Indian shares to see positive opening: Monday Market Preview

Continuing tensions in the Middle East, which is set to impact crude prices, remains a cause for worry

The domestic market is likely to witness a positive opening today. The Asian markets were trading in the positive zone even though China, on Friday, increased its required reserve requirements for banks by 50 basis points. Continuing turmoil in the Middle East and North Africa, however, is expected to keep investors on their toes.

The US markets ended with gains on Friday amid news that the Libyan government forces have agreed to a ceasefire. Meanwhile, Britain and France were contemplating a no-fly zone over Libya to restrain Maommar Qaddafi’s forces from attacking civilians. The SGX Nifty was 43.50 points higher at 5,426.50, up from its previous close of 5,383 on Friday.

The local 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 last week it suddenly took a turn for the worse. The trigger was Reserve Bank of India’s (RBI) 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.

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.

Wall Street closed with gains on Friday on easing of political tensions in Libya following announcement of a cease fire by the government. Bank shares jumped as the Federal Reserve stated that it will allow some banks to boost or restart dividend payments. The collective efforts of the Bank of Japan and the G7 nations to intervene in the currency markets to curb the yen’s rise also boosted investors’ sentiments. However stocks came off their highs to close in the green.

The Dow gained 83.93 points (0.71%)  at 11,858.52. The S&P 500 added 5.49 points (0.43%) at 1,279.21. The Nasdaq rose 7.62 points (0.29%) to close at 2,643.67.

Markets in Asia were trading in the green on optimism as factories are seen restarting operations after the devastating earthquake earlier this month, which brought industrial activity to a standstill in the world’s third largest economy.

Meanwhile, the Chinese central bank on Friday hiked the required reserve ratio for banks by 50 basis points, the third this year and the sixth since November 2010. The move is expected to curb liquidity in a bid to control rising prices. However, continuing tensions in the Middle East remains a cause for worry.

The Shanghai Composite gained 0.43%, the Hang Seng jumped 1.26%, the Jakarta Composite rose 0.45%, the KLSE Composite added 0.01%, the Straits Times advanced 0.86%, the Seoul Composite was up 0.88% and the Taiwan Weighted gained 0.98%. Markets in Japan are closed today for a local holiday.

 Back home, total under recoveries for the oil marketing companies (OMCs) will go up to Rs98,000-crore in FY12 if average crude oil prices continue to remain at $100 per barrel in the coming months,, a report by a brokerage firm IIFL said.

With the crude oil prices touching $100 per barrel mark in February, the under recoveries for FY11 is expected to touch Rs72,000-crore, the report said. For the period April-December 2010, the gross under recoveries of OMCs were Rs47,000-crore based on average crude oil price of $80 per barrel.

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Collecting is a passion that can turn into a great investment, says Rajan Jayakar

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."

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COMMENTS

Sudeer

6 years ago

Is it possible to get a verbatim of his speech by e-mail ?
Regards,
Sudeer

REPLY

Moneylife Team

In Reply to Sudeer 6 years ago

Please be on the lookout for the first edition of April

A fresh round of decline? Weekly Market Report

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.

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