Global cues point out to a soft-to-positive opening for the Indian market today on mixed global cues. The US markets closed lower overnight despite strong economic data on profit taking. Some markets in Asia are closed today, while those that are open are in the green in early trade on the last trading day of 2010. The SGX Nifty, which had a subdued opening, gained 9 points at 6,136 from its previous close of 6,127.
Thursday was the expiry day for the December series of futures and options contract and the market began cautiously. On Wednesday the market had rallied on thin volumes and expectations were positive especially since the Sensex had gone past the recent short-term high of 20,157. The Sensex continued Wednesday’s gains with the index hitting an intra-day high of 20,410.91 and closed 133.04 points up at 20,389.07 (up 1%). The S&P CNX Nifty was up 41.50 points (up 0.68%).
Markets in the US closed lower on Thursday on profit taking, despite strong economic data. Claims for jobless benefits declined in the week ended 25th December to the lowest level in two years. Applications for unemployment assistance fell by 34,000 to 388,000 last week, breaking the 400,000 level for the first time since July 2008. Besides, businesses expanded this month at the fastest pace in two decades and pending home sales climbed in November for the fourth time in five months. The data signals that the economic recovery will gather strength in 2011.
The Dow fell 15.67 points (0.14%) at 11,569.71. The S&P 500 shed 1.90 points (0.15%) to 1,257.88. The Nasdaq lost 3.95 points (0.15%) to 2,662.98.
Some Asian markets are closed today, while those that are open mostly higher in early trade today. Positive economic indicators from the US supported the gains. Markets in Japan, South Korea, Indonesia, and Malaysia are closed for the New Year holidays.
The Shanghai Composite surged 0.88%, the Hang Seng rose 0.39%, the Straits Times added 0.37% and the Taiwan Weighted gained 0.43%. The SGX Nifty, which had a subdued opening, gained 9 points at 6,136 from its previous close of 6,127.
Attributing high food inflation to demand-supply mismatch and rising global commodity prices, the Reserve Bank of India (RBI) on Thursday said high rate of price rise has emerged as a new risk factor.
“Growth has rebounded strongly but inflationary pressures persist, driven both by domestic demand and increasing global commodity prices,” RBI said in its second Financial Stability Report.
Global prices of major commodities, including crude oil, gold, iron ore, silver and farm goods like cotton have risen sharply, while crude oil is trading at two-year high of $92 per barrel.
The report also noted that the structural demand-supply mismatches in several commodities have contributed to high domestic food price inflation. In particular, prices of protein-rich foods like eggs, milk, pulses, meat and fish as well as fruits and wheat in India has been ruling at high levels.
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A realty scheme delivers 3% over three years and a consumer-focused PMS loses capital. Investors never learn and eagerly put money in the next PMS pushed by their ‘relationship manager’
A big fund house recently announced the redemption of a three year real estate portfolio management scheme (PMS). Investors were happy as they got back a total of 103% of the money they invested. Yes, a pathetic return, but the investors were happy to see their principal back. Of course, it is more psychological than logical. In real terms, probably each investor lost around 30%, if purchasing power is factored in! Not a very prudent investment. Several interesting takeaways from this are:
The ending of this PMS story was still positive. Many others have lost large chunks of the principal. Still, even today, PMS continue to lure investors.
I happened to see a PMS account statement of a gentleman who had invested money in a scheme focused on the 'consumption' theme. In one year since investment, the person was down 11%, in spite of the scheme keeping cash balance of close to 45%! In the same period, the sensex has yielded a return of 20%! My guess is that there has been active churning and trading in the PMS which would have eaten away most of the money. Investors never seem to learn!
The latest among the PMS are the 'debt' PMS, which promises returns of around 20% per annum for 3-5 years. The collected money is lent to investment companies belonging to industrialists who in turn pledge their holdings in listed companies. The money is used by the investment companies to either buy more shares or to manipulate share prices. Not all the investment companies are actually disclosed to be promoter entities as per the official records. And since there are no investment limits etc on PMS, often, the entire pool of money is lent to one entity! This is nothing but pure money lending through the backdoor with huge risks! For selling these funds, the distributor can get 2-5% commission, upfront.
It is rare that PMS give returns higher than mutual funds. In spite of that, people with too much money, seem to easily get conned by the sales folk who push PMS at them because the selling commission is much higher than a mutual fund. It is time the market regulator raised the minimum ticket size for PMS to at least a few crores of rupees. Then, it is a case of the rich putting their money knowingly. Today, people with less than even a crore of investment portfolio, are being lured into PMS. Of course, they too do not deserve any sympathy, but greed is a normal human tendency and if the regulator can curb it somewhat, some investors would be protected.