Trading with PT style
- Thread starter praveen taneja
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MUMBAI: Banks have pulled out over Rs 1,00,000 crore invested in mutual funds (MFs) in a single fortnight of December ‘09. Aggregate bank investment
in MFs dipped Rs 1,04,851 crore to Rs 42,428 crore during the fortnight ended January 1, the biggest fall in any 15-day period.
This withdrawal could have been necessitated by the demand for funds to meet growth in loans which rose over Rs 75,000 crore in the second half of December ‘09. However, it could have also been done to address RBI’s concerns over banks parking their funds in mutual funds, which subsequently invested them in corporate paper.
There could be a third reason for the shift. Data suggest that bank also tend to pull out from MF towards the end of a quarter as it attracts capital provisioning. Banks are also in a position to window dress their balance sheets by withdrawing funds from investments and deploying them in short-term loans. In the second half of December, bank loans grew Rs 79,515 crore along with a surge in statutory bond investments which grew by Rs 67,900 crore.
Unlike investments in mutual funds, government bonds being risk-free do not attract capital requirements. “But such large investments often funds find their way back, after a few days in the beginning of the next quarter,” said a senior official with a public sector bank on condition of anonymity.
RBI’s opposed to banks parking funds in mutual funds, as it feels that by doing so lenders are deviating from their core business of providing credit. The central bank had first flagged of the issue in its mid-term review of monetary policy in October asking banks to rein in such investments and even urged bank CEOs to set a limit for mutual fund investments.
The ceiling was to be determined for each bank by its board. The governor had termed banks investment in MFs as circular trading. The money invested by banks in MF was finding its way back to banks through the Collateralised Borrowing and Lending Operations (CBLO). While MFs, on whom the central bank had no jurisdiction, in turn lent funds to corporates by subscribing to the commercial paper (CP) issued by them.
Subsequently, it also wrote to banks twice subtly reminding them to cap investment in mutual funds. It may be recalled that in the October credit policy, RBI governor D Subbarao had warned banks against excessive investment in mutual funds and even urged bank CEOs to set a board approved cap investment in this sector.
in MFs dipped Rs 1,04,851 crore to Rs 42,428 crore during the fortnight ended January 1, the biggest fall in any 15-day period.
This withdrawal could have been necessitated by the demand for funds to meet growth in loans which rose over Rs 75,000 crore in the second half of December ‘09. However, it could have also been done to address RBI’s concerns over banks parking their funds in mutual funds, which subsequently invested them in corporate paper.
There could be a third reason for the shift. Data suggest that bank also tend to pull out from MF towards the end of a quarter as it attracts capital provisioning. Banks are also in a position to window dress their balance sheets by withdrawing funds from investments and deploying them in short-term loans. In the second half of December, bank loans grew Rs 79,515 crore along with a surge in statutory bond investments which grew by Rs 67,900 crore.
Unlike investments in mutual funds, government bonds being risk-free do not attract capital requirements. “But such large investments often funds find their way back, after a few days in the beginning of the next quarter,” said a senior official with a public sector bank on condition of anonymity.
RBI’s opposed to banks parking funds in mutual funds, as it feels that by doing so lenders are deviating from their core business of providing credit. The central bank had first flagged of the issue in its mid-term review of monetary policy in October asking banks to rein in such investments and even urged bank CEOs to set a limit for mutual fund investments.
The ceiling was to be determined for each bank by its board. The governor had termed banks investment in MFs as circular trading. The money invested by banks in MF was finding its way back to banks through the Collateralised Borrowing and Lending Operations (CBLO). While MFs, on whom the central bank had no jurisdiction, in turn lent funds to corporates by subscribing to the commercial paper (CP) issued by them.
Subsequently, it also wrote to banks twice subtly reminding them to cap investment in mutual funds. It may be recalled that in the October credit policy, RBI governor D Subbarao had warned banks against excessive investment in mutual funds and even urged bank CEOs to set a board approved cap investment in this sector.
Last week Nifty opening was seen flat with lack of support from global markets.There was dip in volume and also the investors, traders booked profits. Meanwhilein the mid of the week the market gained momentum. Robust growth Industrialdata in November and better than expected third quarter results by InfosysTechnologies pulled up the market. The wholesale price index (WPI) rose 7.31% inDecember 2009 from a year earlier, sharply higher than previous month's annualrise of 4.78%. By end of week market closed with marginal gains.
With CRR rates hike of 50 bps already factored in the market, prebudget wouldtake the rally for the forthcoming week. Technically market is expected to remain inrange bound movement between 5150-5350 levels. Crucial Resistance is seen at5360 levels .The break of the resistance level would dictate market trend for nearterm. Support is seen at 5120 levels and break of it could further take lower levels.Meanwhile RSI and the MACD remain in positive territory showing possibility of uptrend.
With CRR rates hike of 50 bps already factored in the market, prebudget wouldtake the rally for the forthcoming week. Technically market is expected to remain inrange bound movement between 5150-5350 levels. Crucial Resistance is seen at5360 levels .The break of the resistance level would dictate market trend for nearterm. Support is seen at 5120 levels and break of it could further take lower levels.Meanwhile RSI and the MACD remain in positive territory showing possibility of uptrend.
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