Public sector banks Canara Bank, Corporation Bank and Allahabad Bank have decided to lower interest rates on housing loans, preferring to keep their prime lending rates (PLR) unchanged. ICICI Bank's managing director and chief executive officer, KV Kamath, has indicated that the country's second largest bank, would review interest rates only in 2008-09.
Canara Bank, which had in October 2007, reduced interest rates by 50 basis points only on fresh home loans, from February 7, will cut floating
interest rates by 25 basis points for new as well as existing borrowers.
The revised interest rates for housing loans upto Rs 20 lakh are 10-10.5% and 10.25-10.75% for loans above Rs 20 lakh. The bank’s PLR stands at 13.25%.
GS Vedi, executive director, Canara Bank, said, “We hope to see growth in business following the revision in lending rate. The bank did not revise
its PLR as any change in PLR impacts the entire credit portfolio. Additionally, the rates on deposits have not gone down (substantially) and
the bank has to protect the margins.”
The bank's net interest margin stands at 2.4%. However, the bank is likely to take a fresh look at the PLR in the first quarter of 2008-09.
Mangalore-based Corporation Bank, has decided to lower interest rates on personal loans and home loans by 50 basis points and on loans to small
enterprises by 25 basis points from February 15, for existing as well as new borrowers.
Kolkata-based Allahabad Bank has also cut interest rates only for new borrowers by 50-100 basis points in home loans, loans for consumer
durables, car loans and education loans from February 10, 2008.
The bank said that the decision to lower interest rates has been taken in keeping with the reduction in the cost of raising incremental funds,
falling yields on government bonds and the overall market scenario.
“With the cut in lending rates we hope to see increase in retail advances like home loans, consumer loans. I don't see any reason to reduce the PLR at the moment,” said AC Mahajan, chairman and managing director of Allahabad Bank.
The bank has increased interest rates on short-term deposits from 61 days to 180 days maturity by 75 to 100 basis points to make these deposits more attractive even as it lowered interest rates on over 2 year deposits by 25 basis points.
Meanwhile, UCO Bank will seek board approval on February 11 to revise its PLR by 25 basis points to 13.25% even as United Bank of India (UBI) has hinted on a possible rate cut. “We would take a call on the PLR in the Asset Management Liability Committee in a few days time,” said PK Gupta, CMD, UBI.
The chairman maintained that they may in fact lower the PLR rates taking the overall domestic situation into account.
In its third quarter review of monetary policy statement, the Reserve Bank of India (RBI) had placed the onus of reducing interest rates on banks.
The RBI had observed that contrary to the comfortable liquidity situation, banks had not cut lending and deposit rates, which were at the elevated
levels of the previous year.
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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