[T.S.R:14781] 9am with Emkay

 

9am with Emkay

Contents

n Research Views

PSBs decide base rate at 7.5-8.0%

The public sector banks have decided their base rates in the range of 7.5-8.0% as expected with SBI being the lowest at 7.5%. SBI has calculated base rate on last six months average cost of deposits. Banks like PNB, BoB and UBI have kept their base rate at 8%.

n The base rates for various banks have been in line with expectations. We do not expect the base rate to impact volumes for banks in immediate term as for banks like SBI the volume of businesses done below the base rate is just about 3%

n The base rate regime is also positive for banks' profitability as the banks can not lend below base rate which means no loans with negative carry.

n We believe that the problems with volumes will arise when the yield curve gets steeper and the interest rates in less than one year NCD/CP markets are much below the medium/long term rates.

n Technical Comments

Momentum shift

On daily chart, Nifty has formed a second consecutive lower low and with that broke the last week's low of 5259, which indicates that a correction is on the cards. In addition to this, Nifty also failed to find support at the 50-hourly exponential moving and did manage to close below that average, which means that from hereon any pull back towards 50-hourly exponential moving average (i.e. 5285) should be used for adding fresh shorts. Furthermore, RSI has also formed a declining peak, meaning that the momentum has now again shifted in the favour of the bears.

BSE Bankex

With the target of 38.2% retracement of the whole rally from 10011 to 11127, on the cards, we are now revising our target to 50% retracement packed at 10573 and below that the fall can also extend upto 61.8% retracement packed at 10443.

BSE Metal

The index (currently @ 14635) has started a fresh leg down after finding resistance near its 200-dma. For the current leg the first target is packed at 13827. If this level is violated then the fall can even worsen upto 13000 level.

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