck speed. If the land route across Himalaya were made hospitable for conduct of trade, it would become a formidable combination. Not only this , the size of these two economies and the security concerns of both these nations would make them ever alert and put on the path of military rivalry. This would become a big concern for the world at large. Although China is racing ahead of India on all fronts for the time being but India would catch up with it eventually as the resources of both these countries are matching and the strength of one in one sector is compensated by the strength of the other in another sector. The most important points would be the political governance and social harmony in future ratings of the nations. Let us see who emerges winner, as the race is not yet over.
Hari Om
BIRDINFO Stock Rx - A Vedic Prescription for stock market
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28th March 2007, 10:31 AM
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