Addressing a special Moneylife Foundation workshop, Mr Jayakar, who is a solicitor and renowned collector, advised collectors to follow their passion, with a shrewd eye on its potential value
"If you are a passionate collector, you can never be one to treat your collection as an investment. Because you will find it impossible to assign a price to your collection or part with it for money," said Rajan Jayakar, solicitor and renowned collector. But he admitted that with age and time, the investor in some matures, and that instinct balances passion with prudence. Mr Jayakar was speaking at a workshop hosted by the Moneylife Foundation on Friday.
Mr Jayakar, who is a huge collector of such regular items like stamps, coins and books, also has some special notable collections of vintage cars, Victorian furniture and Shammi Kapoor memorabilia.
He spoke about how to turn a hobby into investment and gave tips on how to start, how to source items, to assign correct prices while buying and selling items, and how to preserve collectibles. "The big four collectibles are paintings, sculptures, stamps and coins. But there are so many other options and the quirkier ones are often invaluable," said Mr Jayakar.
His advice to every collector is, 'Follow your passion', because that eventually may lead to great investments. "Collectors collect because they want to collect. It is the pleasure derived in accumulating these things that gives the collector a high, not the market value of what they hold," he said. So, he said, every parent and teacher should encourage the child collector.
There are certain things that a collector must do: study his collectible, read up about the field and aim for completion for his collection. He said, "Everything is collectible, but not everything is saleable, because if there is no easy and accessible market for the collectible, it cannot be sold."
He said a collector must be careful about preserving his collection, and insist on getting the items authenticated by the authorities concerned. Mr Jayakar also spoke on the hindrances that Indian collectors face with the Antiquities and Art Treasures Act of 1972. "The problem is that markets for collections are all abroad. And if you are forbidden to take anything out of the country, you cannot sell," he said.
He talked at length about philately, and gave a brief history on many stamps, including the most valuable stamps in the world. He said, "People have the misconception that everything becomes valuable with age. But this is not the case. There are many modern or later-day items which are more prized than ancient ones, because it is the rarity and the history of that item that makes it so special."
On the idea of investment, Mr Jayakar said, "Well, for an investor, the return brings happiness, but for a passionate collector, who builds up his collection brick by brick, happiness is the return."
A decline to 17,300 on the Sensex and to 5,250 on the Nifty is possible
The market was weighed down by the fallout of the devastating earthquake and tsunami in Japan a week ago, and the rate hike by the Reserve Bank of India (RBI) in its mid-quarter monetary policy review on Thursday. The hawkish measures led all the sectoral indices lower on Thursday and Friday, as the central bank asserted that it would tighten policy further, going ahead. The move, if persisted, would drain out liquidity from the system and is expected to put pressure on India Inc in the months ahead.
The market is breaking down in a slow motion. For the entire February and March, market indices have been moving sideways. A short sell-off before the Union Budget was followed by a short rally thereafter. But this week it has suddenly taken a turn for the worse. The trigger was RBI's credit policy. The RBI has hiked the interest rates by 0.25% to control inflation. This follows a series of hikes RBI has been making over the past one year. The impact will be instant.
Loans for business and individuals will become costlier. In a rising inflation and a rising interest rate situation, it becomes difficult for stocks to maintain high valuations. While companies may be able to absorb a slightly higher cost of borrowing, the environment becomes uncertain and stock prices go down. This leads to a compression in PE ratios. This is exactly what is happening now.
The next few weeks will be a testing time. If the Sensex goes below 17,700 in the next few days, more declines will happen.
On a weekly basis, the Sensex fell 295 points, or 2%, and the Nifty lost 1%, or 72 points.
Reliance Communications (up 9%), Reliance Infrastructure (up 4%), Tata Steel and Tata Power (up 2% each) and State Bank of India (up 1%) were the top gainers on the Sensex during the week. The major losers were Maruti Suzuki (down 8%), HDFC (down 6%), Hindalco Industries, ONGC and Hero Honda (down 4% each).
In the sectoral space, the BSE Consumer Durables index (up 1%) was the lone gainer, while BSE Auto and BSE Fast Moving Consumer Goods (down 3%) were the top losers.
Following the RBI rate hike will likely lead to borrowers having to pay more for their home and auto loans. The central bank in its mid-quarterly policy review raised repo (short-term lending) and reverse repo (borrowing) rates to 6.75% and 5.75%, respectively.
Bankers said they will take a call on increasing interest rates next month, but ruled out any immediate hike. Finance minister Pranab Mukherjee and Planning Commission deputy chairman Montek Singh Ahluwalia welcomed the RBI measure, but India Inc has expressed fears that the move would hurt growth.
India's headline inflation rose marginally to 8.31% in February, driven by high food and fuel prices. The inflation rate stood at 8.23% in January this year, whereas it was 9.42% in February last year.
Mr Mukherjee has expressed the hope that inflation should come down to 7% by the month-end. He pointed out that monthly fluctuations in inflation do not give a correct picture.
Food inflation fell to a three-and-a-half-month low of 9.42% for the week ended 5th March, from 9.52% in the previous week. The drop in food inflation, which is still above the comfort zone, is as a breather for the government that has been grappling with high prices of essential commodities.
On the international front, the Group of Seven (G7) industrialised nations, along with the Bank of Japan, have agreed on joint intervention in the currency market to curb the rising yen, as the country takes stock of the damage from the earthquake and tsunami. Japan is the world's third largest economy.
Meanwhile, British and French leaders began preparing for possible air strikes against Libya after a United Nations vote cleared the way for the first Western military action against an Arab country since the 2003 invasion of Iraq. The proposed move comes in the wake of forces loyal to Maommar Qaddafi shelling rebel-held strongholds to get back control of the country.
A few more months would be needed before we can say that a sustainable trend of inflows has started
For three months in a row, equity funds have recorded net inflows after many months of continuous outflows. After inflows of around Rs800crore-Rs900 crore in December 2010 and January 2011, in February 2011 inflows jumped to a massive Rs2,495 crore. Is there a turnaround in the fortunes of the fund industry which as been suffering a massive erosion since August 2009?
There could be two reasons for the inflows turning positive-investor behavior and tax planning.
After the ban on entry load from 1 August 2009, the mutual fund (MF) industry has seen a massive outflow of investments even as the bull market continued. The truth was that, the ban on entry loads had dried up the distributors' revenues and they were asking investors to consider Unit-linked Insurance Plans (ULIPs) and company fixed deposits as the next best investment opportunity.
However, money was flowing out because of investor behavior as well. When a particular investment goes down sharply and then comes up to the purchase price after many months, investors tend to sell and get out. This is one of the reasons fund companies have cited as the reason for investors redeeming their units and taking money out. Once this kind of investors exit, outflows slow down. This is one reason why outflows have gone down after the Sensex almost hit its January 2008 peak, late last year.
However, the second reason, tax planning, could be the main reason why inflows have turned hugely positive in February. People usually do their tax planning in these months and tend to invest in ELSS (equity-linked savings schemes), a major tax-saving device. We saw the same trend for two years-2010 and 2011. The total net inflows for January and February 2010 was Rs2,494 core and total net inflows for January and February 2011 was Rs3,376 core.
If these inflows sustain further from the month of April 2011 onwards, it's only then that we can conclude that the MF industry has finally managed a turnaround. After all, even in February 2010, sandwiched between months of negative outflows, inflows were positive. As much as Rs1,514 crore was the net inflow in February 2010 after an outflow of Rs7,315 crore during August 2009-December 2009. So, we may have to wait for a few more months before we can be sure that inflows into funds are sustainable.