Indian stocks likely to open lower: Wednesday Market Preview

Wall Street closed lower on Tuesday on mixed economic news and markets in Asia were trading mostly down on concerns of a weak economic outlook

The local market is likely to see a gap-down opening on weak global cues as Wall Street closed with marginal losses overnight on mixed economic news and lingering concerns about Europe. Tracking the losses on the US indices, most markets in Asia were in the red in early trade on Wednesday. The SGX Nifty was 43.50 points lower at 5,350.50 compared to its previous close of 5,394 on Tuesday.

The market which saw listless trade in the absence of any triggers, ended flat with a positive bias on Tuesday, reflecting the small gains accrued by Asian markets. Earlier, the Sensex and Nifty opened at 18,016 and 5,385, respectively, and hit an intra-day high at 18,110 and 5,423 in the early afternoon. Oil & gas, auto, banking, realty and consumer durable stocks supported early gains. Also, Asian markets, which were weak in early trade, were higher in subsequent trade, supporting investor sentiments here. While the key indices were positive, the gains were marginal in the absence of any major trigger.

There was selling pressure from institutional investors after news about inflationary pressures that could impact economic growth. The market hit its intra-day low, lower than that of Monday, at 17,934 and 5,367. But value buying came in immediately afterwards and the market closed positive. The Sensex closed at 18,012, up 19 points, and the Nifty closed at 5,395, a gain of eight points.

Markets in the US closed lower on Tuesday on mixed economic news and lingering sovereign debt issues plaguing Europe. The Federal Reserve Bank of Richmond’s manufacturing index slid to negative six in May, compared with a reading of 10 in April. On the other hand, new home sales rose 7.3% in April to a seasonally adjusted annual rate of 323,000, from a 8.3% gain in March. Economists had expected new home sales to remain unchanged.

On the commodities front, oil prices gained after Goldman Sachs said demand for crude would rise. US light, sweet crude rose nearly 2% to $99.59 a barrel, while in London, Brent crude rose 2.2% to $112.53. Gold gained 0.52% to close at $1,523.20 an ounce, while silver gained 3.5% to close at $36.12 an ounce.

The Dow declined 25.05 points (0.20%) to 12,356.21, its lowest close since 19th April. The S&P 500 shed 1.09 points (0.08%) to 1,316.28, The index has fallen 3.5% since climbing to a three-year high on 29th April amid a commodity slump and concern about Europe’s debt crisis.  The Nasdaq fell by 12.74 points (0.46%) to 2,746.16.

Markets in Asia were mostly weak in early trade this morning on depressing economic news from Japan and negative sentiments from the US. Japanese exports tumbled in April, dragged down by a slump in carmakers’ output after the earthquake in March. Exports fell 12.5% from a year earlier, in line with a median forecast for a 12.4% annual decline and followed a 2.3% drop in March.

Among corporates, Japanese electronics major Sony fell 1.3% after the company said on Tuesday that its websites in four countries had been hacked, while in Seoul Hyundai Motor and Kia Motors both rose over 1% after news late on Tuesday police had dispersed a strike at a parts supplier.

The Hang Seng fell 0.48%, the Jakarta Composite declined 0.16%, the Nikkei 225 retraced 0.36%, the Straits Times was down 0.22%, the Seoul Composite tanked 1.04% and the Taiwan Weighted was down 0.56%. On the other hand, the Shanghai Composite added 0.07% and the KLSE Composite gained 0.26%.

Back home, industry body PHD Chamber urged the government not to withdraw tax refund DEPB scheme, which is ending in June, as it will make exports uncompetitive and would affect the growth momentum. Exporters get refund of duties on import content of their export products. It costs the exchequer about Rs8,000 crore per annum.


JP Morgan launches fund to let you invest in US large-caps

It’s a joke. Would you want to pay 2.5% for a fund that returns 2.58% over the last five years?

