Bandhan Bank eyes reduction in group microfinance loans

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Bandhan Bank is looking to bring down the share of group microfinance loans to around 50 per cent by March 2022 and to 30 per cent of its total loan book in the next four to five years.

Diversify asset mix

The share of group loan to the total loan book of the bank, which was around ₹81,660 crore, currently stands at close to 57 per cent.

The bank plans to grow the share of individual loans which are typically not restrained by ticket size (as in the case of group loans) to around 20–30 per cent (of its total loan book) from the current 10 per cent as a part of its strategy to diversify its asset mix.

Group to individual loans

According to Chandra Shekhar Ghosh, MD & CEO, Bandhan Bank, the bank is in the process of upgrading some of their group loan borrowers into individual loanees. The bank chooses some of its existing borrowers under group loan model who have been doing well and generating “good income”. It also checks for the credit quality using data from credit bureaus before upgrading the customer into an individual borrower.

Also see: Bandhan Bank posts ₹3,009-cr net loss in Sept quarter on high provision

“We developed this product (group loan to individual loan) about two years back and we have tested the system and processes. It has witnessed a very good growth of around 155 per cent on a y-o-y basis. Individual loans account for around 14 per cent of our total microcredit book and in the future we are looking to diversify group loan to individual loan,” Ghosh told BusinessLine.

Save on time

While there may not be much of a difference in terms of interest paid by both set of borrowers, individual loanees are usually not required to attend group meetings which are organised on a weekly or fortnightly basis, thereby saving time. Staff can utilise the time to grow other businesses.

Besides, unlike in group loans where there is a cap on the amount that can be disbursed to a particular group (by a set of lenders), in individual loans that is not the case and the bank can extend a loan based on the viability of the business model, Ghosh said. Moreover, the bank would also be free to cross-sell other products including housing loan, consumer loan etc to these customers, thereby bringing in more business in the future.

Vision 2025

The bank, which had unveiled its Vision 2025 last year and laid out a roadmap for diversification, expects the plan to get pushed back by a few months due to Covid induced slowdown and its impact on businesses.

As on September 30, 2021, its total advances stood at ₹81,660 crore. Of this, group microcredit (EEB Group) accounted for around 57 per cent, individual loans (EEB Individual) around 10 per cent, commercial 8 per cent, housing 24 per cent, and retail one per cent.

Also see: RBI approves Bandhan Bank as ‘agency bank’ to conduct govt biz

Under Vision 2025, the share of group loans should come down to 30 per cent; individual and commercial loan together should account for around 30 per cent; housing would be another 30 per cent and the share of retail is expected to increase to 10 per cent.

“Our Vision 2025 plans may get delayed by one year because of this Covid…. we should get a clearer picture next year and we would be able to revise our plan accordingly,” Ghosh said.

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Crypto exchanges launch crypto gift cards

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Amidst rising investor interest, cryptocurrency exchanges have launched crypto gift cards as an alternative to traditional gifts like sweets given on Diwali and other festive occassions.

Bitbns has launched exclusive crypto gift cards.

“These gift cards will be available in multiple cryptocurrency options like Bitcoin, Ethereum and many more,” it said in a statement.

Starting on November 4, anyone can avail of the benefits of the crypto gift cards irrespective of whether they invest or trade in cryptocurrency, it said.

CrossTower

Similarly, CrossTower has also introduced an e-gift card feature that allows its users to gift cryptocurrencies of their choice to friends and families.

“Indian users can create a personalised gift card by adding their preferred cryptocurrency from CrossTower wallet, to generate a unique card ready for sharing,” it said.

Users receiving the e-gift card can redeem it at the CrossTower India App (Application) by sharing the voucher link in the ‘Redeem’ section, after registering with the platform. The cryptocurrency will be automatically updated in their CrossTower wallet.

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Dollar in driver’s seat as payrolls loom; sterling staggers

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The dollar was on course for a second straight week of gains against major peers on Friday, ahead of a key US jobs report that could sway the timing of Federal Reserve interest rate increases.

