Fitch Ratings today revised the outlook on UCO Bank’s national ratings to “Negative” from “Stable” due to low tier-I capital level and deterioration in profitability.
While UCO has been improving its operational efficiencies and risk management systems, its capitalisation and profitability ratios have slipped below the system median for Indian banks, the rating company said.
The Kolkata-based bank’s tier-I capital ratio at 5.78 per cent and equity/assets ratio at 3.56 per cent (end-March 2007) were also lower than its peer group government banks. Therefore, UCO needed to infuse substantial equity and demonstrate a clear trend in improving its profitability, Fitch said.
The bank’s profitability weakened because of two reasons: one, the rapid loan growth in recent years was funded by an increasing proportion of higher cost wholesale deposits and, two, low yields on the corporate loan portfolio, it said.
The bank has put on board a capital restructuring plan to improve valuation. It has requested the government to convert a part of its equity into non-cumulative preference shares to be followed by a public issue of equity shares.
It needed to issue more equity than planned to maintain its tier 1 ratio well above the regulatory requirement of 6% (from 2010).
This is particularly significant since the government’s holding in the bank after equity expansion could dip to the statutory minimum of 51 per cent from the current 75 per cent. It will limit the bank’s flexibility to raise further capital.
UCO plans to increase the proportion of low-cost deposits (saving account plus current account - CASA) from 28 per cent of total deposits at end September 2007. The level of CASA deposits of the bank is lower than that of other large government banks.
Its ability to do so could be constrained due to delayed implementation of technology and increased competition among banks for low-cost deposits, Fitch added.
Source - Business Standard
Understanding Short Term Trading
Before I begin, this blog is not for intraday traders. My definition of short term implies duration of around 2 to 3 months.
Short Term stock picking is no rocket science, but rather a visual interpretation of technical charts. A basic moving average on a time frame chart will show the direction of the securities movement.
Moving averages is a mathematical results calculated by averaging a number of past data points. Moving averages (MA) in it's basic form is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. Once the value of MA has been calculated, they are plotted onto a chart and then connected to create a moving average line. Typical moving averages used for short term trading are 50 MA and 100 MA.
Types of Moving Averages
1) Simple Moving Average (SMA)
SMA is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. The usefulness of the SMA is limited because each point in the data series is weighted the same, regardless of where it occurs in the sequence. Critics argue that the most recent data is more significant than the older data and should have a greater influence on the final result.
2) Exponential Moving Average (EMA)
EMA overcomes the limits of SMA, where more weight is given to the recent prices in an attempt to make it more responsive to new information. When calculating the first point of the EMA, we may notice that there is no value available to use as the previous EMA. This small problem can be solved by starting the calculation with a simple moving average and continuing on with calculating the EMA.
The primary functions of a moving average is to identify trends and reversals, measure the strength of an asset's momentum and determine potential areas where an asset will find support or resistance. Moving averages are lagging indicator, which means they do not predict new trend, but confirm trends once they have been established.
A stock is deemed to be in an uptrend when the price is above a moving average and the average is sloping upward. Conversely, a trader will use a price below a downward sloping average to confirm a downtrend. Many traders will only consider holding a long position in an asset when the price is trading above a moving average.
In general, short-term momentum can be gauged by looking at moving averages that focus on time periods of 50 days or less. Looking at moving averages that are created with a period of 50 to 100 days is generally regarded as a good measure of medium-term momentum. Finally, any moving average that uses 100 days or more in the calculation can be used as a measure of long-term momentum.
Support, resistence and stoploss can be infered by referring the closet MA below or above the market price. The other factor that is used in short term momentum is the trading volume. The moving averages along with the trading volume can provide a better insight to short term movement.
Markets are moved by their largest participants - I believe this is the single most important principle in short-term trading. Accordingly, I track the presence of large traders by determining how much volume is in the market and how that compares to average. Because volume correlates very highly with volatility, the market's relative volume helps you determine the amount of movement likely at any given time frame--and it helps you handicap the odds of trending vs. remaining slow and range bound.
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