Financial Update-5


     

DAY-5

 

Name

Open

High

Low

Close

HDFC

1685.00

1737.25

1685.00

1730.15

Bank of Baroda

202.00

202.00

196.00

197.40

SBI

700.90

701.35

682.60

689.80

 

 TECHNICAL UPDATE:

As I mentioned earlier, we need to wait and observe where HDFC’s price moves next. Today, it respected its support at the 200 EMA, holding around ₹1,681.01 before closing at ₹1,730.15—a strong recovery.

On the other hand, Bank of Baroda and SBI continue to decline. However, their fundamentals remain solid, and this dip seems more like a market-driven correction than a reflection of their intrinsic value. For long-term investors, this could be an opportunity to accumulate quality stocks at a discount. Sometimes, patience pays off in the world of investing.


BANK LIQUID DEFICIT:


India’s financial system is facing a severe liquidity crunch, with the deficit surging to ₹3.3 trillion—the highest in 14 years. The chart below illustrates how liquidity levels have fluctuated throughout the year.



One of the key reasons for this cash shortage is the Reserve Bank of India’s (RBI) past interventions in the forex market to shield the rupee from volatility. This volatility, in turn, has been influenced by global trade disruptions, including the tariffs imposed during former U.S. President Donald Trump’s tenure, which likely affected global trade and currency movements.

To ease the liquidity strain, the RBI recently conducted a foreign-exchange swap auction, purchasing dollars from banks in exchange for rupees. Under this agreement, the RBI will sell back the dollars at a future date, effectively injecting much-needed rupee liquidity into the banking system. Over the past month, the central bank has infused approximately $47 billion into the financial system as part of its broader strategy to combat the ongoing liquidity crunch.

Despite these measures, the rupee remains under pressure. Following the swap auction, it weakened by 0.3%, settling at 87.49 per U.S. dollar. This suggests that while RBI's interventions have provided temporary relief, the broader economic challenges persist.


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