Neel Doshi

@sandipsabharwal Luckily prices are below that level too now so maybe they’re doing good now ? Unless you think everyone sold at the top

People who sold during the #Covid selloff regretted in the next 6 months and some never got the guts to invest higher The same will happen to those panicking now

@InvestorOfJAMMU Difficult to oppose the big people

Happy that he is raising the voice of Investors. I want Mutual Fund sleeping managers to speak up on this issue and not just count their crores of rupees as fee from Retail investors pocket.

@equities_samjho No , NOP is to curb speculative position , if bank is doing it hedged for another institution that’s a different story.

The rupee is in free fall even after RBI intervenion, which led to a bloodbath in Bank Nifty today. It is down by ~4% as I write this. In this post, I’ll explain everything that you need to know. To understand this, you’ve to first know that every Bank has a Treasury. You can think of it as the bank’s own internal hedge fund. This department is responsible for managing the bank's cash and making profits by trading currencies and bonds. Now, you might also be hearing that the RBI has pulled the plug on Rupee’s speculation machine. If you’ve looked at the Rupee today, you’ve seen a violent tug-of-war. To understand why the bank stocks crashed and why the Rupee is acting like a roller coaster, you need to understand how the RBI fundamentally changed Treasury’s plumbing after a decade. The Old Game It was where a bank’s treasury made easy money. Until Friday, big banks were playing a double game. In Mumbai (onshore market), they would buy massive piles of dollars hoping that it would rise. In other words, they were Long USD. Simultaneously, since these bank’s Treasury can’t just randomly take Long bets, what they used to do was in offshore markets like Dubai or Singapore (also called Non-Deliverable Forward (NDF) market), they would Short those dollars immediately (making a bet that the dollar would fall). This would complete the cycle and make their bets risk free. If USD rises, they earn in India, and lose in Dubai. If USD falls, they lose in India, but then gain in Dubai. So, net net, no speculative risk. But why take that trade in the first place when the end result is no gain or loss? Because the price in Dubai was usually higher than in Mumbai (called as Spread). By holding dollars in India and betting against them abroad (to cancel the speculative risk), they locked in a risk-free profit called a Spread. It was easy money for treasuries (let’s say they bought at 93 and sold it at 93.10) even though the overall position remains hedged. The Problem was that to make this profit, banks were hoarding billions of dollars inside India. This hoarding made the Dollar scarce and the Rupee weak. When the Rupee hit 95 on Friday, the RBI realized the banks' profit machine was actually pushing the country toward a currency crisis. The New Rule This led RBI to introduce the $100 Million limit on the Net Open Position (NOP) of banks. Over the weekend, the RBI slapped this limit on how many dollars a bank can hold unbalanced on its books (the difference between what a bank owns and what it owes). Imagine having $800 million in arbritage trade that now must be reduced to $100 million. The result is forced selling. This forced every major bank in India to dump their multi-billion dollar piles into the market starting this morning to bring their NOP within $100 million. This morning, banks were selling their dollars at Fire Sale prices (around 93.60) just to follow the law. Once they sold their Mumbai dollars this morning, they were left with those Short bets in Dubai (that they earlier took to hedge their speculative trade) but no longer had any dollars left in Mumbai to back them up. They were Naked. If the dollar rose, they would be wiped out (as they had shorted it in Dubai). Banks obviously panicked. They rushed to Dubai to Buy Back (cancel) their short bets. But the offshore traders knew the Indian banks were desperate. They jacked up the price. Banks were selling cheap in Mumbai (93.60) and being forced to buy expensive in Dubai (95.00+). This was a double whammy. The 135-paisa gap you saw today is the physical cost of banks being forced to exit a safe trade at suicide prices. They lost on the way out of Mumbai, and they lost again on the way into Dubai. Impact on Rupee Because banks were legally forced to sell USD, the Rupee gapped up this morning to 93.53 (pure demand and supply). It looked like a recovery, but it was artificial. As I write this, the Rupee has already slipped back toward 94.70. This might be because the real buyers (which are oil companies and importers) saw the cheap prices and swallowed every single dollar the banks dumped. Importers just love when currencies appreciate (95 —> 93). The banks took a massive ₹4,000 Crore loss today (according to Jefferies) just to follow the rules, but the Rupee is still under extreme pressure because the fundamental reasons (high oil and war) haven't changed. This loss is however, one time and will reflect in Q4 Treasury earnings for Banks. Liquidity Crunch Again There is also an important angle to this, which is where I am concerned. The economy was already reeling under liquidity crunch, this move will undo all those efforts taken in the last few months. This is where it also tends to hit the real economy. By capping banks at $100M, the RBI (knowingly) killed Liquidity (the ease of trading). For instance, if a big company like Reliance needs $500M to pay for oil, no single bank can handle that trade anymore because it would blow past their $100M limit. The company now has to go to 10 different banks, causing a stampede that spikes the price. Then comes the increased hedging price. An importer buys a Forward Contract to lock in a price for the future (hedging 101). But since banks now have a tiny limit of $100M, that space is incredibly scarce. Banks are now charging double the premium to provide this insurance. So, an importer is now either paying a scarcity tax just to protect his business or is not hedging at all, which is also very risky during a volatile currency phase. The Bottom Line The bottom line is that the RBI has successfully kicked the speculators out of the room, but they’ve also made the room very small for everyone else. We have moved from a market driven by greed to one driven by regulation. The Rupee might be steadier in the short term, but the cost of doing business and liquidity crunch are likely to stay here for a while. This is the short term pain I was referring to in my earlier posts. It is a necessary pain because the alternative is currency crisis, which is even more brutal for the economy.