Sterling headed for its worst week in 11 after the Bank of England caught the market off-guard by keeping rates steady on Thursday.

The dollar index, which measures the greenback against a basket of six rivals, was steady at 94.327 after rallying 0.51 per cent overnight. That lifted it into the positive for the week, adding 0.20 per cent.

The British pound was little changed on Friday following a 1.36 per cent tumble in the previous session that set it upfor a 1.39 per cent slump for the week.

Investors have been forced to reset monetary policy expectations this week, after some of the biggest global central banks knocked back bets for early rate hikes.

European Central Bank President Christine Lagarde pushed back on Wednesday against market bets for a rate hike as soon as next October and said it was very unlikely such a move would occur in 2022.

Also on Wednesday, Fed Chair Jerome Powell said he was in no rush to hike borrowing costs, even as the Federal Open Market Committee announced a $15 billion monthly tapering of its $120 billion in monthly asset purchases.

The Fed has set a labour market recovery as a condition for rates lift-off. US non-farm payrolls due later on Friday are forecast by economists to show a 450,000 surge in jobs in October, following a 194,000 rise in the prior month.

“The FOMC delivered a ‘dovish taper,’ but the USD is still better positioned than most,” Westpac strategists wrote in a client note.

“Payrolls this week should be at least as strong as consensus given signs that recovery momentum is accelerating again,” making dips into the mid-93s a buying opportunity for the dollar index, they said.

Euro trades flat

The euro was little changed at $1.1556 after dropping 0.49 per cent overnight, putting it on course for a 0.16 per cent decline this week.

“If the markets are indeed dominated by the ‘taking away the punch bowl’ theme, then this force will prove consistently corrosive against the EUR,” Deutsche Bank macro strategist Alan Ruskin wrote in a research note.

“It may need more than payrolls to break 1.15, but payrolls will not stand in the way of the USD chipping away at EUR/USD’s major downside support.”

The dollar was about flat at 113.67 yen, down 0.29 per cent since last Friday. While the Bank of Japan is set to be slowest among developed-market central banks to normalize policy, the Japanese currency benefited as those expectations remained constant while investors cut bets elsewhere.

The Reserve Bank of Australia set the tone for the week on Tuesday, when policy makers stuck to their dovish stance in the face of increasingly sticky inflation pressures.

On Friday, the RBA said in its statement on monetary policy that “an increase in the cash rate in 2023 could be warranted. However, in the Board’s view, the latest data and forecasts do not warrant an increase in the cash rate in 2022,” as markets are pricing.

The Aussie dollar was slightly lower on the day at $0.7394, adding to the previous session’s 0.67 per cent decline and putting it on course for a 1.67 per cent drop this week.

New Zealand’s kiwi dollar slipped 0.09 per cent to $0.70915 after a 0.81 per cent slide on Thursday, setting up a 1.07 per cent weekly loss.

Among cryptocurrencies, bitcoin was around $62,100, having largely traded sideways since it hit its all-time high above $67,000 last month.

Ether, the second-biggest cryptocurrency, traded around $4,500 after hitting a record high of $4,670.81 on Wednesday.

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Global equity rally pauses as bonds hold surge, BFSI News, ET BFSI

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Asian stocks dipped Friday and US futures were steady as a global equity rally paused. Sovereign bonds held gains after investors scaled back expectations for monetary-policy tightening to quell inflation.

Shares fell in Japan and Hong Kong, where developer Kaisa Group Holdings Ltd. and its Hong Kong-listed units were suspended from trading in the latest sign of stress from China’s troubled property sector. S&P 500, Nasdaq 100 and European futures fluctuated after tech shares led Wall Street to a record high.

Treasuries and the dollar held a climb. A surprise Bank of England move to hold interest rates spurred a global surge in bonds as investors reviewed the outlook for borrowing costs. Interest-rate futures had priced in two quarter-point Federal Reserve increases in 2022 but shifted the second one toward 2023. Jerome Powell this week said the Fed can be patient on hikes.

