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NIFTY analysis with experts, KOTAK gets more time after dragging RBI to court, Indian markets show recovery signs after turmoil during election time…. Market updates for 12/12/18

PurpleTrades - stock market courses > News > NIFTY analysis with experts, KOTAK gets more time after dragging RBI to court, Indian markets show recovery signs after turmoil during election time…. Market updates for 12/12/18

Report by- Sabyasachi Bhattacharya


Kotak Bank won itself more time by dragging the Central Bank to court-

The Indian private sector Bank, Kotak Mahindra Bank, has bought itself more time for itself in the promoter stake dilution issue by taking the Reserve Bank of India to court. If the matter is sub-judice, the central bank can’t take Kotak to task or penalise it when the deadline for promoter stake dilution whizzes by on December 31, which is hardly another three weeks away. To recap the issue, the Reserve Bank’s guidelines mandate that no single entity – unless it is a regulated, well-diversified, listed financial institution or a government undertaking – can hold more than 15 percent in a private sector bank. Kotak Mahindra Bank’s promoters, who hold (or held, depending on which side you are on) 30 percent, have to dilute their holding to 20 percent by December 31 and 15 percent by the end of 2020. The bank took advantage of loosely-worded RBI regulations to issue Rs 500 crore of perpetual non-convertible preference shares (PNCPS), which increased its paid-up capital to Rs 1,453 crore and reduced promoter Uday Kotak’s stake to 19.7 percent. An unimpressed RBI refused to buy this argument. There this matter rested till Kotak filed a petition in the high court. On the other hand, if promoters have more skin in the game – by way of higher economic interest – they will tend to favour good governance more. This is especially so, since voting caps are already fixed at 26 percent. Having an ownership higher than one’s voting rights will make them tread more carefully. It is also clear that the board is supreme and responsible for governance in any corporate entity, including a bank. In the case of banks, RBI has the last say in deciding who is fit and proper to be on a bank’s board. Here too, like in the case of well-diversified holding, the strategy hasn’t always worked since we have seen boards beholden to superstar CEOs. The answer then perhaps lies in better banking supervision and better drafting of rules. For instance, RBI should have clearly spelt out what it means by capital. Neither are the rules governing shareholding and voting rights cast in stone; the RBI itself has changed it on several occasions. The PJ Nayak committee had recommended that promoter shareholding be capped at 25 percent rather than the RBI’s 15 percent. In the meantime, RBI faces a Hobson’s choice: diluting the rules or granting more exemptions could be a loss of face; allowing Kotak to get away will leave it facing charges of favouritism.

Source- MoneyControl, Purple Trades Research Department   




Indian markets show strong Bullish signs-

Chart source- ChartInk

Indian markets started the week on a very negative note, but major recovery was seen today by major Indices like Nifty and Sensex. As you can see on the chart given above Nifty had a GAP-UP opening after which it moved upwards and showed no signs of bearish nature. During the election time there is a lot of volatility seen in the markets. Major setback to BJP as congress has won majority in most of the states. In what was anticipated to be a day of bloodbath on D-Street, Nifty not only recovered all the losses it incurred due to election turmoil but is also showing signs of major Bullish run. In the end we would like to say that the bulls took charge right from the word go and consistently traded in the green. But intense buying in the last hour helped the market end on an even stronger note. The Nifty, not only managed to clock 10,700, but also closed above this mark. Buying was visible across all sectors, with maximum gains seen among automobiles, metals, banks, infrastructure and consumption names. In the broader market, the Nifty Midcap index ended 3 percent higher. At the close of market hours, the Sensex closed up 629.06 points or 1.79% at 35779.07, while the Nifty rose 188.40 points or 1.79% at 10737.60. The market breadth was positive as 1,882 shares advanced, against a decline of 645 shares, while 139 shares were unchanged. Hero MotoCorp, Bharti Airtel, and Indiabulls Housing gained the most, while Dr Reddy’s Laboratories, and Bharti Infratel lost the most.




Let’s take a look at the heat map-


Let’s take a look at the performance of major Indices-

Global markets made a comeback after yesterday’s bear attack. US index NASDAQ, European Indices CAC, DAX and FTSE, Asian Indices NIKKEI, Hang Seng and KOSPI all ended up in the GREEN.

Source- MoneyControl, Purple Trades Research Department   


Key Points for Traders to watch out for while trading Nifty tomorrow-

  • 10,700 is a short term support for Nifty.
  • If Nifty breaks 10,700 then it has the potential to go down.
  • 10,770 is a short term resistance for Nifty.
  • If Nifty breaks 10,770 then it has the potential to go up.


Top sectors that moved the market today-                            Data source- Moneycontrol



Top Gainers for today-                                                                                        Data source- Moneycontrol



Top losers for today-                                                               Data source- Moneycontrol


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