Indian Stock Markets!

Today will be remembered as a day when the NIFTY could possibly open at 10,300 and that’s a huge huge gap up of 95-100 points. It’s been a while since we have seen this. Imagine what is going to happen to Bank NIFTY? I am expecting a 225-250 point gap up for Bank Nifty that will take Bank NIFTY to close to 24,500!!
What a day!! It could possibly be the turnaround that we are all looking for in the economy! It’s all because of this bank recapitalization announced by Finance Minister last evening after markets closed.

What is bank recapitalization?

Banks, especially the PSU banks are have a big stress on their balance sheets and are having huge NPAs that’s compounding the problem. The result is a massive drop in their share values because of which the equity share capital of many banks. Even a big leader like SBI in its last 2 years gave 0% returns and banks like syndicate bank lost 25-30% of its value! That has eroded the equity share capital of almost all the PSU banks. Normally for every 10 rupees that a bank is holding 9 rupees comes from deposits and 1 rupee from equity share capital. This fell drastically to 65-70 paise and in Bank of India kind of banks to even 50 paise. That created a huge stress in banking system.
Govt. announced a 2.11 lakh crore recapitalization plan where it would be pumping in money into these banks. 1.36 lakh crore of this money will come in the form of recap bonds that will be front loaded into the system. That means Govt will sell these bonds and the money raised by selling them will be pumped into the banking system. The rest of 70,000 Crore will be through budgetary support. I feel its an excellent move that will take care of loan needs and NPA problems of many PSU banks that are reeling under stress.

What will NIFTY do today?

Forget technicals for the day, NIFTY will open at 10,300 or close to that and what a day its going to be! Nobody knows what is going to happen. There are huge shorts built for expiry and if those shorts are covered after opening, you will see NIFTY racing towards 10,350 levels or if shorts are created at the open then NIFTY will correct to 10250 levels. Two short straddles taken by FIIs were shattered this series, one at 10,000 level and 2nd at 10,200 levels. What these straddle holders do on the penultimate day of this most exciting series need to be seen.
Watch out for Bank NIFTY and State bank of India! Dont be surprised if SBI gives you 10% in a single day today. If you are holding it, you are lucky. Other things, I wont say, as I need to wind up this post and go to college.

Q2 results for today

1. Cigniti
2. Coromandel cements
3. Emami
4. Exide Industries
5. GSK Pharma
6. HCL Tech
7. IDFC bank
8. Kotak bank
9. M&M Financials
10. Mindtree solutions
11. NIIT
12. PNB Housing
13. RBL bank
14. Tata communications
15. Tata Elxsi
16. V guard