Crude oil advanced. Saudi Arabia and its OPEC+ allies rebuffed US President Joe Biden’s pleas for a large production boost. That leaves Biden with the option of tapping the US strategic reserve.

The focus turns to the US jobs report due Friday since the level of progress on employment could shift views on monetary policy again, heralding further volatility in the bond market. Stocks are riding out such gyrations so far: solid US earnings appear to have reassured investors that the economic recovery can weather pandemic-related supply chain and labor disruptions.

“You have to stay away from bonds at the moment,” Nancy Tengler, chief investment officer at Laffer Tengler Investments, said on Bloomberg Television. While there is a “little bit of a rally going on” in fixed income, “it’s difficult to see a way clear to make a lot of money, especially when real rates are negative,” she said.

Elsewhere, Australia’s central bank in a quarterly update of forecasts dismissed the prospect of a rate increase in the next 12 months, further pushing back against market expectations of a tightening cycle starting next year.

Meanwhile, China’s government bonds were set for their biggest weekly advance since July after the nation’s central bank increased its injection of short-term cash.

The latest US data showed unemployment benefits fell to the lowest since March 2020. Friday’s employment report is forecast to show nonfarm payrolls rose by 450,000 in October. Traders are likely to watch out for wages growth.

“The narrative around wage growth and very strong job creation suggests to me we are nowhere out of the woods in seeing higher bond yields going into next year,” Sean Darby, chief global equity strategist at Jefferies, said on Bloomberg Television.



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Dhanlaxmi Bank Q2 net declines 74pc at Rs 3.66cr on soaring bad assets, BFSI News, ET BFSI

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Dhanlaxmi Bank on Friday reported a nearly 74 per cent plunge in its net profit to Rs 3.66 crore in quarter ended in September 2021 as provisions rose due to a spike in bad loans. The private sector bank had posted a net profit of Rs 14.01 crore in the corresponding period a year ago.

Total income of the bank during the July-September period of 2021-22, however, grew to Rs 266.59 crore from Rs 249.66 crore in the same period of 2020-21, Dhanlaxmi Bank said in a regulatory filing.

Interest income was down at Rs 229 crore in Q2FY22 from Rs 243.97 crore in Q1FY21, even as the other income was higher at Rs 37.58 crore, as against Rs 5.69 crore.

Provisions for the bad loans and contingencies for the reported quarter rose to Rs 22.40 crore from Rs 4.29 crore in September 2020.

The bank’s gross non-performing assets (NPAs) rose to 8.67 per cent of the gross advances as of September 30, 2021, from 6.36 per cent in the year-ago same period.

However, sequentially from gross NPAs were down compared to 9.27 per cent in June 2021 quarter. Value-wise, the gross NPAs were worth Rs 604.15 crore, up from Rs 448.72 crore.

Net NPAs too rose to 4.92 per cent (Rs 329.55 crore) from 1.66 per cent (Rs 111.45 crore).

“During the quarter ended September 30, 2021, NPA for which provision had already been made amounting to Rs 7,786 lakh has been technically written off,” the bank said.

Provision coverage ratio (including technical write off) as of September 30, 2021 is 74.18 per cent, it added.



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3 Best Gold Investment Options In Diwali

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Sovereign Gold Bond

Sovereign Gold Bond (SGB) is a kind of government bond or certificate that is traded considering gold and the current 24 carat gold price in the market. SGB is issued by the RBI on behalf of the central government, hence it is one of the most secured gold investment options. This Diwali, you can buy SGB from the secondary market, if you do not need any jewellery and want to buy gold just for investment purposes. SGB also offers yearly 2% interest on the bond, which makes it the most lucrative gold investment option available. Recently RBI had issued its latest SGB subscription date. Check the upcoming SGB issue dates here.

(Also read: Why Investors Should Put Money In The Sovereign Gold Bond Scheme?)