@InvestorOfJAMMU Bhai he’s getting richer , why should we be proud ?

Surprised to know that biggest Oil Billionaire is not from the Saudi, Russia or from US. He is none other than Mukesh Ambani and that too from last 11 years. Ambani ji is making India proud🇮🇳 Just wow.

@Iamsamirarora Sir ji , why waste mental energy + time to reply to these trolls ? We respect you that’s why we invest in Helios❤️👌🏻

@avasthiniranjan Not totally wrong , don’t rush to buy thinking this is the last dip , let some money recover as well. No need to be over invested , no ones going to reward you , and who knows maybe the implications of this war may last 2-3 quarters. You’ll get a chance again to enter

Forget convincing others, the real challenge is at home now 😅 Tried convincing my wife to invest more… but now after investing 2-3 times in this correction, she said: “Pehle jo invest kiya hai, woh green ho jaaye… phir baat karte hain.” Markets recover fast. Confidence… takes its own sweet time.

@InvestorOfJAMMU Sell call given as well , long-short is okay

How someone can give Buy trading calls in the morning when you know market is going to Gap down heavily??

@piyush_trades I disagree , many a times old funds are stuck in stocks which were good maybe 3-4 years ago like IT, ITC, IEX etc

If you want to do an SIP successfully for the long term, invest only in those mutual funds that are more than 10 years old. Those who disagree will end up sending their money to funds that invest in stocks like Lenskart and Ola Electric. Thank me later.

@InvestorOfJAMMU Doesn’t look likely

Eberybody was predicting big fall for market today and it opened flat. I will not be surprised if Market closes positive today. 25150 has to come.

@vijayshekhar Sir, impact on Paytm ? Amex, Visa also down 5-7%

The COBOL machine cracked.

@sourabhwadhwa22 Hogaya bhai ?

Less than 180 won’t be a challenging total

@InvestorOfJAMMU Trump U turn

What is your biggest worry in the current market condition??

@shiladitya4u Large IT

What is the biggest theme you see in Q3 results? For me, it is clearly asset quality improvement in banks, particularly - PSUs, Microfinance, small-midcap banks. Also, this is one sector where valuations are reasonable. No wonder market is rewarding them handsomely.

@InvestorOfJAMMU Kaafi sab bech diya

All Motilal Stocks under deep pain. Band baji padi hai🤣🤣

@nixxin Should’ve sold if don’t like the founder

Eternal/Zomato's financial results are being announced today. The company should answer why a board member, who is thus a company representative, has created a long term political risk for the company by attacking a Rajya Sabha member personally on Social Media, in response to the Members criticism of the company's practices. Was this outburst on behalf of the company? Was it sanctioned by the company? If not, then what is Eternal/Zomato going to do prevent such risk from arising in the future. In the least, it should have a Code of Conduct for its Board. Disclosure: I have shares of Eternal and Info Edge.

@nixxin Lag gaye

@InvestorOfJAMMU Hahahaha

Can we expect pre-Budget rally from tomorrow onwards??

@SanaSecurities Dikha diya market ne ?

So far corporate earnings are much better than what everyone had expected. Stocks recommended, which reported post market: HDFC Bank - up 12% Can Fin Homes - up 25% Tomorrow: It will be interesting to see how HDFC Bank opens, and how ICICI bank closes.

@InvestorOfJAMMU Labour law impact on PAT, otherwise EBITDA & EBITDA Margin improving , along with AI revenue contribution

It is clear from IT companies result that this sector is not going to support Nifty for 29k journey. HCL & TCS result PAT is down for whatever reason, not helping Nifty to deflate its PE. Hopes shifted to other sectors🤞

@safiranand No, it basically means regulation will still come

If cerc lawyer is asking for more time to consider withdrawing order it means things are going in favour of IEX as of now. As of now as matter is still on