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Flat-to-positive opening likely: Monday Market Preview

Wall Street settled in the green on Friday on goods jobs report while markets in Asia, most of which have opened after the Lunar New Year holiday, were playing catch-up and were in the green in early trade on Monday

The Indian market is likely to see a flat-to-positive opening today on supportive global cues. Wall Street settled in the green on Friday on goods jobs report. Markets in Asia, most of which have opened after the Lunar New Year holiday, were playing catch-up and were in the green in early trade on Monday. The SGX Nifty pared early losses and was down 1.50 points at 5,380.50 from its previous close of 5,382.

Concerns about rising inflation and its impact on the economy pulled the market down for the fourth week in a row. While manufacturing output data for January was a tad higher than that in December, food inflation for the week ended 22nd January surged to 17.05%, rekindling fears of the possibility of a further hike in interest rates. Corporates have also toned down their forecasts for the fourth quarter on rising costs. 

We were hoping to see a slow rally on Friday, but apparently the bears are not done yet. After staying strong for an hour or so, foreign investors started selling ferociously again. Their selling quickly brought the indices to the levels from where the market started rallying on Thursday. The indices tried to stage a rally in the afternoon, but selling pressure-that too on the last trading day of the week-was just too strong. The market lost 2% over the week as the Sensex declined 387.82 points and the Nifty shaved off 116.40 points.

The market is clearly in bear territory. But even a bear market is punctuated by rallies. So, don't get too pessimistic. After the current decline is over, a slow and weak rally will start.

Markets in the US finished Friday’s trade with modest gains on reports of a decline in unemployment rate last month. The Labor Department said the unemployment rate fell to 9% in January, the lowest rate since April 2009 and a steep fall from 9.4% in December. Meanwhile, the government said that 36,000 new jobs were created last month, the fewest in four months. However a day ago, Federal Reserve chairman Ben Bernanke said that the United States can’t fully recover from the worst recession in decades until hiring improves. He further added that the economy is strengthening, and will likely grow at a faster pace this year as more confident consumers and companies spend more.

The Dow gained 29.89 points (0.25%) to close at 12,092.15. The S&P 500 added 3.77 points (0.29%) to 1,310.87 and the Nasdaq rose 15.42 points (0.56%) to 2,769.30.

Markets in Asia most of which opened after the Lunar New Year Holiday, reported gains in early trade this morning, boosted by optimism from the US and a weaker yen that supported export-oriented companies. However, the crisis in Egypt is being closely watched by market participants.

The Jakarta Composite surged 0.71%, the KLSE Composite gained 0.58%, the Nikkei 225 rose 0.69%, the Straits Times added 0.05% and the Seoul Composite jumped 0.55%. The Hang Seng pared early gains and dipped into the red, down 0.13%. The Chinese and Taiwanese markets continue to be closed for the New Year holiday.

Back home, CEOs surveyed by industry body Assocham suggested an increase in the personal income tax exemption limit to at least Rs3 lakh from Rs1.6 lakh at present in the upcoming Budget for giving relief to taxpayers from high inflation. 
At present, income up to Rs1.6 lakh is exempted from tax for individuals. For women and senior citizens, the limit is Rs1.9 lakh and Rs2.4 lakh, respectively.

The budget for 2011-12 would be unveiled by finance minister Pranab Mukherjee on 28th February.


Need for regulatory forum to resolve customer grievances says RBI deputy governor

Dr KC Chakrabarty, deputy governor, RBI, discussed customer related issues in banking services at Moneylife Foundation’s first anniversary function in Mumbai.

“Scams are everywhere. And they will continue to be, because every sector has finance involved. But citizens suffer because of scams, and they need to be empowered, said Sanjay Nirupam, member of Parliament, speaking on the first anniversary of Moneylife Foundation on Saturday. He also released a Position Paper  on issues faced by retail investors prepared by Moneylife Foundation.
Dr KC Chakrabarty, deputy governor of the Reserve Bank of India, spoke on customer issues relating to banking and para-banking services. He said, “In this country, 50% people don’t have bank accounts, 90% don’t have access to loans and 98% don’t have access to capital markets. Banks must increase their reach to rural people, and ensure better service.” He also said that there is a need for effective regulatory forum, and there should be a system to resolve the issues. Customers must raise their concerns and demand justice.
Speaking on the problems faced by the customers in banks, he said, “India is a big country, and I agree there are many problems. Unfortunately, banks are not properly equipped, technologically or otherwise, to solve the problems and provide good service. There needs to be a strong movement. But the citizens should also understand that there are certain limitations, many of them are legal.”
Anita Pai, executive vice president, ICICI Bank spoke about the tie-up of her organisation with Moneylife Foundation and its efforts to spread financial literacy.  She said, “It is better to have an informed customer than a complaining one. We are definitely in support of financial literacy.”
Ms Sucheta Dalal, managing editor of Moneylife magazine, and trustee, Moneylife Foundation, gave a brief introduction to the Foundation’s activities and elaborated on its objectives. “Producing an unbiased personal finance magazine is not enough.  India will have smart savers only if there is a concerted effort to spread financial literacy. Lack of knowledge and understanding about financial markets and financial products is at the root of most investor problems.”
Moneylife Foundation’s first Position Paper, which was on the issues faced by senior citizens, was anchored by former SEBI chairman Dr SA Dave and was sent to the government last month.
Moneylife Foundation was launched by Mr Sanjay Nirupam a year ago, on 6th February. In one year, it has attracted 4379 members and organised 53 workshops. As Ms Dalal said, the aim is now to take the Foundation’s events all over the country.


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