Gold ETF

Gold ETF

Gold ETF is another virtual gold investment option by which you can avoid the hurdles of buying physical gold. Investing in gold by around 15%-20% of your portfolio is recommended by analysts to de-risk your investments. Gold ETF can be purchased by regular mutual fund mobile apps, that you use for investing in SIPs. You can invest in gold ETF monthly to strengthen your portfolio. Gold prices in the international markets and Indian markets are rising again because of inflation concerns. Although US Federal Reserve has announced tapering, and it was estimated that gold prices will fall. As an immediate result on the date of announcement gold prices in Comex December, gold future dropped around $1763/oz, but later it hiked again. In the Comex, gold rates are quoted at around $1800/oz again till 2.18 PM IST, because the investors are not ready to ignore the inflation factors, worldwide. Gold is a hedge against inflation, and in this bullish market, it is important to maintain a percentage of gold in your portfolio. For an investment purpose, gold ETF is one of the best options because it is affordable, safe, and you can make a regular investment habit from it.

(Also read: How To Invest In Gold ETF In Mobile App? Benefits Of Buying Gold ETF)

(Also read: What Are The Differences Between Gold ETFs And Gold Funds)

Gold Jewellery

Gold Jewellery

Gold jewellery has always remained at the top list of gold investment options during Diwali. Diwali and Dhanteras are followed by the wedding season in India, and many people naturally buy gold jewelleries for that purpose. Additionally, to encourage customers, jewellers offer discounts on making charges of jewelleries and precious stones. Recently in a report, World Gold Council has stated that in India demands for gold jewelleries have increased by 60% in Q2. Indian gold jewellers are optimistic to hold their buyers this wedding season too. The mandatory hallmarking of gold jewelleries system, introduced by the central government is also helping customers to purchase authentic and pure gold.

(Also read: Gold Jewellery Demand Has Increased By 60% In India, In Q3)

(Also read: New Hallmark Rules In India: How It Is Impacting Gold Buyers and Why It Becomes Tough For Jewellers?)



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IPO rush continues; Paytm, 2 other public issues to open next week, BFSI News, ET BFSI

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New Delhi, Hectic fundraising through IPOs will continue next week, with three firms — One97 Communications, owner of Paytm; Sapphire Foods India, which operates KFC and Pizza Hut outlets; and Latent View Analytics — are set to launch their initial share-sales to collectively mop up about Rs 21,000 crore. This comes after five companies successfully concluded their public offerings (IPOs) this week.

Those five firms are – FSN E-Commerce Ventures, which runs online marketplace for beauty and wellness products Nykaa; Fino Payments Bank; Policybazaar parent entity PB Fintech; decorative aesthetics supplier SJS Enterprises; and microcrystalline cellulose maker Sigachi Industries.

The three-day IPOs of Paytm, Sapphire Foods India and Latent View Analytics are scheduled to open on November 8, November 9 and November 10, respectively.

So far in 2021, as many as 46 companies have floated their IPOs to raise Rs 80,102 crore and market experts believe that the year should close with the Rs 1-lakh crore primary market fundraising.

Apart from these, PowerGrid InvIT, the infrastructure investment trust (InvIT) sponsored by the Power Grid Corporation of India, mopped up Rs 7,735 crore through its IPO, and Brookfield India Real Estate Trust raised Rs 3,800 crore via its initial share-sale.

The fundraising so far this year is way higher than Rs 26,611 crore collected by 15 companies through initial share-sales in the entire 2020.

Such impressive fundraising through IPOs was last seen in 2017 when firms mobilised Rs 67,147 crore through 36 initial share-sales.

Digital firm One97 Communications, which operates under the Paytm brand name, is set to come out with its Rs 18,300-crore IPO on November 8.

The IPO comprises fresh issuance of equity shares worth Rs 8,300 crore and Rs 10,000 crore from an offer for sale (OFS) by existing shareholders.

The company has fixed a price band of Rs 2,080-2,150 apiece, implying a valuation of around Rs 1.48 lakh crore.