JP Morgan Mutual Fund has filed an offer document with the Securities and Exchange Board of India (SEBI) to launch JP Morgan America Large Cap Equity Off-shore Fund, an open ended fund of funds. The scheme will invest 80% to 100% of assets in units / shares of JPMorgan funds like the America Large Cap Fund. It would allocate up to 20% of assets in money market instruments and / or units of liquid schemes.

In recent weeks, there has been a rush of foreign funds queuing up to tap Indian savings for foreign products. Global funds offer diversification benefits, investing in stocks (biotech, technology, energy, agriculture, mining, etc.) that an Indian investor may not be able to get if they invest in domestic schemes. As with other kinds of products, foreign funds are not about returns alone. There are risks too. In the case of JPMorgan America Large Cap Equity, there is a risk of concentration in large-cap stocks.

The Benchmark index for the scheme will be Russell Top 200 (net of 30% withholding tax). The Russell Top 200 Index is a subset of the Russell 3000® Index. It includes 200 of the largest securities based on a combination of their market cap and current index membership and represents approximately 65% of the US market. The top 10 holdings as of 30 April 2011 are Exxon Mobil Corp, Apple Inc, Chevron Corp, International Business Machines, General Electric Co, Microsoft Corp, Procter & Gamble Co, AT&T Inc, JP Morgan Chase & Co And Johnson & Johnson.

Should you invest? Well, if you believe that the Russell Top 200 will give a better return than Indian large-cap stocks, then go ahead. Unfortunately, the Russell Top 200 Index has not performed that well. From 1 May 2006 to 30 April 2011 the Sensex gave an annualised return of 9%, while the Russell Top 200 Index gave a return of just 2.58% in the last five years. Would you want to pay 2.5% for a fund that returns 2.58% over the last five years?


SEBI to embark on transparency drive

SEBI generally does not make public its ongoing probes on the ground that the investigations could be jeopardised by interest parties. However, regulators in the US and some other countries generally issue a public statement even at the time of launch of their investigations

New Delhi: Market regulator Securities and Exchange Board of India (SEBI) has decided to embark on a transparency drive with an aim to make its functions as transparent as possible, reports PTI.

As part of the proposed move, SEBI will make public all the prosecution cases undertaken so far in the interest of the markets and investors and might consider revealing even some of its ongoing probes, depending on their sensibility.

The proposed moves, which also include appointment of a chief information officer (CIO), are being seen as part of a new operating environment being ushered in by UK Sinha, who succeeded CB Bhave as SEBI chairman in February this year.

In the past, SEBI has faced the flak for being surrounded in a veil of secrecy, which has been often defended in the name of possible misuse of the information by vested parties.

SEBI generally does not make public its ongoing probes on the ground that the investigations could be jeopardised by interest parties.

However, regulators in the US and some other countries generally issue a public statement even at the time of launch of their investigations.

Besides, SEBI has also decided to appoint a CIO for maintenance and dissemination of all information from it.

The regulator has been told by its board of directors, which includes nominees from the central government, that it needs to appoint a CIO for proper information dissemination.

The board also suggested SEBI to develop a strategic action plan for a period of 3-5 years as against the current practice of such plans being framed for one financial year.

A longer-period strategic action plan would help the regulator maintain better business continuity and transparency in its various functions in the interest of investors and the markets, sources said.

Besides, SEBI has been asked to undertake necessary measures for securing its data and those of market entities from possible cyber attacks and to maintain its business continuity.

The board has also suggested further strengthening of SEBI's various regional offices, as against previously proposed attempts to centralise most of its functions.

On its proposed move to make public as many prosecution cases as possible, SEBI recently uploaded on its websites lists of various kind of cases.

These include cases dismissed in the prosecution, cases that resulted in convictions, prosecution cases launched against collective investment scheme entities, cases where accused was declared as proclaimed offenders and cases that resulted in compounding.

These lists are of cases till 31 March 2011 and SEBI intends to add many more such lists in the coming days.


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