Tit - bits

Yesterday, the 30-share BSE Sensex settled 2,919.26 points or 8.18% lower at 32,778.14 while the broader Nifty slumped 868.25 points or 8.30% to close at 9,590.15.

It is interesting to note that while the Nifty marked its biggest intraday drop since October 2012, the Sensex recorded its largest daily fall in over a decade.

Though the immediate  support levels for Nifty are placed at 9,385/ 9,180, I feel the Nifty is likely to test 8700 on the downside due to panic created by Choronavirus outbreak.  You may buy 8700 put at around Rs.85/90 for targets of Rs.120.

Photo: Frontline 

#A sell call was given in Yes Bank Ltd (Rs.25.05) in my last post when the share price tanked to Rs.17.45 yesterday, before closing at Rs.25.05.

Meanwhile, there are media reports that The State Bank of India (SBI) will buy YES Bank’s shares worth Rs.7,250 crore at Rs.10 per share, subject to regulatory approvals. This is a peanut considering the proportion of the problematic area. 

Also, the media is agog with the news that big bull Rakhesh Jhunjhuwala, DMart (Avenue Supermarts) owner Radhakishan Damani and PremjiInvest are likely to join the Yes Bank rescue consortium. I feel no smart investor will take stake in a collapsing bank.

It doesn't make sense, because a bank operates basically on borrowed funds. So,  if there is a hit on the reputation, tell me who will put their hard earned money in such a bank? 

Photo: The Financial Times 

Moreover, India is not US that half of its population will live on mortgage loans. In a slowing economy, the loan offtake will also be less. When even at such an interest rates, established banks are not able to push credit growth too much, it would be Utopian to think that to happen in case of a sick bank. 

Market participants will have to wait till later this month to get an idea of the true extent of the problem at Yes Bank when it declares its third-quarter results.

Hereto we are in the dark about the magnitude of the hole in Yes Bank's books.

It is pertinent to mention here that, in the 3rd quarter, Yes Bank's asset quality and deposits deteriorated sharply, but the RBI kept silent to prevent a run on the bank and because Yes Bank was still wooing international investors to raise capital.

I feel Yes Bank will only survive if it taken over by a large bank or merged. Otherwise we could see the share price falling  to Below Rs.5 in the coming days. Those who are still invested are suggested to exit  and not enter till we know more clearly, the condition of its finances. 

The fall of Yes Bank is likely to have severe repercussions on India's economic front, as it was the 4th largest private sector bank; so be prepared for the worst to come. 

Another thing: with the kind of quality we are having persons occupying the post of Prime Minister, the RBI governor and Finance Minister, I don't see much hope in the future of Yes Bank. I'll be happy if I'm proved wrong and India economy escapes its cascading negative effects. 

Those who voted Narendra Modi government to power in the last elections are themselves to be blamed for the current state of the Indian economy.  Even the smaller countries like Bangladesh, Sri Lanka, Nepal, Hungary, Ghana, South Sudan, Dominican Republic, etc are doing much better than India. It is a shame for us... Now we are already in a stagflation stage....and if the situation continues for another quarter we could slip into the black hole of deflationary stage!!

Conclusion: As we sow so we reap. If you allow an incompetent person to become PM of this great country, then....