The Rs 18,300-crore offer, if successful, will be the biggest in the country after Coal India’s IPO in 2010, wherein the state-owned company had garnered Rs 15,200 crore.

“The biggest merit for Paytm’s IPO would be that they have so much more diversified regulatory access under one roof.

“This focus on diversification means that none of their particular business books has depth, unlike other major players who focus more on specialising,” Nikhil Kamath, co-founder of True Beacon and Zerodha, said.

On Wednesday, Paytm raised Rs 8,235 crore from anchor investors.

Sapphire Foods India’s public issue will be entirely an offer of sale (OFS) of 17,569,941 equity shares by promoters and existing shareholders.

As part of the OFS, QSR Management Trust will sell 8.50 lakh shares, Sapphire Foods Mauritius Ltd will offload 55.69 lakh shares, WWD Ruby Ltd will divest 48.46 lakh shares and Amethyst will offer 39.62 lakh shares.

In addition, AAJV Investment Trust will sell 80,169 shares, Edelweiss Crossover Opportunities Fund will offload 16.15 lakh shares and Edelweiss Crossover Opportunities Fund-Series II will divest 6.46 lakh shares.

The company has fixed a price band of Rs 1,120-1,180 a share for its IPO. At the upper end of the price band, the initial public offering is expected to fetch Rs 2,073 crore.

Latent View Analytics’ IPO comprises a fresh issue of equity shares worth Rs 474 crore and an offer of sale of equity shares to the tune of Rs 126 crore by a promoter and existing shareholders.

As part of the OFS, promoter Adugudi Viswanathan Venkatraman will offload shares worth Rs 60.14 crore, shareholder Ramesh Hariharan will sell Rs 35 crore shares and Gopinath Koteeswaran will offload Rs 23.52 crore shares among others.

Currently, Venkatraman owns a 69.63 per cent stake in the company, Koteeswaran holds a 7.74 per cent stake and Hariharan has a 9.67 per cent holding in the firm.

The company has set a price band of Rs 190-197 a share for its IPO.

The proceeds from the fresh issue will be used for funding inorganic growth initiatives, working capital requirements of the subsidiary LatentView Analytics Corporation, and investment in subsidiaries to augment their capital base for future growth and general corporate purposes.

The company provides services ranging from data and analytics consulting to business analytics and insights, advanced predictive analytics, data engineering and digital solutions. PTI SP HRS hrs



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Mid-size firms, retail lead the charge in credit rebound, BFSI News, ET BFSI

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Indian lenders are beginning to see a pick-up in loan demand, with medium-sized firms and retail clients at the vanguard of a visible credit rebound.

Bank credit rose 6.8% in October, compared with 5.1% in the same period a year ago, show the latest figures published by the Reserve Bank of India (RBI).

Outstanding credit amounted to ₹110.5 lakh crore as of October 22, up ₹7 lakh crore in a year.

The pick-up is largely due to the push from government schemes even as large corporates and top rated borrowers continue to rely on capital markets and overseas money hubs where they manage to raise funds at much cheaper rates. India’s weighted average lending rates were at 7.2% in September, according to RBI data.

At the same time, the average rates for triple-A rated five-year corporate bonds were at 6% and at 5.29% for three-year maturity, show Bloomberg data compiled by ETIG.

The latest data on sectoral flow of credit offtake show that lending to medium-sized firms rose 49% year-on-year to ₹1.75 lakh crore as of end September compared with the same period a year ago.

Much of the lending is reckoned to be under the government’s Emergency Credit Line Guarantee Scheme (ECLGS) MSME sector, under which the government provides 100% guarantee to banks in respect of eligible credit facilities extended by it to its borrowers.

In addition, consumer durable loans have risen by 40% compared with 14.9% in the same period a year ago, with borrowers taking advantage of the reduced interest rates. With the government’s renewed thrust on the social sector, lending to infrastructure more than doubled to ₹1,323 crore in September from ₹1,081 crore a year ago.

On the liability side, the pace of deposit pick-up has slowed marginally to 9.9%. But deposit growth still continues to outpace credit growth.

