NIFTY
Open was against the cues, negative, the dive, hits our part profit, then moves back to our trailing stop. Falls again, gathers support, rises. Rises hopes.
The rise was largely lead by the Metals, on the back of CRR cut of 0.5% starting from Feb 5 by the Chinese Central Bank. One has to understand the difference between "stabilising" and "reviving".
As recently as in the WEF Chinese Primer said, they are able to achieve 5.3% with appropriate policy without resorting to any excess measures. The equity markets have hit near 15 year low. It needs to be read only to that context and nothing more. No doubt it would create a bottom there. It will take time.
As of this writing FTSE China down -1.5%, US equity negative tones (read of NIFTYBANK report), cues in Asia are red. Clearly Bulls born in China are brittle elsewhere.
The case of Hedge Fund which folded is interesting. They apparently failed in the pair trades. That is going short in one and long in another. They have gone long in China and Short in Japan. While China continued its down move, Japan roared. Pair trades are a different kind of animal all together, they look less risky but not always. Added to that the leverage trades adds cocaine to the risk. Simple lesson, the world is not cut and paste any more.
While China liquidity may be positive, the Yields on Japan, the Canda Central Bank hawkish tone, US raising the rates on BTFP balances, continued aggression in RED sea, ED raids, confusion surrounding the HDFC, the less convincing management response, results season host of the drivers to choose from. In the aggregate markets hate uncertainty. That alone is the selling point.
In terms of the up move, it exceeded the 0.382% of the fall, but stalled below the 0.5%. Sell with stops 21730 a close below 21300 would invite much larger sell off. With expiry today, markets may choose to remain in volatile range. 21280-21480 range should prevail.
In sum CRR is for China, and previous correlation of any cuts in CRR from China is positive for commodities is an extended, not for now logic. Also, the PIP graph shows potential HnS. These patterns are visible in part of the larger Index graphs. So guarding is important.
NIFTYBANK
A day that starts on a note and ends on a similar note, but in between the drama that the markets decide to focus.
To start it is the Japan Yields that skyrocketed. The longer yields still climbing. All these on a low base, so the percentage terms are huge.
For a start the previous high on 2 Y is 0.15 basis, and look set to climb one more time. BOJ clearly said it is not if they unwind their holdings, it is whether they have to continue to buy more.
The US 5 Y auction miserably failed, the direct participants showing a dismal picture. The Yield story is not going anywhere. Add to that FED measures to remove the anomaly and adjust the rates on the BTFP, Bank Term Funding Program, rates rattle the markets. Dow loses all its gains. Market now anticipating moderate QT unwinding after this. One has to wait and see. Change from Buy the F... Dip to focus on the BTFP.
There is one common thing from all the banks that one needs to notice. It is the underlying change in the structure of deposits, either tenor or the cost, or the CASA. It is growing and going higher for all. Be it IDFC, HDFC, AXIS or the NBFC. PSU bank's stay at an advantage. With both loan and deposit growth at some point of time it is reduced focus on the loan growth aka, focus on NIM that is going to drive.
In a market where the corporate bonds are still in nascent stage (we have been discussing last 2 decades), who else the higher cost will filter to, it is going to be the Corporates. With US dollar at elevated rates, we can wish no FII needed, FPI monitoring and FDI remains the only hope. No wonder RBI is actively holding the USDINR.
Back to the TA part, we printed the bullish meeting line (Candle) in the daily. However, that in itself may not be sufficient. Broader frames still l in 44600-45600 range. Play that, hopefully, we try and figure out some lower base bottom for stability if not change in direction.