In absolute terms, banks raised almost double the amount of deposits at ₹14 lakh crore than the amount they lent during the period.



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Gold gleams as central banks hold off on interest rate hikes, BFSI News, ET BFSI

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Gold prices were poised for their best day in three weeks on Thursday as the U.S. Federal Reserve and the Bank of England indicated they were in no rush to raise interest rates.

Spot gold was up 1.6%, its most since Oct. 13, to $1,798.05 per ounce at 10:29 a.m. EDT (1429 GMT). U.S. gold futures for December delivery jumped 1.9% to $1,797.00.

The Fed indicated that they are probably not going to mess with interest rates, and that is bullish for metals, said Bob Haberkorn, senior market strategist at RJO Futures.

The Federal Reserve and its chair, Jerome Powell, on Wednesday signaled the central bank would stay patient – and wait for more job growth – before raising interest rates, while beginning to trim its massive bond-buying program this month.

Ultra-loose U.S. monetary policy has helped drive gold sharply higher since the financial crisis of the late 2000s, with low interest rates cutting the opportunity cost of holding non-yielding assets and inflation fears stoking demand for a hedge.

“The Bank of England leaving rates unchanged overnight shows central banks right now don’t have an appetite for higher rates,” Haberkorn said, adding that gold could by Friday go “north of $1,800 just based on sentiment and the technicals.”

The Bank of England kept interest rates on hold on Thursday, dashing expectations for a hike that would have made it the first of the world’s big central banks to raise rates after the pandemic.

Independent analyst Ross Norman said strong physical demand for gold was supporting the market, as India‘s Diwali festival generally boosts sales of the precious metal.

Elsewhere, spot silver rose 2.1% to $23.98 per ounce. Platinum gained 0.7% to $1,036.43 and palladium jumped 1.5% to $2,030.34.



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This Automobile Stock To ‘Buy’ With +29% Return In 1 Year: Motilal Oswal

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Target price

According to the firm Motilal Oswal, the current market price (CMP) of Eicher Motors is Rs. 2,522. the target price (TP) for the stock is Rs. 3,250, hence giving a +29% return in 1 year. Motilal Oswal has recommended investors to buy this stock. About the company’s growth, the firm said, it’s “Above our estimate; beat driven by higher realization.”

CMP AND TP chart
Current market price (CMP) Rs. 2,522
target price (TP) Rs. 3,250
Return in 1 year 29.00%

Company performance

Company performance

Eicher Motors reports a consolidated revenue/EBITDA/PAT growth of 5%/flat/9% YoY and 14%/29%/57% QoQ to ~ Rs. 22.5b/ Rs. 4.7b/ Rs. 3.7b. Their revenue/EBITDA/PAT also increased by 43%/75%/ 112% YoY in H1FY22. Standalone revenue increased by 3% YoY and 14% QoQ to Rs. 21.8b (beating Motilal Oswal’s estimation of Rs. 18.95b), while gross margin declined by 130bp YoY (+40bp YoY) to 41% (est. 40%). They have doubled their revenue from accessories, and expanded their network in the international market, by adding 9 exclusive stores (149 outlets in total) and 3 new multi-brand outlets (over 650 stores). Eicher Motors also added 14 new studio stores (1,052 stores in total) and 20 large stores in the domestic market (1,053 stores in total).

Motilal Oswal's estimation

Motilal Oswal’s estimation

The firm said Eicher Motors’ EIM’s beat in performance has been driven by growth in RE realization and lower staff cost. With supply chain issues showing some signs of improvement, the company is expecting volume performance to be better in H2FY22. Export focus and revenue from accessories are also helping RE improve the company’s realization.

According to Motilal Oswal’s estimation, “We cut our FY22E consolidated EPS by 5% to account for lower volumes in FY22E while maintaining our FY23E earnings estimates. We maintain our Buy rating with a target price of Rs. 3,250/share (Mar’23E SoTP).”

Disclaimer

Disclaimer

The above stock is picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.



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